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Initial Assessment Report for a complaint filed by a coalition of 28 organizations about the activities of Walmart Canada Corp.

 

File number: 220851
Complaint filed on: June 21, 2022
Report published on: August 24, 2023

About the CORE

The Canadian Ombudsperson for Responsible Enterprise (CORE) is a business and human rights grievance mechanism established by the Government of Canada. People can file complaints with the CORE about possible human rights abuses arising from the operations of Canadian garment, mining, and oil and gas companies outside of Canada.

For more information, see the Canadian Ombudsperson for Responsible Enterprise website.

What is the purpose of this report?

The CORE is reporting on the initial assessment stage of a complaint filed by a coalition of 28 Canadian organizations on June 21, 2022, about the activities of Walmart Canada Corp. 

Pursuant to section 16 of the CORE’s Order in Council, the parties had an opportunity to comment on the facts contained in the report. A summary of the comments received is at Part 5 of the Report.

Who are the parties to the complaint?

The Complainants are a coalition of 28 Canadian organizations listed in Annex 1.

Walmart Canada Corp. (Walmart Canada) is a Canadian garment company. Walmart Canada was incorporated under the Ontario Business Corporations Act on February 1, 2001 with its principal place of business at 1940 Argentia Road, Mississauga, Ontario.Footnote 1

What is the complaint about?

The complaint alleges that Walmart Canada has commercial relationships with Chinese companies identified as using Uyghur forced labour.

In support of their complaint, the Complainants rely on the March 2020 Australian Strategic Policy Institute (ASPI) Uyghurs for sale identifying Qingdao Jifa Huajin Garment Co. Ltd and Jiangsu Guotai Guosheng Co. Ltd. as factories in Walmart Canada’s supply chain, which subject Uyghurs to work under conditions that strongly suggest forced labor. Footnote 2 The ASPI report provides the following information:

Qingdao Jifa Huajin Garment Co. Ltd. ("Qingdao")

Jiangsu Guotai Guosheng Co. Ltd

The Complainants point out that Walmart Canada has not issued a statement responding to the allegations made in the ASPI report nor addressed the alleged use of Uyghur forced labour at earlier stages of its supply chain. The Complainants submit that despite Walmart Canada’s reported removal of products made in Xinjiang from its stores, questions persist regarding its due diligence practices and that of its suppliers.

In support of their allegations, the Complainants also rely on the November 2021 Laundering Cotton report by Dr. Laura Murphy (the Murphy Report) that identifies Jiangsu Lianfa Textile Co. Ltd, Luthai Textile Co. Ltd., Texhong Textile Group and Weiqiao Textile Co. Ltd. as manufacturers linked to forced labor in Walmart’s supply chain.Footnote 3 The Murphy report provides the following information:

Jiangsu Lianfa Textile Co. Ltd (“Jiangsu”)

Luthai Textile Co. Ltd. (“Luthai”)

Texhong Textile Group (“Texhong”)

Weiqiao Textile Co. Ltd. (“Weiqiao”)

Part 1 — Summary of the intake stage (or admissibility stage)

  1. On July 22, 2022, on the basis of the information provided by the Complainants, the Ombud decided that the complaint was admissible pursuant to section 6.1 of the Operating Procedures. This means that the Ombud decided there was sufficient information for the Complainants to form a reasonable belief that each of the three admissibility criteria was met. The threshold for admissibility is a low one. The admissibility criteria are that:
    • The complaint concerns an alleged abuse of an internationally recognized human right;
    • The alleged abuse arises from the operations abroad of a Canadian company in the garment, mining or oil and gas sector; and
    • The abuse allegedly occurred after May 1, 2019 or, if it allegedly occurred before May 1, 2019, is ongoing at the time of the complaint (Section 5.7, Operating Procedures).
  2. The Ombud’s decision was communicated to the Complainants on July 27, 2022.
  3. The Ombud’s decision was communicated to Walmart Canada by email on July 29, 2022 with a copy of the complaint. The complaint was then moved from the intake stage to the initial assessment stage of the complaint process. At the request of counsel for Walmart Canada, CORE also held a preliminary meeting with counsel for Walmart Canada on January 10, 2023.

