State Department Awards Human Rights Abusers for “Excellence” – The Gap and Intel

The State Department awarded The Gap and Intel the prestigious Award for Corporate Excellence on Friday. The award went to subsidiaries in India (Gap) and Costa Rica (Intel) for work independent of corporate headquarters here at home.

Despite the positives these subsidiaries have been awarded for in India and Costa Rica, their reward for good behavior also warrants a look at the actions of the parent. Would they be deserving of the same award for excellence?

The parent companies of the State Department’s award winners both have proven ties to Xinjiang supply chains. This far West China province is where the State Department says Beijing is committing genocide against religious and ethnic groups – predominately Muslim – through forced sterilization regimes. It is a province where the United Nations said thousands of people were being held arbitrarily in an ever-expanding prison system there.

Both Intel and The Gap are iconic American corporations. They have been in China for decades, including in Xinjiang. Their subsidiaries in India and Costa Rica act on the behalf of corporate headquarters in the U.S. While the “dirty” laundry list is long, Intel is a known supplier of hardware to China for surveillance of Uyghurs in Xinjiang and has plants in China. While Gap suppliers get their cotton from Xinjiang slave labor companies.

For decades, multinational corporations have profited from doing business in China, and have often turned a blind eye to Beijing’s authoritarian regime and human rights abuses. But Congress has begun to shine a light on companies profiting off of China’s use of forced labor. For this reason, Congress passed the Uyghur Forced Labor Prevention Act and it was signed into law last December. For goods produced in the Xinjiang supply chain or made with displaced Uyghur labor, there is supposed to be a presumption of guilt that goods from there were delivered under the CCP’s labor regime that includes Uyghur prison laborers who are not part of the paid labor force.

Moreover, the U.S. has had bans on cotton from Xinjiang, which includes any fabric made from that cotton. The first ban was in 2020, against a provincially-owned company called Xinjiang Production and Construction Corps. Their products were subject to a Withhold Release Order by Customs and Border Protection (CBP) because of suspicion they were made with the help of unpaid labor. That was not enough to keep forced labor cotton and cotton-derived goods out of U.S. supply chains, so the CBP went ahead and banned all cotton sourced from Xinjiang in January 2021.

Here is how Intel and The Gap are linked to this troubled Chinese state. Some links are more obvious than others.

Intel:

Business intelligence and political risk firm Horizon Advisory gave Intel an F grade in their Corporate Complicity Scorecard. [1] They note that Intel has an extensive footprint all over China, including:

• An extensive production, research, and development footprint in China, featuring partnerships with the government and military-tied entities;
• Long-standing ties to the Chinese government, including research collaborations with government research institutions developing surveillance technologies and elite-level relationships with the institutional players (such as the Ministry of Industry and Information Technology) charged with implementing Beijing’s military-civil fusion strategy;
• Investments in and alongside Chinese military-civil fusion and surveillance-relevant companies

It is not a far stretch to assume Intel technologies are being used as part of China’s 24/7 surveillance operations in Xinjiang. While Chinese people live under the careful, watchful eye of the state in every major city, the Xinjiang surveillance system is particularly onerous. Facial recognition and optical tracking systems are an everyday part of Xinjiang’s Criminal Procedure Law led to the arrest of thousands of Uyghur Muslims, often caught in police dragnets and held without bail, the United Nations found. [2]

Intel technology helps power China’s 24/7 surveillance of the Uyghurs.

In 2019, the Wall Street Journal reported that Intel provided computer hardware to Xinjiang surveillance systems bought by the Chinese Ministry of Public Security.[3]

In 2020, the New York Times reported that the Xinjiang city of Urumqi’s Cloud Computing Center, which is used to monitor the large Muslim population there, runs on chips made by Intel.

In December 2020, the chairs of the Congressional-Executive Commission on China sent a letter to Intel CEO Bob Swan seeking information about what they sell to companies that run the Xinjiang surveillance system.[4]

China’s Ministry of Commerce says its Xinjiang Entry-Exit border inspection system runs on Intel CPUs. Last year, the Public Security Bureau of Changji Hui Autonomous Prefecture in Xinjiang bought Intel servers, undoubtedly to be used as part of its oppressive regime against Uyghurs there.

