An investigation into the supply chain disruptions of Calvin Klein's parent company in Xinjiang has been initiated by China.

An investigation into the supply chain disruptions of Calvin Klein's parent company in Xinjiang has been initiated by China.
An investigation into the supply chain disruptions of Calvin Klein's parent company in Xinjiang has been initiated by China.
  • The Chinese Ministry of Commerce announced on Tuesday that it was launching an investigation into PVH Group, the parent company of Calvin Klein, over claims of business disruptions in its Xinjiang supply chain.
  • The investigation is part of the ministry's "unreliable entities" list mechanism, which was introduced following the U.S. blacklisting of Huawei.
  • On Monday, the U.S. Commerce Department unveiled plans to prohibit the import or sale of vehicles equipped with certain hardware or software originating from China or Russia.

The Chinese Ministry of Commerce announced on Tuesday that it would investigate Calvin Klein's parent company for any disruptions in its Xinjiang supply chain.

The ministry's "unreliable entities" list mechanism includes an investigation launched in 2019, which is China's version of the U.S. Commerce Department's entity list that restricts named companies from accessing items originating in the U.S.

On Monday, the U.S. Commerce Department unveiled plans to prohibit the import or sale of vehicles equipped with certain hardware or software originating from China or Russia.

The Commerce Ministry of China did not disclose the reason for investigating PVH on Tuesday, but gave the U.S. retail group 30 days to respond. Previously, U.S. defense companies that were on the "unreliable entities" list were prohibited from engaging in China-related imports or exports.

The Chinese probe claims that PVH targeted Xinjiang suppliers in violation of market principles, causing disruptions to transactions with Chinese businesses, individuals, and others, and implementing discriminatory measures.

CNBC did not receive a response from PVH when requested for comment outside of U.S. business hours.

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Several foreign retail companies, including the group that owns Tommy Hilfiger, have faced scrutiny in China over efforts to distance themselves from alleged forced labor in Xinjiang region.

PVH stated in its July 2022 corporate responsibility report that Xinjiang is not allowed to be sourced directly or indirectly.

The revenue for Calvin Klein and Tommy Hilfiger decreased by 4.3% annually to $1.38 billion in the quarter ending August 4th, due to the challenging consumer market in Asia Pacific, particularly in China and Australia, as stated in PVH's earnings report.

More than half of PVH's total revenue of $2.07 billion for the quarter came from overseas.

The Uyghur Muslims, who have been identified as a repressed ethnic group by the United Nations, United States, United Kingdom, and others, reside in Xinjiang. Despite accusations of forced labor and other abuses in Xinjiang, China maintains that the facilities there, which have been labeled internment camps by the U.S., U.K., Canada, and human rights groups, are actually vocational training centers.

—CNBC's Sonia Heng contributed to this report.

by Evelyn Cheng

China Economy