Part 2 — Initial assessment

Background

  1. Initial Assessment is the process for deciding how to proceed with an admissible complaint including how to address any objections from the respondent (the company named in the complaint). The Ombud does not make a decision on the merits of the complaint during initial assessment.
  2. The objectives of the initial assessment process are to:
    • Develop a better understanding of the parties’ positions regarding the allegations including any objections to the complaint from the respondent;
    • Begin to identify the parties’ underlying needs and interests;
    • Provide information regarding the role of the CORE and the different dispute resolution processes; and
    • Work with the parties to decide what dispute resolution process may best address the issues raised by the complaint including the allegations and any objections from the respondent.
  3. During initial assessment, the Ombud meets with the parties to learn about their views regarding the allegations, respond to their concerns and questions, and seek their agreement to participate in early resolution or mediation. If the parties do not agree to participate in a consensual dispute resolution process, the Ombud will decide how to deal with the complaint including whether to begin an investigation.

The initial assessment process in this complaint

  1. The steps taken by the CORE during the initial assessment of this complaint were as follows:
    1. Desk review of the complaint.
    2. Virtual initial assessment meeting with the Complainants’ representatives on November 18, 2022.
    3. Virtual meeting with counsel for Walmart Canada on January 10, 2023. (This meeting was not an initial assessment meeting. CORE responded to questions from counsel about the complaint process).
    4. Desk research on academic reports and corporate statements.

What the Complainants told the CORE

  1. During the initial assessment meeting on November 18, 2022, the Complainants expressed their willingness to participate in early resolution or mediation including agreeing to terms of confidentiality. The Complainants noted that they were willing to work towards a systemic resolution that does not name Walmart Canada and that finds solutions to address the possible use of Uyghur forced labour and that would help Canadian garment companies to undertake appropriate HRDD in this high-risk context. The Complainants also indicated that given the complexity of tracing the origin of textiles, particularly from Xinjiang, it is preferable that garment companies use fibre tracing technology to map their supply chains from fibre to retail.

Walmart Canada’s response to the complaint

  1. On November 18, 2022, Walmart Canada provided an initial response to the complaint via email:
    1. Walmart Canada stated that forced labour is strictly prohibited under its Standards for Suppliers, and emphasized that it takes allegations of forced labour very seriously.
    2. Walmart Canada noted that the complaint letter dated July 21, 2022 did not link it to allegations of forced Uyghur labour in China.
    3. Walmart Canada also expressed a general denial of the allegations on their merits, asserting that the complaint did not meet CORE’s admissibility requirements.
    4. Walmart Canada also emphasized that the practices described in the complaint run counter to its Standards and Values.
    5. Walmart Canada noted that it reviewed the entities referenced in the complaint (Qingdao Jifa and Jiangsu Guotai Guosheng, Jiangsu Lianfa Textile Co. Ltd., Luthai Textile Co. Ltd., Texhong Textile Group, and Weiqiao Textile Co. Ltd.) to determine if it had any record of those entities in its active disclosed supply chain. Upon concluding its review, it found that none of the entities named in the complaint were recognized as factories that its suppliers used to produce its merchandise.
    6. Walmart Canada emphasized that its Responsible Sourcing program monitors suppliers and the facilities used by those suppliers to produce merchandise for compliance with its Standards for Suppliers.
    7. Walmart Canada maintained that it requires its suppliers globally to provide to it, the names and locations of factories used by those suppliers to produce Walmart-branded merchandise and merchandise Walmart Canada will import.
    8. Walmart Canada also noted that it requires its suppliers to obtain audits of suppliers’ factories from internationally recognized, independent, third-party audit programs performed by qualified independent auditors. Walmart Canada also emphasized that every audit is reviewed for indications of forced and underage labour and unsafe working conditions, among other issues, and if there were indications of such practices, it conducts an investigation.
    9. Walmart Canada also contended that beyond compliance, it takes proactive steps to combat forced labour and human trafficking because it is the right thing to do. It also emphasized that taking such proactive steps makes it a stronger business, and enhances trust with its customers and stakeholders.
  2. During the initial assessment meeting on February 6, 2023, Walmart Canada representatives noted that Walmart Canada was not inclined to reiterate its position as its position was outlined in its complaint response letter. They further explained that it is unclear how Walmart Canada is implicated in the CORE process given Walmart Canada’s due diligence and the information that it provided to the CORE. According to them, Walmart Canada looked for the entities referenced in the complaint and did not find them. The company representatives also questioned what Walmart Canada would have to gain from participating in the process. They also explained that information about the company’s due diligence is publicly available. According to them, Walmart Canada participates in a lot of councils and reviews around the world, and has a high integrity threshold around forced labour. They further emphasized that Walmart Canada leads in its field, with some of the best systems traceability, ethics hotlines, and traceability teams. Walmart Canada representatives also confirmed that the company did not respond to the November 2021 letter from the Complainants in which the Complainants expressed their concerns, asking Walmart Canada to ensure beyond a reasonable doubt that it does not benefit from the atrocities being committed against the Uyghurs.Footnote 4
  3. On May 19, 2023, Walmart Canada communicated its decision to not participate in the CORE’s dispute resolution process. Fundamentally, Walmart Canada declined to participate further in the complaint process, including mediation, stressing that it denies the Complainant’s allegation that its supply chain includes facilities or organizations that engage in human rights abuses. Walmart’s response to the complaint on its merits are outlined as follows:

