Supply chains: the dirty secret of China’s prisons
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At dawn the gates to the detention centre open. A truck laden with several tonnes of freshly dug garlic bulbs enters, and disappears into the vast complex, which houses both prisoners and people awaiting trial. For three hours, there is no movement apart from the Chinese police practising their morning drills.
Then the same truck emerges from the complex, its load replaced with cloves of peeled garlic. It drives for two hours to a depot in the central-eastern town of Jinxiang — the world’s garlic capital — which packages peeled garlic for export to India, according to a worker inside the facility.
Prison labour is common in China, where the law states that prisoners able to work must do so — a system known as “reform through labour”. China is home to around 2.3m prisoners and pre-trial detainees, according to the Institute for Criminal Policy Research, giving it the world’s second-largest prison population after the US.
Exporting prison-produced goods is illegal under domestic and international trade laws. Yet evidence of prison labour is present in many of China’s supply chains, from handbags to washing machines, according to experts and ex-prisoners.
“Most of the companies set up under prison provincial administration bureaus in China look, from the outside, like ordinary companies,” says Joshua Rosenzweig of Amnesty International in Hong Kong. “Foreign corporations are in a pretty tough position to do the kind of due diligence that would be needed to identify whether their supply chains are connected to prison labour.”
Forced labour is not a new phenomenon in the country, but it is becoming more prevalent as a result of higher wages in China and the decline in the working-age population. Manufacturers are under increasing pressure to stay competitive with Bangladesh and Vietnam. Li Qiang, head of the activist organisation China Labor Watch, says that suppliers to US retailers have told him about redirecting some of their orders to prisons in a bid to cut costs after renewed pressure on prices.
“We have seen companies exploiting prison labour as a way of keeping costs low,” says Kenneth Kennedy, senior policy adviser on forced labour at US Immigration and Customs Enforcement.
A spokesperson for Walmart, the world’s biggest retailer, which uses Chinese suppliers says: “We regularly assess factories and have systems in place to investigate complaints.”
Some manufacturers are also under pressure because local governments have started to enforce labour laws that restrict flexible hiring. This has led some subcontractors to cut corners for foreign clients, who do not always have the ability to scrutinise supply chains.
“Illegal subcontracting appears to have increased as a result of the government cracking down on the use of contract workers from 2012,” says Lesli Ligorner, partner at legal firm Morgan, Lewis & Bockius in Shanghai. “When companies had rush orders or a lack of labour, they appear to have decided they would rather violate their supplier contract, and farm out the work to another company, than risk breaking the labour laws and be caught out by local government.”
Companies who use forced labour reduce their wage costs to the level of paying off the prison or detention centre which keeps most, if not all, of the payment for the work, leaving workers very little, according to labour rights advocates and ex-convicts.
In the words of the owner of a small garlic company in Jinxiang: “It means working for nothing.”
Inside a detention centre in Peixian town, 90km south of Jinxiang, detainees work on a fresh shipment of garlic bulbs, according to surveillance footage acquired by a local garlic businessman, Xu Mingju, and seen by the Financial Times. Some of the prisoners are awaiting trial. Others have been convicted and will be transferred to prisons where ex-convicts say labour conditions are better, as they are more closely regulated than detention centres.
Former prisoners say the pungent acids in the garlic can melt detainees’ fingernails, exposing stinging flesh. Those who can no longer use their hands bite off the garlic skins with their teeth.
Peixian’s detainees are only a fraction of those forced to work in China’s export supply chains. Thousands of kilometres from Jinxiang, prisoners in the south-western city of Guilin made handbags once sold in Arizona, while those in the north-eastern city of Tonghua made wreaths to be exported to South Korea, say ex-prisoners interviewed by the FT. Prisoners from Yantai, near Jinxiang in Shandong province, assemble the wiring that goes into household appliances sold worldwide.
In Jinxiang, prison labour is an open secret. The owners of two different shops near the Peixian detention centre say that at least one or two garlic trucks enter the centre every day. A detention centre guard confirmed that the garlic truck arrived via the main gate. In the afternoon, a rubbish cart leaves the centre filled with garlic skins, dripping grey water along the pavement.
Good relationships with the police are essential to getting access to prison labour. “This is the kind of thing you need to sort out with the officials,” says the owner of the small garlic company. “It’s not the kind of service [that just] anyone can have access to.”
Mr Xu’s photos of workers inside the detention centre show them unloading garlic bulbs and loading peeled garlic. They also show footage from a surveillance monitor, which shows detainees sitting together in cells peeling garlic. They wear blue bibs with numbers on the back. On the top of the screen, red letters show crimes against the numbers of the rooms. Cell 202: robbery, intentional bodily harm. Cell 203: kidnapping. 205: theft.
The truck that the Financial Times followed 90km back to Jinxiang carried an estimated two tonnes of peeled garlic, wrapped in mesh sacks. It pulled into the entrance of a depot emblazoned with the characters Jinxiang Shuanglong or Jinxiang Double Dragon.
