Levi’s, ‘Illegitimate Cotton’ and ‘Imaginary’ Forced Labor Risks

Forced labor is one of fashion’s most worrying concerns, thanks to increasing regulatory scrutiny, legislative firepower and the omnipresent specter of negative press.

In Canada, the Canadian Ombudsperson for Responsible Enterprise (CORE) has launched deep-dive investigations into several major companies related to their alleged involvement in forced labor, including the Canadian subsidiaries of Levi Strauss, Zara, Ralph Lauren, Nike, Diesel, Hugo Boss and Walmart.

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But uncovering the true relationships between suppliers and brands can prove maddeningly difficult. Because of regulations like the Uyghur Forced Labor Prevention Act (UFLPA), companies importing goods into the United States have begun spending more time and money investigating their supply chains, with more incentive than ever to work out the kinks and weak links.

The UFLPA requires U.S. importers to bear the burden of proof that their products have not been produced either fully or partly in China’s Xinjiang Uyghur Autonomous Region. U.S. Customs and Border Protection (CBP) will prohibit goods linked to the embattled region from trading in the American market.

The law assumes that any goods that have been touched by the Xinjiang region have direct ties to the forced labor of Uyghur people, whose abuse has been labeled genocide by the U.S. and other governments.

As companies scramble to comply with the UFLPA, they must show that every tier of their supply chain is compliant. Previously, many placed that burden on their Tier 1 suppliers.

Because of the need to understand all facets of their supply chains, companies have turned to traceability solutions, forensic cotton testing companies and real-time supply chain mapping platforms to help them uncover any potential ties to forced labor and other risks.

But even as those platforms help brands, suppliers and governments glean insights into potential risks, it can be difficult to confidently link brands to Tier 4 and Tier 3 suppliers, said John Foote, partner at law firm Kelley Drye & Warren and an expert in supply chain compliance and forced labor issues.

“There are different gradations of relationships that are less than an actual supply chain, and a lot of times they get mistaken for being an actual supply chain when they’re not,” he said.

Foote categorized supply chain linkages into four buckets: actual, direct, theoretical and conjectural.

An actual supply chain, he said, exists when a brand can, with certainty, be connected to its suppliers, whether Tier 1, 2, 3 or 4.

Direct supply chain linkages use evidence to show there reasonably could be a connection between a brand and the suppliers that its Tier 1 suppliers source from, Foote said.

“In a direct supply chain, you know for sure, based on evidence, that the parties are, in fact, doing business with one another, and the nature of what they are buying and selling from one another are such that they could form an actual supply chain,” he explained. “For example, if you have a sale of cotton fabric from a Tier 2 to a Tier 1, and then you have a sale of cotton apparel from a Tier 1 to an importer, that would presumably be evidence of a direct supply chain. Whether it’s evidence of an actual supply chain is not necessarily clear.”

Where things start to become even murkier, he said, is in theoretical and conjectural supply chain linkages.

Per Foote, theoretical supply chain linkages rely on the idea that commercial transactions that may have occurred between early-tier suppliers could show a link between a company and a distant supplier—but often, the goods exchanged between suppliers don’t match the types of materials that would be needed for a supplier to create a garment for its end importer.

And conjectural supply chain linkages, he said, are often based on suppliers’ peripheral connections to the Xinjiang geography, rather than actual evidence.

“I would say that that’s even a lesser degree of risk than a theoretical risk. It’s a conjectural risk, which is a nicer way of saying ‘imaginary,’” he said. “We don’t have any evidence in that type of supply chain that there is problematic merchandise … under the jurisdiction of the UFLPA, but we could imagine it because there is this Tier 4 entity that has a relationship connection to the region.”

Levi Strauss & Co. is named as a company that is linked to Xinjiang-headquartered Jiangsu Lianfa in a widely circulated report from Sheffield Hallam University known as “the Murphy report,” nicknamed for its author, Laura Murphy. The report states that the Stüssy partner, among a number of other companies, has ties to Jiangsu Lianfa through an Indian intermediary company, called Aquarelle India Private Limited, through what Murphy labels “cotton laundering.”

That report has been one of the main sources of intel that the CORE investigation used against the red tab jeans purveyor, which previously told Sourcing Journal that the claims made in the filing are based on “outdated and inaccurate data from 2017-2019 that were included in reports published in 2020 and 2021.”

Publican Trade Solutions, which uses artificial intelligence-based technology to analyze supply chains based on fraud patterns, told Sourcing Journal that its analysis shows that, in 2022, Levi Strauss had a robust relationship with supplier Aquarelle India, a subsidiary of Ciel Textile that makes casual and denim shirts.

