China Places PVH Corp. and Illumina on Unreliable Entity List

China’s Ministry of Commerce has officially initiated an Unreliable Entity List management procedure against American apparel giant PVH Corp. and biotech company Illumina. The Bureau of Security and Regulation announced that both companies violated market trading principles by unilaterally suspending commercial cooperation with Chinese enterprises and implementing discriminatory policies, severely impacting the legitimate rights of Chinese companies.

Under the “Unreliable Entity List Regulations,” listed entities will face regulatory measures, including import and export restrictions, domestic investment bans and restrictions on executive entry into China. The announcement, effective immediately, states that additional actions will be taken as per the relevant laws and regulations.

This move follows a special investigation launched in September against PVH Corp., requiring the company to submit compliance reports on its Xinjiang operations over the past three years. The probe focused on whether PVH Corp. adopted discriminatory procurement policies against Xinjiang-based products. Despite ongoing communication with Chinese regulators, the company has not disclosed investigation details in its official filings.

PVH Corp., founded in 1881 and headquartered in New York, is one of the world’s largest apparel groups, owning brands such as Calvin Klein, Tommy Hilfiger, Izod, and Van Heusen. The company recently reported a 4.6% year-over-year revenue decline in Q3 2024, with Tommy Hilfiger and Calvin Klein sales also falling. Despite mid-single-digit growth in the Asia-Pacific region, largely driven by Japan, PVH’s China market grew 7% in local currency.

During a recent earnings call, CEO Stefan Larsson acknowledged that while China contributes only 6% of PVH’s total revenue, it accounts for 16% of its EBITDA. He confirmed compliance documentation was submitted but refrained from detailing the company’s response strategy.

Analysts believe that given current U.S.-China trade tensions, PVH Corp. is unlikely to pass compliance review. If formally placed on the list, it will be forced to exit the Chinese market, disrupting operations for major brands like Calvin Klein and Tommy Hilfiger.