Inside, workers using forklift trucks moved sacks of garlic around the warehouse, with no obvious separation of garlic from the various sources.
“Our area exports peeled garlic to many countries,” the boss of Double Dragon later told the FT, posing as a garlic importer. “Foreign demand from developed countries for peeled garlic is growing bigger and bigger, because clients want to save time.” He added that the company exported peeled garlic.
But when contacted later by the FT for an official comment, Double Dragon said it did not export peeled garlic and sold only to the domestic market.
A separate Jinxiang garlic company representative said that his company used to rely on labour from the local prison and detention centre to peel garlic for export to Japan, but that it lacked the necessary police connections to continue. As a result, the price he charged for peeled garlic went up 50 per cent over the two years up to the end of 2017.
Jinxiang produces 80 per cent of the world’s garlic exports. The US sources 80 per cent of all its fresh garlic imports from China, according to ASKCI Consulting, a trade data consultancy. Chinese imports make up roughly 20 to 30 per cent of all garlic consumed in the US, according to US and Chinese figures.
But it is illegal to import goods produced in part or whole by forced labour into the US. If a complaint is raised against a foreign production site, US Customs and Border Protection will issue a “withhold release order” — meaning that shipments from that source must be held at the border — and may also launch a criminal investigation into the importer.
Anti-dumping measures imposed after calls from the American fresh garlic-growers’ association, and in place since 2008, mean that all Chinese garlic importers face a 376 per cent duty, apart from Zhengzhou Harmoni and its US affiliate Harmoni International Spice.
US anti-dumping cases can only be initiated by domestic companies that have suffered as a result of the dumping. The garlic association has not nominated Harmoni in its annual submission of complaints against Chinese companies. As a result, Harmoni has never faced an anti-dumping investigation by the Department of Commerce.
But after receiving allegations that Harmoni was using prison labour, the customs department detained shipments of garlic from the company in December 2016 and January 2017. It later reversed that decision after Harmoni supplied CBP with documentation about its supply chain, according to the company. CBP declined to comment on the case.
The use of forced labour is not, however, restricted just to the garlic industry. It also occurs in other Chinese supply chains. Of the 29 active withhold release orders that have been issued by the US, 23 are against Chinese sites.
Customers have found notes, hidden by prisoners, in goods sold in the UK and US — from Christmas ornaments to socks. One note was found by an Arizonan woman after buying a Walmart own-brand handbag last year. “Prisoners in the Yingshan Prison in Guangxi, China are working 14 hours every day,” the handwritten note read in Chinese. “Whoever doesn’t finish his work will be beaten . . . Being a prisoner in China is worse than being . . . a dog in the US.”
The letter was signed with the name of a man who was sentenced to serve 15 years in Yingshan Prison in 2012, according to local court records. Calls to Yingshan Prison confirmed that it has a department in charge of production and sales. Walmart confirmed to the FT that it has dropped a supplier who had been sub-contracting from Yingshan Prison after investigating the issue.
But there are at least 55 prison companies whose registrations detailed all kinds of manufacturing and even construction work. Some explicitly had “prison” in the name, such as Jiangxi Province Prison Group.
Others were owned by provincial prison bureaus, or were owned by the officials in charge of prison bureaus. Many describe themselves as being in the export industry — particularly those companies in the coastal export zones of Zhejiang, Jiangsu and Shandong.
Neither the Peixian detention centre nor the commerce ministry responded to requests for comment on this story. The ministry of foreign affairs declined to comment. “Prisons are run like companies, with their own sales teams,” says Mr Li of China Labor Watch.
Unlike companies, prisons do not enforce labour law.
“We often needed to work from five in the morning to nine at night so the prison is able to make more money,” says one ex-convict who served five years in jail in Tonghua, Jilin province, where he made wreaths for export to South Korea. Another inmate, released from Yantai Prison in Shandong province last year after serving four-years, also described a 5am-8pm working day with at most one rest day each month.
“We did nothing but work,” says the Yantai ex-prisoner, “there were no traces of life.” The prison holds 3,000 people but, he says, he was part of a smaller team of 130 doing unskilled electronics work, bundling wires together for electronics company Weihai Ruicao, which supplies the South Korean multinational LG.
LG confirmed that Weihai Ruicao was a supplier to another LG supplier, SL Electronics. LG has since told the FT in a statement that: “SL Electronics severed its business relationship with Weihao Ruicao when SL was unable to obtain clear proof that they were in compliance with our code of conduct.”
Multinationals often rely on a series of local intermediaries and suppliers, who have an incentive to keep their use of prison labour secret. Detecting its use can be extremely difficult. Prisons do not print receipts or sign formal contracts, according to ex-prisoners, although some have sales departments that responded to telephone inquiries from the FT posing as a buyer.
But for prisoners there is no choice. “The incentive for the prisoner is not monetary,” says one rights advocate who asked to remain anonymous. “Engaging in labour is a prerequisite for clemency in terms of sentence reduction or parole. Prisoners earn points for performing labour.”
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