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From the Wall Street Journal:

"Costco Wholesale faces questions from influential U.S. lawmakers over alleged links between forced labor in China and products sold in the retail giant’s stores.

"Costco should explain why it continues to sell seafood and security cameras that are allegedly tied to human rights abuses in China’s Xinjiang region and elsewhere, said Rep. Chris Smith (R., N.J.) and Sen. Jeffrey Merkley (D., Ore.) in a letter to Costco Chief Executive W. Craig Jelinek. Smith and Merkley head the Congressional-Executive Commission on China, a group of lawmakers and executive branch officials that monitors human rights developments in the country.

"Amid escalating bilateral tensions with China, Washington is increasingly singling out U.S. companies to demand answers about supply-chain links and other ties to the country.

"In their letter to Jelinek, made public Wednesday, the lawmakers said Costco continues to sell China-sourced seafood despite reports detailing concerns about the use of forced labor in its production.

"Smith and Merkley also questioned why Costco sells security cameras from Lorex, a former subsidiary of camera maker Zhejiang Dahua Technology that they said still uses Dahua components in its products. They asked whether Costco would stop selling these products.

"Dahua, a China-based company whose cameras are banned from sale in the U.S., has helped aid Chinese government oppression in Xinjiang, the home of the Uyghur people and other minority groups, they said."

According to the story, a Costco representative told the Journal that “we are currently reviewing the letter, and we will respond in due course.”

KC's View:

Without prejudging Costco's exposure on these issues, I think it is critical for the company to take them seriously and not believe that it can outlast any criticisms it is getting on these issues.  Tensions between the US and China don't seem to be going away anytime soon, and could threaten ways in which Costco traditionally has done business.

Interestingly, the Seattle Times had a story over the weekend about some of the threats that Costco is facing, noting that "the company has formidable competitors in Walmart and its affiliated warehouse membership club, Sam’s Club. Amazon and Target are also competitors."  I wonder if all those companies also have some exposure on the China issues;  it would be my suspicion that they do, and that their time in the spotlight will come shortly.

(FYI … the Times story also observed that Costco "has been slower than some of its competitors to adopt digital technologies. For example, Costco has just begun to do data-driven, targeted advertising to its members."  It was only last year that the company "hired a vice president of digital last year to spearhead a digital transformation but was still in the 'early innings' of a 'two-year road map' to improve its e-commerce website, mobile app and mobile site.")

The Times makes the point that among many of its members, Costco elicits passionate loyalty, but that won't help when it comes to serious questions about how the company's operations may conflict with legitimate public policy questions.