Corporate policies and controls that prevent human rights abuses in the supply chain

  1. Walmart Canada notes that as a matter of company policy, it takes allegations of human rights violations seriously. It also develops and executes policies, standards, controls and supply chain monitoring systems that support its corporate mandate to prohibit the use of forced labour anywhere in the supply chain. Walmart Canada urged the Complainants to review its standards and policies related to the requirements and expectations of its suppliers with respect to labour and human rights, particularly Walmart Canada’s Standards for Suppliers and Disclosure Policy, which can be found at the following link: Walmart Responsible Sourcing Compliance Hub. Walmart Canada emphasized that its Responsible Sourcing program monitors suppliers and the facilities they use to produce merchandise for compliance with the above-noted Standards for Suppliers. According to Walmart Canada, it also requires its suppliers to provide the names and locations of factories they use, and obtain audits of those factories from internationally recognized, independent, third-party audit programs. Walmart Canada noted that the auditors are trained to look for (among other things) forced labour indicators throughout its supply chain. Any indications of forced labour in any form are investigated further and immediately escalated for further review.

Specific responses to the complaint

  1. With respect to the complaint letter received from CORE, Walmart Canada stated that it reviewed the entities referenced in the complaint (Qingdao Jifa and Jiangsu Guotai Guosheng, Jiangsu Lianfa Textile Co. Ltd., Luthai Textile Co. Ltd., Texhong Textile Group, and Weiqiao Textile Co. Ltd.) as well as the 27 factories referenced in the underlying ASPI report. According to Walmart Canada, none of the entities are in Walmart Canada’s active disclosed supply chain, nor are any of the factories listed as factories used by Walmart Canada suppliers to produce merchandise for Walmart Canada.

Part 3 — How to deal with the complaint?

  1. The Ombud must decide how to deal with the complaint. The Ombud may decide to:
    1. Close the file - The Ombud may decide not to deal with the complaint and to close the file after publishing this report pursuant to section 14(2) of the Order in Council; or,
    2. Conduct an investigation using independent fact-finding - The Ombud may decide to investigate the complaint using independent fact-finding pursuant to section 7(b) of the Order in Council.
  2. In deciding whether to investigate a complaint, the Ombud considers the overall context of the complaint and relevant factors including whether:
    1. The complaint is frivolous or vexatious;
    2. The complaint is being reviewed or has been reviewed, in another forum.
    3. The Canadian company has already provided a satisfactory response or remedy to the allegations in the complaint;
    4. Relevant information is likely to be available;
    5. Effective remedy is likely to be available: and
    6. An investigation is likely to lead to unacceptable risk to the complainant or others.
  3. In considering whether relevant information is likely to be available, the cooperation of the Canadian company named in a complaint is not determinative. The CORE may consider the availability of information from all reasonably accessible sources. As well, in any final report, the CORE may comment on how the cooperation of the parties impacted on the availability of information and other aspects of the investigation.
  4. In considering whether any practical or effective remedy is available, the Ombud will weigh the scope of the investigation i.e., who would be covered by the investigation, possible remediation options, and other competing factors including institutional capacity (public resources) and the desirability and effectiveness of launching a public investigation.

