Parent company of Calvin Klein and Tommy Hilfiger, PVH has been added to the ‘unreliable entities’ list of China's Ministry of Commerce (MOFCOM). According to MOFCOM, PVH undermines market rules and violates Chinese laws.
This designation could potentially shut down all of PVH's business operations in China, although no specific sanctions have been announced yet, and PVH has a timeframe to present its defense.
PVH is the first fashion brand to receive this designation, typically reserved for companies in defense and biotech, such as Illumina, which was also recently added to the list. This move comes amidst escalating US-China trade tensions and follows the Trump administration's 10 per cent tariff on Chinese imports. MOFCOM has been investigating PVH's China operations since September.
In its 20 years of operating in China and serving customers, PVH has always maintained strict compliance with all relevant laws and regulations and operates in line with established industry standards and practices, a company’s spokersperson. It will continue engaging with relevant authorities and looks forward to a positive resolution, he adds.
The MOFCOM decision appears to stem from PVH's ban on the use of cotton from China's Xinjiang region, aligning with US government’s import restrictions imposed in 2020. Experts suggest that China is using PVH as an example in the ongoing trade dispute.
While Stefan Larsson, CEO, PVH emphasizes on the importance of the Chinese market for retail growth (the Asia-Pacific region accounted for approximately 20 per cent of PVH’s $9.2 billion in revenue in fiscal year 2023), the greater threat may be to PVH’s manufacturing capabilities.
The company operates 128 factories in China, producing approximately 20 per cent of its goods. Shifting manufacturing could be disruptive, impacting quality and production processes, according to analysts. PVH also has manufacturing facilities in Vietnam, Turkey, and other countries.
Experts speculate, PVH was targeted due to its size—large enough to make a statement, but not as large as other US brands like Nike or Gap, which also have policies against using Xinjiang cotton. Tommy Hilfiger and Calvin Klein have a significant retail presence in the Asia-Pacific region, with thousands of stores.
Neil Saunders, GlobalData, opines, China is using PVH as an example to say, look, if tariffs go ahead, if other restrictions are put in place on China, we can make life difficult for US companies in the country.
