Malaysian Palm Oil Response to U.S. State Department Labor Rights Assertions


This is the first blog in a four-part series that assess the claims made by three U.S. government agencies against Malaysian palm oil on labour issues.

  • U.S. Department of Labor
  • U.S. State Department
  • U.S. Customs and Border Protection

These blogs summarize a lengthy rebuttal to these claims published by MPOC.

Background and Context

The Malaysian palm oil sector has come under considerable scrutiny in the global debate on labour. This has resulted in some disruptions to the sector, with the seizure of several shipments of palm oil products from Malaysia to the United States by U.S. Customs and Border Protection (CBP).

The scrutiny on Malaysian labour is not entirely surprising. Allegations of the mistreatment of workers, particularly in the manufacturing sector, have been reported and acted upon by companies and authorities over several years. This is a genuine concern.

  • Distinction is Key: However, it is important to make a distinction between close scrutiny backed by evidence, and broad-brush allegations. The Malaysian palm oil sector has largely been subjected to the latter.

There has been a broad movement, largely backed by environmental campaigners, to undermine palm oil in any way possible. This has included allegations of widespread labour/human rights abuse and trafficking in the industry.

This effort has resulted in large volumes of material being circulated by NGOs and other opponents of palm oil, with very little strong evidence behind it.

  • The Net Result:  More than ten years of allegations against Malaysian palm oil has led to a broad narrative about palm oil and labour that is weak on substance, but has not been adequately refuted.

This narrative has been taken very seriously by a number of U.S. authorities and has resulted in trade disruptions between Malaysia and the U.S.  

New State Department TIP Report: Cherry-Picks Data; Highly Misleading

Every year the State Department releases a report known as the Trafficking in Persons Report (TIP). The latest version was released by Secretary of State Antony Blinken on 19th July 2022. The TIP report doesn’t analyze sectors and products. Rather, it assesses how different countries – specifically governments – are performing in terms of their responses to human trafficking.

The TIP report places countries in ‘Tiers’ indicating the adequacy of their responses, from Tier 1 (best) to Tier 3 (worse).

The placement of countries is at times surprising:

  • Philippines sits alongside the Netherlands in Tier 1
  • Norway and Denmark are on the same footing in Tier 2
  • Malaysia sits alongside North Korea in Tier 3

This is not necessarily an indication of the prevalence of human trafficking, but is an indication of how governments respond to reports of human trafficking in terms of enforcement and prosecutions.

But an objective assessment of approaches to labour rights indicates that the Malaysian palm oil industry was already implementing many of the recommendations of its own volition, rather than being forced into it by other actors. This is largely because of the industry’s implementation of voluntary standards throughout operations and its commitment to meeting the required standards of its customers in Western markets.

  • For example, some key recommendations for Malaysia – as a country – are to eliminate recruitment or placement fees charged to workers by recruiters and ensure recruitment fees are paid by employers; effectively enforce the law prohibiting employers from retaining passports without employees’ consent; expand efforts to inform migrant workers of their rights and Malaysian labour laws, including their rights to maintain access to their passports at any time, as well as opportunities for legal remedies to exploitation.

These specific points are covered by Malaysia’s MSPO standard, which is mandatory for all palm oil supply chain actors. In the past – pre-MSPO – it was prohibited under the rules of voluntary standards. Moreover, the MSPO standard ensures that companies cannot abrogate any responsibilities towards employees by stating that employees are ‘indirect’ or ‘contract’ workers. The standard requires to treat all workers as if they are direct employees.

The revisions to the MSPO standard – which is a government regulation — are not acknowledged by the report, despite the clear emphasis on worker rights during the revision process. The revisions were also made public within the TIP Report’s reporting period.

This begs a question: Did the TIP Report deliberately ignore these changes? Or was there a predetermined conclusion for the report on Malaysia?

The report is also clear that it does not take responses by non-governmental and commercial sectors into account. In other words, it is supposed to be a critique of government policies. There is a problem with this approach: sectors that are doing the right thing – and even attempting to remedy the situation – are nonetheless penalized for their actions. An example is the Responsible Employment Charter set forth by the Malaysian Palm Oil Association (MPOA), which sets out binding commitments including the elimination of debt bondage, the support for workers’ rights and trade unions, and the publishing of Corrective Action Plans (CAPs).

The TIP Report approach means that all actors within a country will be tarred with the same brush unjustly.

However, this doesn’t prevent the State Department from citing ad hominem NGO reports that are critical of the palm oil industry. The TIP report stated that the report “documented multiple indicators of forced labor associated with the production of palm oil in Malaysia.”

That report appears to be authored by the Fair Labor Association (FLA) – a NGO that many of Malaysia’s plantation companies have engaged with directly to improve the labour rights situation in Malaysia.

  • In fact, this highlights that one of the recommendations that the TIP report made to Malaysia was greater engagement with NGOs – something the industry was already doing.

With regards to the FLA report, it made several recommendations regarding recruitment fees, passport retention and living conditions (among other things) – all of which have been addressed by the revised MSPO standard.

  • Same Quote 3 Years Running: It’s also worth noting that this particular entry in the TIP Report on the Fair Labor Association report has not changed in three years. Does this mean the TIP Report has just become something of a box-ticking exercise?

Ultimately, the TIP Report to some extent fails in its overall responsibilities because it fails to acknowledge that some sectors may already be taking matters into their own hands and attempting to improve, and instead persists at calling those sectors out as ‘bad actors’ because of the broader legal and regulatory context.

There is no doubt that the TIP Report is truly helpful for going some way to solving the global problems of human trafficking. However, palm oil has arguably taken more steps on human and labour rights in Malaysia than any other sector. Supporting and rewarding these voluntary shifts – rather than continuing to penalize – would go some way to improving all sectors across Malaysia.