WASHINGTON (BLOOMBERG, REUTERS) - Top Glove's shares sank after the United States Customs and Border Protection (CBP) on Monday (March 29) directed personnel at US ports of entry to seize its disposable gloves, in the wake of finding evidence that the manufacturer used forced labour.

The stock tumbled as much as 5 per cent to its lowest level since March 3, its second day of losses. It is down 21 per cent this year, among the biggest decliners on Malaysia's benchmark stock gauge.

The CBP Office of Trade, in consultation with the Treasury Department, said it imposed the penalties against the world's largest glove maker after having found "sufficient information to believe that Top Glove uses forced labour in the production of disposable gloves". The order expands a directive last year banning imports from two units of the company.

"Today's forced-labour finding is the result of a months-long CBP investigation aimed at preventing goods made by modern slavery from entering US commerce," Mr Troy Miller, a senior official performing the duties of the CBP Commissioner, said in a statement.

"CBP will not tolerate foreign companies' exploitation of vulnerable workers to sell cheap, unethically-made goods to American consumers."

Factories belonging to Top Glove were found to be a major source of Covid-19 infections in Malaysia last year. After discovering thousands of infections among workers at the company's plants in November, the Malaysian government carried out raids on its dormitories.

Top Glove said in a statement on Tuesday (March 30) its US counsels are liaising with CBP representatives to get more clarity and information. It is unable to ascertain the quantum on financial and operational impacts arising from the order, it added.

Top Glove has said in the past months that it has taken extensive rectification actions to improve its labour practices. Ethical trade consultancy Impactt, appointed by Top Glove to assess its trade and labour practices, reported earlier this month that as at January, it "no longer" found indicators of systemic forced labour at the manufacturer.

CBP said its finding does not impact the vast majority of disposable gloves imported into the US that are critical during the Covid-19 pandemic.

"CBP has taken steps to ensure that this targeted enforcement action against Top Glove will not have a significant impact on total US imports of disposable gloves," John Leonard, CBP Acting Executive Assistant Commissioner for Trade said in the statement.

'Unfortunate negative'

Monday's news is an "unfortunate negative" and results in "cloudier earnings certainty and negative investor sentiment", Mr Gan Huan Wen, an analyst at Hong Leong Investment Bank, said in a report dated Monday.

He cut his stock-price target to RM7 from RM8.14. "We understand Top Glove is in contact with the CBP to obtain more information on this finding."

Monday's finding is the second forced labour finding the CBP has issued in the current fiscal year.