HK firm has rare win in row over US sanctions

Hong Kong-based textile and apparel giant Esquel Group may get a subsidiary removed from a US blacklist after a rare victory in litigation against the US government.

A report in Hong Kong's South China Morning Post newspaper, which cited a joint motion filed in the US District Court for the District of Columbia, said the End-User Review Committee of the US Department of Commerce voted to remove subsidiary Changji Esquel from the so-called entity list under certain conditions.

Changji Esquel, headquartered in Urumqi, capital of the Xinjiang Uygur autonomous region, was added to the entity list by the US a year ago along with 10 other Chinese companies due to concerns about allegations of forced labor.

Companies put on the list face restrictions on access to US commodities and technology.

The newspaper report said the litigation is ongoing. A joint motion filed on Tuesday said the parties are engaged in further discussions on the conditions for removing the company from the list and asked the court to delay the next hearing in the case until September while discussions continue.

Esquel Group sued the US Department of Commerce early last month over what it said was its subsidiary's erroneous inclusion on the entity list.

On July 19, the company filed an injunction with the US District Court for the District of Columbia in its lawsuit in a bid to seek "an immediate end to the daily commercial and reputational harm to Esquel Group by barring Changji Esquel's inclusion on the entity list".

An Esquel Group news release issued on July 20 said the company had no choice but to take legal action "to end the devastating ongoing reputational and commercial damage resulting from this erroneous designation" after it had attempted to reach out to and share business documents with the Department of Commerce's End-User Review Committee since September. It said it had not received any meaningful response or evidence from the US government.

In an earlier statement, Esquel Group denied the US government's accusation it used forced labor. "The Department of Commerce provided no evidence to support its erroneous decision and acted far beyond its limited legal authority," Esquel's attorney, James Tysse, said in the statement.

Esquel Group is one of the world's largest textile and apparel manufacturers and a former supplier of some well-known clothing brands including Nike and Gap.

According to its website, Esquel has manufacturing facilities in China, Sri Lanka and Vietnam, and merchandising offices servicing markets worldwide, with over 35,000 employees globally.

Felix Chung Kwok-pan, a Hong Kong lawmaker representing the city's Textiles and Garment constituency, welcomed the progress in Esquel's case against the US government, saying it could help the company restore its business after it suffered reputational and economic harm from being placed on the list.

Chung criticized the US government for alleging human rights violations in cotton production in Xinjiang without investigation.

"Esquel has a long history of investing in Xinjiang and its performance has been recognized by its US clients," he said.

"These companies would have to stop working with Esquel if it had done what the US government alleged."

Hong Kong companies are required by US Customs to provide proof that the cotton they use is not from Xinjiang, Chung said.

He said he hoped the lawsuit could remedy the discriminatory situation faced by Hong Kong companies.

Chloe Xu contributed to this story.