How HSBC’s digital platform is helping the apparel sector to trace the origin of cotton amid Xinjiang scrutiny

Peggy Sito
·3-min read

HSBC’s digital business to business platform, Serai, has launched a solution for the apparel industry to trace the origin of cotton and other raw materials in the industry’s supply chains as cotton exports from Xinjiang come under greater scrutiny by the US government.

Using the new traceability solution, suppliers can input data on the provenance of their goods at each step along the value chain – from raw material to processed or in-process goods and final shippable product.

“The platform adds greater visibility and transparency to the entire supply chain and helps consolidate data at each stage,” said Vivek Ramachandran, CEO of Serai, a wholly owned subsidiary of HSBC.

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It can help buyers and suppliers to prove the origin of cotton and other materials as the US has enacted several legislations aimed at countering alleged human rights violations of Uygurs and other ethnic minorities in Xinjiang, an autonomous region in China’s northwest.

Vivek Ramachandran, CEO of Serai. Photo: Jonathan Wong
Vivek Ramachandran, CEO of Serai. Photo: Jonathan Wong

China is the world’s second largest cotton producer, with 85 per cent of the output originating from the autonomous region alone in 2019, according to the US Department of Agriculture and Rural Affairs. The US imported US$50 billion worth of textiles from China in 2019.

“The US Customs and Border Protection (CBP) has asked for up to almost 44 documents. Those documents can be shared by suppliers and supply chains over the platform,” said Ramachandran, who was previously the global head of growth and innovation at HSBC in Hong Kong.

He said suppliers can get third party surveyors to validate the data and share them over the platform. Buyers – brands and retailers – can explore and send them to the US law enforcement agency. “We do not do any accreditation, we just provide a platform for buyers and suppliers to share data,” he said.

Under the Tariff Act of 1930, last September the CBP issued five Withhold Release Orders (WRO) on goods produced using forced labour in Xinjiang. The CBP can block all merchandise within the WRO scope from entering the US market, according to international law firm Mayer Brown.

If the importer contests the WRO, it can submit to the CBP, within three months, a certificate of origin and a detailed statement countering forced labour allegations.

“It will help the industry if the solution works well,” said Stanley Szeto Chi-yan, chairman of Hong Kong-listed apparel supply chain manager Lever Style, a Serai customer. “Currently buyers only rely on the suppliers to tell us the origin of the materials.”

On top of the traceability solution, Ramachandran said Serai wants to help companies in the apparel industry connect with each other.

L aunched in 2019, Serai bills itself as the “LinkedIn” for apparel companies. It currently has 3,500 companies on the platform, employing a staff of 40 in Hong Kong and 20 in China.

“What we want to do is to build a platform that makes it easy for businesses to share information with each other, and get information from each other and build relationships with each other,” Ramachandran said.

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Lever Style’s Szeto said that while Serai was the first of its kind in the industry to connect buyers and suppliers, the platform was not big enough in terms of network of companies.

It has the potential to become an influential force once the scale has been built up, he said.

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