Top Glove Drops on U.S. Order to Seize Goods Over Forced Labor

(Bloomberg) -- Top Glove Corp.’s shares sank after the U.S. Customs and Border Protection on Monday directed personnel at U.S. ports of entry to seize its disposable gloves after finding evidence that the manufacturer used forced labor.

The stock tumbled as much as 5% to the lowest level since March 3, its second day of losses. It’s down 21% this year, among the biggest decliners on Malaysia’s benchmark stock gauge.

The CBP Office of Trade, in consultation with the Treasury Department, said it imposed the penalties against the world’s largest glove maker after having found “sufficient information to believe that Top Glove uses forced labor in the production of disposable gloves.” The order expands an directive last year banning imports from two units of the company.

“Today’s forced labor finding is the result of a months-long CBP investigation aimed at preventing goods made by modern slavery from entering U.S. commerce,” Troy Miller, senior official performing the duties of the CBP Commissioner, said in a statement. “CBP will not tolerate foreign companies’ exploitation of vulnerable workers to sell cheap, unethically-made goods to American consumers.”

Factories belonging to Top Glove were found to be a major source of Covid infections in Malaysia last year. After discovering thousands of infections among workers at the company’s plants in November, the government carried out raids on its dormitories.

‘Unfortunate Negative’

A Top Glove spokesperson didn’t immediately respond to an emailed request for comment. In October, Top Glove said it had resolved issues highlighted by the U.S. Department of Labor and was seeking an expeditious resolution and revocation of the ban on exporting its products to the country.

The news is an “unfortunate negative” and results in “cloudier earnings certainty and negative investor sentiment,” Gan Huan Wen, an analyst at Hong Leong Investment Bank Bhd., said in a report dated Monday. He cut his stock-price target to 7 ringgit from 8.14 ringgit. “We understand Top Glove is in contact with the CBP to obtain more information on this finding.”

Monday’s finding is the second forced labor finding the CBP has issued in the current fiscal year. U.S. Customs and Border Protection has ensured the enforcement action against Top Glove “will not have a significant impact on total U.S. imports of disposable gloves,” John Leonard, CBP Acting Executive Assistant Commissioner for Trade, said in the statement.

©2021 Bloomberg L.P.