Climate and Environmental Governance: Why palm oil may be a risk to Malaysian exports

This article first appeared in Forum, The Edge Malaysia Weekly on August 31, 2026 - September 6, 2026

On June 2, the US Trade Representative (USTR) proposed tariffs on 60 economies, not for currency manipulation or dumping, but for failing to enforce or adequately ban goods made with forced labour.

Malaysia landed in the lower, 10% bracket — better than Australia’s 12.5%, but still a tariff with a message.

Buried in the technical language of the USTR Section 301 notice is what should worry Malaysian exporters: the currency of evidence in trade has changed, and any country that doesn’t show proof risks paying for it broadly, not narrowly. It is no longer just about palm oil, orangutans or deforestation.

This shift compounds the effects of three components in ways Malaysian industry and policymakers should recognise as a potential tsunami.

The end of the audit as safe harbour

For a decade, the default answer to a forced labour allegation has been to point to a certification and produce a third-party audit. That no longer works. Sime Darby Plantation (now SD Guthrie Bhd [KL:SDG]) entered December 2020 with a clean bill of health from its Roundtable on Sustainable Palm Oil (RSPO)-audited estates. The certification body noted no non-conformances had been found on any certified plantation. US Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) anyway, based largely on evidence outside the company’s own systems. When Sime Darby sought to have the order lifted, CBP explicitly said it needed to see what was behind the audit, not what was submitted.

Top Glove Corp Bhd (KL:TOPGLOV) experienced the same in reverse — active remediation and self-reported progress did not stop CBP escalating its order to a formal Finding in 2021, imposing an even stronger action than the one it replaced.

This is de-facto declared policy rather than coincidence. US guidance under the Uyghur Forced Labor Prevention Act (UFLPA) states plainly that third-party audits alone are insufficient to demonstrate due diligence. For Malaysian palm oil companies whose reporting is built on Malaysian Sustainable Palm Oil and RSPO certification, this is a structural issue. A company can be certified, compliant on paper, yet still fail when its cargo clears port but gets detained. Certification may be necessary, but is no longer sufficient and companies that haven’t adapted their evidence base are exposed, regardless of what actually happens on estates.

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