Analysis

  1. On their face, the allegations made by the Complainants raise serious issues regarding the possible abuse of the internationally recognized right to be free from forced labour, referred to in following instruments:
    1. Right to be free from slavery or servitude (Article 4, Universal Declaration of Human Rights, 1948);
    2. Right to work, to free choice of employment, to just and favourable conditions of work (Article 23(1), Universal Declaration of Human Rights, 1948; Article 6.1, International Covenant on Economic, Social and Cultural Rights, 1966);
    3. Freedom from forced or compulsory labour (Articles 1 & 2, ILO’s Forced Labour Convention, 1930 (No. 29), Article 8(3)(a), International Covenant on Civil and Political Rights, 1966; The Protocol of 2014 to the Forced Labour Convention 1930);
    4. Freedom from forced or compulsory labour as a means of political coercion or of racial, social, national or religious discrimination. (Article 1, ILO’s Abolition of Forced Labour Convention, 1957 (No. 105)).
  2. The seriousness of the human rights impacts arising from the possible use of Uyghur forced labour is underlined by the report OHCHR Assessment of human rights concerns in the Xinjiang Uyghur Autonomous Region, People’s Republic of China issued in August 2022. The report finds that far-reaching, arbitrary and discriminatory restrictions on human rights and fundamental freedoms were imposed on Uyghurs and other predominantly Muslim communities living in Xinjiang “in violation of international laws and standards” and calls on states, businesses and the international community to take actions in order to end the abuses.
  3. Recognizing the seriousness of the possible use of Uyghur forced labour in Xinjiang, the Canadian government requires Canadian companies that source directly or indirectly from Xinjiang or from entities relying on Uyghur labour or who seek to engage in the Xinjiang market to sign the Integrity Declaration on Doing Business with Xinjiang Entities before receiving services and support from the Trade Commissioner Service (TCS). In addition, the Canadian government’s 2023 budget signaled its commitment to reducing supply chain vulnerabilities and its intention to strengthen Canada’s supply chain infrastructure by shifting critical supply chains away from dictatorships and towards democracies.
  4. The complaint raises questions about Walmart Canada’s due diligence activities. Principles 14 and 17 of the UNGPs Guiding principles on business and human rights (PDF) and related commentary indicate that HRDD in high-risk areas such as the Xinjiang region in China be tailored according to the nature and context of a company’s operation, types of vulnerable groups, and the intensity and severity of human rights risks and that a company may need to adopt more robust measures in a high-risk operating context.
  5. As well, the UNGPs provide guidance regarding the responsibility of companies to be transparent about their HRDD activities. Companies whose business operations or operating context pose risks of severe human rights impacts are required to report formally about how they identify and address those serious human rights impacts (Principle 21 and its commentary of the Guiding principles on business and human rights (PDF)). When concerns are raised by or on behalf of affected or other relevant stakeholders, companies need to provide sufficient information and ensure that its reporting/communication is accessible to the intended audiences.
  6. As mentioned above, Walmart Canada provided the CORE with a response to the complaint. Walmart Canada’s response asserts that the entities referenced in the complaint, (Qingdao Jifa, Jiangsu Guotai Guosheng, Jiangsu Lianfa Textile Co. Ltd., Luthai Textile Co. Ltd., Texhong Textile Group, Weiqiao Textile Co. Ltd.) and the 27 factories referenced in the underlying ASPI report are not entities in Walmart Canada’s active disclosed supply chain. Walmart Canada also asserts that none of the factories listed in the complaint are used by Walmart Canada’s suppliers to produce merchandise for Walmart Canada.
  7. Considering the information contained in the ASPI report which links Walmart Canada with factories that the report identifies as using Uyghur forced labour, it appears that there is a conflict in the available information that may warrant an investigation. While Walmart Canada notes that it has developed and executed policies, standards, controls and supply chain monitoring systems that support its corporate mandate to prohibit the use of forced labour anywhere in the supply chain, the complex nature of garment supply chains may warrant investigation of the relationship between Walmart Canada and Uyghur forced labour. An investigation may, for example, explore the degree to which Walmart Canada has taken any concrete steps, such as desk-based due diligence, to ensure beyond a reasonable doubt that forced labour is not implicated. Indeed, during the initial assessment meeting of February 6, 2023, Walmart Canada representatives emphasized Walmart Canada’s due diligence processes, stating that Walmart Canada’s due diligence is publicly available; Walmart Canada participates in a lot of councils and reviews around the world; and that Walmart Canada has a high integrity threshold around forced labour and leads in the field, with some of the best systems traceability, ethics hotlines, and traceability teams. But more information is required to consider whether Walmart Canada’s HRDD is consistent with the robust due diligence required by a high-risk context such as Xinjiang.
  8. If the Ombud decides to investigate the complaint, there will be an ongoing opportunity for Walmart Canada to respond and participate including providing additional information regarding its HRDD activities.
  9. Given the broader context of the complaint and challenges in gathering information on an in-country basis, independent fact-finding may be limited. The availability of the information would need to be assessed as the investigation progresses and would be considered in any final report.
  10. The complaint does not name individuals or make individuals identifiable thereby reducing the potential for an investigation to increase risk to individuals. If the Ombud decides to investigate the complaint, an assessment of risk will be ongoing throughout the investigation.