“Aquarelle… in 2022, has, according to our records, shipped 5,000-plus different shipments to Levi Strauss of source material or product,” said Ram Ben Tzion, founder of Ultra Information Solutions, which owns the patented technology behind Publican.

Ben Tzion noted that information on whether the Stony Creek Colors partner has continued that relationship through 2023 is not yet available.

Ben Tzion said that Jiangsu Lianfa and Aquarelle India have ties that would link Levi’s to Jiangsu Lianfa.

“I cannot say with certainty that 100 percent of [Aquarelle India’s] cotton is [from China], but I can tell you with great certainty that a significant part is coming from China and from Jiangsu Lianfa, and I can tell you with certainty that they don’t have any way to distinguish between legitimate cotton to be shipped to Levi’s and illegitimate cotton to be shipped to other customers,” Ben Tzion said.

Other companies working in supply chain traceability told Sourcing Journal that the potential link may not be representative of what Foote would consider an actual supply chain.

One company that gathers supply chain data confirmed that Levi’s is supplied by Aquarelle but denied the denim giant’s connection to Jiangsu Lianfa through that supplier. While the company shared that Aquarelle may have previously imported materials from Jiangsu Lianfa, it noted that it’s highly unlikely that those materials have recently ended up in Levi Strauss products.

Another supply chain data company told Sourcing Journal that, while it could confirm that the HSBC partner is supplied by Aquarelle India, it could not confirm, based on its data, that Aquarelle India currently has ties to Jiangsu Lianfa.

Levi Strauss did not return Sourcing Journal’s multiple requests for comment on its relationship with Aquarelle India and on the practices it uses to root out forced labor risks in its supply chain.

The difference in what the technology platforms’ data can reasonably show sometimes results in confusion and unfair allegations about linkages to suppliers blacklisted under the UFLPA, Foote said.

“​​The problem is that if you look at the information in many of these tech platforms, they will not delineate and they’ll just say it’s a connection, and it really is a ‘Six Degrees of Kevin Bacon’-style connection. But, at best, that’s a theoretical supply chain,” he told Sourcing Journal.

Many companies have zero-tolerance policies toward forced labor, the Emma Chamberlain collaborator included.

Levi’s has also recently inked a partnership with Artistic Milliners to enable better organic cotton traceability and has previously signed a contract with the R Collective, which gives the denim seller better insights into its supply chain and circularity efforts.

Foote and Ben Tzion agreed that many brands are working hard to prevent materials from the Xinjiang region from entering their supply chains, which can be a daunting task.

“I have not yet met a company that isn’t trying some piece of that puzzle. They’re trying to better understand who’s in its supply chain, what risk that supply chain presents,” Foote said.

To do that, some companies have employed forensic testing companies like Oritain, which leverages forensic science to trace the origin of cotton fibers and other raw materials. The New Zealand-based testing company partners with other denim makers, like Cone Denim, to ensure the cotton used in its products is in line with regulations.

Other traceability solutions, like TextileGenesis, offer fiber-to-retail traceability for brands and suppliers such as Renewcell. Meanwhile, supply chain mapping solutions like Altana, which partners with CBP, enable brands to preemptively mitigate risk factors more effectively.

The USDA estimates that 90 percent of China’s cotton is produced in Xinjiang, with only 20 percent of cotton used by Chinese textile manufacturers being imported. The agency also notes that “most Chinese cotton products contain cotton that was produced in Xinjiang.”

And a September Reuters report showed that CBP data indicated that, of samples taken in May, 27 percent of garments tested showed some traces of cotton linked to forced labor in the Xinjiang region, even despite companies’ flurried partnerships with supply chain traceability companies.

Foote said fully eradicating cotton made with forced labor poses a major challenge.

“I think the reality is that targeting a particular variety of cotton, a particular jurisdiction of cotton, and trying to eliminate it from a U.S.-bound supply chain is an enormously difficult undertaking,” he said.

Still, going forward, importers will need to hone their understanding of their supply chains as technology continues to evolve, allowing clearer visibility, Ben Tzion said.

Foote said for importers looking for the most effective solution today, fiber-to-garment traceability tools provide a strong option.

“Regardless of your commodity, regardless of your industry, the grown-up solution is to take responsibility for where this material is, in fact, coming from and to ensure that your source is non-problematic, and that you can track its movement technologically, through the supply chain,” Foote said.