Chinese telecom giant Huawei has long been the thorn in the side of Washington. It is arguably the poster child of a villainous Chinese tech firm. No company in China has been attacked more than Huawei. This has been going on since 2018.

But in 2020, Intel core processors were part of a winning contract to equip the DiwopuInternational Airport Branch of the Public Security Bureau of Urumqi City, Xinjiang. The Intel processors are likely being used for surveillance purposes since they were bought in conjunction with the Huawei ASG5300 surveillance middlebox. China has also worked with Hikvision, an Entity List company today, on its Deep Eyes surveillance camera.[5]

Intel’s Chinese language website advertises the sale of medical and diagnostic equipment in Xinjiang. This could be benign. But Xinjiang is China’s prison province, so judging by the testimony of numerous Uyghur women, anything goes.

Intel is a big investor in China. They are also a reliable partner with the Chinese government. From 2011 and 2017, at least, Intel partnered with the Ministry of Industry and Information, the state entity charged with implementing China’s military-civil fusion strategy.

As far as supply chains go, Intel is likely exposed to Uyghur forced labor through suppliers Foxconn. That company’s Zhengzhou factory in Henan province has been known to take “traveling Uyghurs” as part of a labor transfer program that China says is designed to alleviate poverty, but others have said is exploitative as they work more overtime than non-Xinjiang workers.[6]

The Gap Inc:

The Gap’s reliance on and connections to Xinjiang are more obvious. Whether their contractors have used forced labor is up for debate. That Xinjiang is deemed to be committing genocide against minorities should have been enough to get the State Department to reconsider awarding any American company, including its subsidiaries, with supply chain ties to that province.

This is especially true for Xinjiang cotton, which faces a ban, unlike semiconductors. Still, the U.S. has restrictions on what U.S. computer hardware manufacturers can sell to Chinese companies like Hikvision due to human rights and national security concerns. Cotton has long been one of the more notorious sectors of the Xinjiang economy, known to have used forced labor in the past. The State Department put out a fact sheet on this last year. [7]

One of their suppliers, Texhong Textile Company, has a subsidiary in Xinjiang, buys cotton from Xinjiang, and works with Entity List company XPCC.[8]  Another company the Gap has worked with is called Huafu Fashion Co., which works through numerous subsidiaries all the way down to Sri Lanka, that rely on Xinjiang cotton to make yarn and fabrics. One of Huafu’s factories is located in Aksu Textile Industrial City, just 20 minutes away from a Xinjiang prison facility.[9]

The Gap says it does not use forced labor, though many of the companies it relies on have questionable ties to Xinjiang. Had The Gap opted to produce its clothes from cotton outside of China, including in our own backyard here in the Americas, the shift in supply chains to avoid such questionable human rights atrocities would possibly warrant an award for corporate excellence. But knowing the geopolitical risks that abound in China, The Gap remains.

“We can confirm that we do not source any garments from the Xinjiang region,” The Gap said in a statement. “We also recognize that a significant amount of the world’s cotton supply is grown and spun there. Therefore, we are taking steps to better understand how our global supply chain may be indirectly impacted.”

Their comment suggests that they do not fully understand their China supply chain.

More than 20% of the world’s cotton comes from China, with the Xinjiang region producing 85% of exported cotton.

Jewish World Watch’s Uyghur Forced Labor Database ties Intel to five facilities under scrutiny for forced labor. Additionally, according to the Database, Gap, Inc., still has dozens of implicated suppliers in its chain.

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CBP is already having difficulty stopping China goods believed to have benefited from Uyghur forced labor. The Uyghur Forced Labor Prevention Act only requires an importer to state its innocence, by showing “bills of lading” and “receipts” as proof that their goods did not touch Xinjiang and are free of forced labor. Or if they did, that the company there is not known for being a transfer hub for Uyghur prison labor.

In the past few months, CBP has released hundreds of shipments into the country after initially stopping them under the Uyghur law. According to online news magazine, The Dispatch, the agency hasn’t shared with Congress the details of its decision to release goods into the domestic market, nor have they been required to show examples of the evidence they were provided that led them to greenlight once-withheld products to their final buyer in the states.

“The intent of the law is clear,” Sen. Marco Rubio (R-FL), a lead sponsor of Uyghur Forced Labor law, said Wednesday in a statement to The Dispatch. “Congress will continue oversight of its implementation and if bad actors are creating loopholes to allow the importation of goods into the U.S. made by slaves then we will act to shut down those loopholes. It is that simple.”

