Top Glove subsidiaries face foreign labour issue in the US

  • Corporate News
  • Friday, 17 Jul 2020

The disposable gloves manufactured by the two subsidiaries make up some 12.5% of Top Glove’s annual sales to the US.

PETALING JAYA: The issues surrounding foreign labour were said to be the reason behind the ban by the United States on disposable gloves manufactured by two of Top Glove Corp Bhd’s subsidiaries.

The glove maker singled out one particular matter – the reimbursement of recruitment fees paid by their foreign workers to agents as the cause behind the ban.

The US Customs and Border Protection (CBP) has placed a detention order on Top Glove Sdn Bhd and TG Medical Sdn Bhd but it has yet to explain the reason behind the move.

To put into perspective of how significant the order is, the disposable gloves manufactured by the two subsidiaries make up some 12.5% of Top Glove’s annual sales to the US.

The group derives around 25% of its annual sales from the US.

While Top Glove will still be able to ship its products to the US, the goods will be parked at the warehouses at the Free Trade Zone.

In the worst-case scenario, Top Glove can redeploy its supply meant for the US market to other countries, should the detention order take a much longer time to resolve.

Given the current global Covid-19 situation whereby demand for rubber gloves has overtaken supply, Top Glove believes that other countries would readily take up its supply of gloves.

Due to the pandemic, Top Glove has been experiencing an exponential increase in sales from countries such as Germany, Spain, Italy, Brazil and Canada besides the US.

It also has the alternative to bank on its other subsidiaries to export its gloves to the US, given that only two subsidiaries are affected by the detention order.

But the management is confident that they would overcome the issues soon and get themselves off the detention order within two weeks to a month.

Group managing director Datuk Lee Kim Meow said the group’s executive director David Lim, who is familiar with dealing with regulatory authorities in the US and Top Glove’s US office, will be engaging the CBP to find out why the two subsidiary companies are on the list.

Top Glove has also engaged the same consultant that advised WRP Asia Pacific Sdn Bhd, another glove maker that was placed on the same list last year before being lifted in March. “We engaged them today and and we have already set a plan in motion to take us out of this detention order.

“We are confident that in a short amount of time, we will be able to overcome the challenges.

“Being the largest glove manufacturer, we understand it’s much easier to create big news when you target a big manufacturer and what else (if not) the biggest maker of gloves in the world so people’s attention will be focused on that area, ” he said.

During the conference call yesterday, Top Glove also partially attributed the issue to an agenda by some activists that continued to target the group.

Lee added that when news broke out in 2018 on allegations of worker exploitations in Top Glove, ambassadors from several countries including the United States and Malaysian authorities visited the company’s factories and were satisfied with what they have observed.

He said he believed that all of them felt it was just part of news reporting.

“Once in a while, the foreign media have to report some stories to their readers to make it more interesting.

“I think we’ve had enough of all these reporting and we think this is a good opportunity to put this behind us and move ahead once and for all, ” he said.

According to a source, employers are concerned that the act of paying the recruitment fees can be interpreted as condoning the charging of exorbitant fees to foreign workers.

The source opined that the detention order faced by Top Glove will be resolved swiftly, given that the group’s alleged reimbursement issue is less severe as compared to WRP.

WRP, which was slapped with a detention order in September last year, took six months to revoke the detention order.

“WRP’s detention order was due to non-payment of wages and that triggered an immediate intervention from CBP.

“On the other hand, our situation was highlighted by non-governmental organisations and activists.

“We have been working to reimburse our foreign workers for the agent fees paid prior to January last year, which involves extensive tracing, but these activists are expecting us to make immediate reimbursements, ” said Lee.

It is estimated that the total value of reimbursements range from RM20mil to RM50mil.

Since January 2019, Top Glove has implemented a Zero Recruitment Fee Policy, where agents are not allowed to collect agency or recruitment fees from foreign workers.

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