Tuesday, July 6, 2021

Esquel Group sues Department of Commerce over erroneous inclusion on U.S. Entity List


WASHINGTON, July 6, 2021 – Today, Esquel Group, the Hong Kong-based textile and apparel manufacturer, has filed a lawsuit in the United States District Court for the District of Columbia seeking relief from the economic and reputational harms caused by the placement of its subsidiary, Changji Esquel Textile Co. Ltd., on the U.S. Entity List. Esquel is a recognized leader in responsible labor, sustainability and ethical business practices. The company categorically denies the false allegations that have been made by the Department of Commerce – allegations that are antithetical to everything for which Esquel stands.

Under the prior U.S. administration, Changji Esquel was added to the Entity List without notice and with no supporting evidence, causing incalculable reputational and economic harms. Despite continued outreach and the sharing of numerous business documents with the Department of Commerce’s End-User Review Committee since September 2020, Esquel has received no meaningful response or evidence from the U.S. government that would support its inclusion on the List. Accordingly, Esquel has had no choice but to take legal action to end the devastating ongoing reputational and commercial damage resulting from this erroneous designation. 

“The Department of Commerce provided no evidence to support its erroneous decision and acted far beyond its limited legal authority,” said James Tysse, a partner at Akin Gump LLP about the lawsuit filed today. “Esquel is a globally recognized leader in corporate social responsibility. This action is completely contrary to Esquel’s proven track-record of ethical labor practices.”

The listing falsely implicated Changji Esquel in using forced labor in China’s Xinjiang region, a conclusion that contradicts the facts, including audits by multiple world-class, third-party independent auditors using internationally recognized industry standards such as the SMETA standard, a widely respected social audit format. These audits involved site visits to facilities in the region and independent interviews with randomly selected Uyghur workers. In every instance, the audits found no evidence of forced labor or coercion. Further, the Changji Esquel facility is highly automated and technologically advanced, and it requires highly skilled workers – the inverse of a business model reliant on underpaid labor.

“The use of forced labor or coercive practices is completely contrary to our founding principles and the business we have operated for more than 40 years,” said Esquel Chairman and CEO Marjorie Yang. “Esquel values and respects the dignity of all our people in Xinjiang and actively works to create an inclusive environment free from any kind of discrimination or intimidation. Esquel has never used forced or coerced labor.”

For the past 10 months, Esquel has provided extensive corporate information to the End-User Review Committee in an effort to secure a just resolution of the erroneous listing. Esquel also offered to undertake additional independent audits and to facilitate site visits by relevant officials and representatives. In response, the End-User Review Committee provided no evidence to justify its listing of Changji Esquel.

In addition to pointing out the lack of any factual basis for the listing, the lawsuit shows that there was no lawful basis for the Department of Commerce to list Esquel in the first place and seeks access to the administrative record the Commerce Department relied on in making the erroneous listing.

“It is our continued hope that the Department of Commerce will voluntarily address what is clearly an error,” said Yang. “But so far, the ERC has given no meaningful response to the comprehensive materials we have submitted and taken no step to rectify its mistaken inclusion of Changji Esquel on the Entity List. Accordingly, we have been forced to take legal action in order to protect our business interests and mitigate the devastating harm that is accruing daily to our business, employees and business partners.”