Michael Stumo, CEO of CPA warned CBP and the Department of Homeland Security of the shortfalls of the Uyghur law in a letter on Aug. 11.  CPA requested that several additional Chinese companies engaged in forced labor be added to the CBPs Uyghur Forced Labor Prevention Act Entity List.

We are not sure if The Gap benefits from free, forced labor. Can The Gap be so sure, themselves?

The companies they have sourced from in the past are dubious. Intel has clearly been part of the Chinese state surveillance system, a system that – in some aspects – might not be able to run without them.

“As a former employee of the State Department, it is highly disappointing that these prestigious awards are being given to companies with dubious reputations and linkages to human rights violations, especially on a day when Washington just handed out more sanctions to Russia and China for human rights abuses,” said Robby Smith Saunders, national security advisor for the Coalition for a Prosperous America.  The Treasury Department sanctioned two fishing companies, both with flagrant labor and human rights abuses. One of the sanctioned companies, Pingtan Marine Enterprises is traded on the NYSE. Shares of the newly sanctioned company are owned by Miami-based Citadel Advisors LLC, Boston-based Geode Capital Management, and are part of the Fidelity Nasdaq Composite Index, a mutual fund with $10 billion under management, according to Morningstar.

“The State Department should consider rescinding these honors and awarding them to actually deserving entities,” said Saunders. “Furthermore, the U.S. needs to do more on this. You can’t just block goods; you need to block Wall Street from financing companies that use forced labor.

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[1] Corporate Complicity Scorecard: An Assessment of U.S. Companies’ Exposure to Military Modernization, Surveillance, and Human Rights Violations in the People’s Republic of China, Horizon Advisory and the Victims of Communism Memorial Foundation, February 2022. Intel was one of 8 companies whose China supply chains and connections to state-run businesses were noted in the report.

[2] United Nations Human Rights Office of the High Commissioner’s report dated August 31, 2022 said the constant surveillance of Uyghurs in the “vocational training centers” and on the streets, were violations of basic human rights.

[3] From the WSJ article dated Nov. 26, 2019: “Intel…provided seed money, as well as chips and technical solutions, to China’s NetPosa Technologies Ltd., which serves the police departments of Beijing, Shanghai and around 60 other cities, as well as the Ministry of Public Security. NetPosa is embedded in Xinjiang, providing cloud-based video management systems and surveillance vans to police, according to the company website. NetPosa isn’t on the U.S. entity list.”

[4] The letter, dated Dec. 4, 2020 and signed by CECC members Sen. Marco Rubio and Rep. James McGovern asked Were you aware that your company was selling its product(s) or service(s) to entities in the PRC, that the U.S. Government has determined are either a national security risk or are complicit in serious human rights violations and placed on the Department ofCommerce’s Entity List? And What, if any, due diligence did your company perform prior to selling your products to the PRC entities in question to ensure that your products were not used in human rights abuses, and, in particular, the mass surveillance systems used to suppress Uyghurs and other PRC citizens?

[5] UK-based market research firm Top10VPN funded research by two professor experts on surveillance systems and cyber security out of Oxford University and Humboldt University in Germany. This comes from an August 2021 report titled “China’s Surveillance State: A Global Project.”

[6] See “Uyghurs for Sale: Re-Education, Forced Labor, and Surveillance Beyond Xinjiang” by the International Cyber Policy Center, page 23, published in 2020.

[7] From the State Department Fact Sheet dated July 1, 2021: “In Xinjiang, the government is the trafficker.  Authorities use threats of physical violence, forcible drug intake, physical and sexual abuse, and torture to force detainees to work in adjacent or off-site factories or worksites producing garments, footwear, carpets, yarn, food products, holiday decorations, building materials, extractives, materials for solar power equipment and other renewable energy components, consumer electronics, bedding, hair products, cleaning supplies, personal protective equipment, face masks, chemicals, pharmaceuticals, and other goods—and these goods are finding their way into businesses and homes around the world.”

[8] XPCC is on the Uyghur Forced Labor Entity List. Full list here.

[9] See “Laundering Cotton: How Xinjiang Cotton is Obscured in International Supply Chinas” by Laura Murphy et. al., Nov. 2021, for China companies using Xinjiang cotton.