Part 4 — Participation in the complaint process

  1. As indicated above, Walmart Canada provided an initial response to the complaint and participated in an initial assessment meeting held on February 6, 2023. On May 19, 2023, Walmart Canada also communicated its decision not to participate in the CORE’s dispute resolution process, stating that it rejects the Complainants’ allegations.
  2. The CORE’s Operating Procedures provides that full and active participation in the complaint process is part of good faith:

    Section 11.1 requires the parties to fully participate in the complaint process including by providing the Ombud with relevant information and documents and making witnesses available on reasonable notice, according to the timelines established by the Ombud.

    Section 11.2 provides that where a Canadian company does not participate actively in the complaint process, including refusing to provide relevant information and documents, the Ombud may draw appropriate negative conclusions or adverse inferences during fact-finding.

    Section 12.4 provides that the Ombud may consider a party not to be acting in good faith if the party does not actively participate in a review without reasonable explanation.

  3. Given Walmart Canada’s limited participation so far in the process, the Ombud may consider the question of good faith participation at a later stage. The Ombud may exercise their discretion under section 10 of the Order in Council which provides that they may make recommendations to the Minister on implementing trade measures including any of the following:
    1. Withdrawal or denial of trade advocacy support provided to the Canadian company by the Department of Foreign Affairs, Trade and Development (known as “Global Affairs Canada”);
    2. Refusal by the Department of Foreign Affairs, Trade and Development to provide future trade advocacy support to the Canadian company; and
    3. Refusal by Export Development Canada to provide future financial support to the Canadian company.

Part 5 — Comments from the parties

Comments from the Complainants

  1. On June 12, 2023, the Complainants provided their comments on the draft initial assessment report. The Complainants assert that the CORE should conduct an investigation using independent fact-finding. To support their assertion, the Complainants apply the factors set out in paragraph 15.
  2. First, the Complainants assert that the complaint is not frivolous or vexatious and that the “conflict in available information” (paragraph 24) warrants an investigation. The Complainants reiterate the evidence provided in the complaint, namely from the Australian Strategic Policy Institute and research by Laura Murphy. The Complainants also assert that beyond mere denials of involvement, none of Walmart Canada’s statements satisfactorily address Walmart Canada’s use of forced labour. As noted by the Complainants, Walmart Canada’s denial of involvement in the use of force of labour is also directly contradicted by ASPI and Laura Murphy’s findings.
  3. Second, the Complainants note that the complaint is not being reviewed in another forum, nor has it been reviewed in the past in another forum.
  4. Third, the Complainants assert that Walmart Canada has not provided a satisfactory response or remedy to the allegations in the complaint. They note that Walmart Canada communicated its decision on May 19, 2023 to not participate in the CORE’s dispute resolution process. They further note that Walmart Canada failed to respond to their letter of November 2021. The Complainants also assert that the CORE should not accept Walmart Canada’s attempts to deny responsibility, especially as Walmart Canada has demonstrated a lack of good faith by refusing to participate in the CORE’s dispute resolution process.
  5. Fourth, the Complainants state that relevant information is likely to be available in the public domain, including through the Australian Strategic Policy Institute and Laura Murphy. They note that even if Walmart Canada fails to cooperate, the relevant information that is available on public domain is substantial.
  6. Fifth, the Complainants note that effective remedies are available as the Ombud may make recommendations to the Minister of International Trade for trade measures including denial or withdrawal of existing trade advocacy support, and/or refusal of future trade advocacy and financing supports.
  7. Finally, the Complainants note that conducting an investigation is not likely to lead to unacceptable risk to the Complainants or others.

Comments from Walmart Canada

  1. On June 8, 2023, Walmart Canada sent an email to the CORE stating that it has no further comments, and noting that its decision to provide no further response is not an endorsement of the draft initial assessment report or its conclusions.

Part 6 — Ombud’s decision

  1. To move forward with mediation or a joint fact-finding investigation, the agreement of both parties is essential. While the Complainants initially indicated that they are open to all dispute resolution options, Walmart Canada has declined to participate further in the CORE’s dispute resolution process, including mediation. Consequently, it appears that mediation is not currently a viable option.
  2. In order to address the allegations raised in the complaint, the Ombud has decided to launch an investigation using independent fact-finding. In reaching their decision, the Ombud considered the factors mentioned in paragraph 15 of this report:
    1. On its face, the complaint raises serious allegations regarding the possible abuse of the international human right to be free from forced labour. Closing the file before conducting an investigation would prevent the Ombud from considering every process available to them to pursue their mandate of promoting respect for human rights and preventing human rights abuses;
    2. The complaint is not pending for review and has not been reviewed in another forum;
    3. Walmart Canada has provided information regarding its corporate policies and controls that are geared towards preventing human rights abuses in its supply chains, including its Standards for Suppliers and Disclosure Policy, which monitors its suppliers and factories to ensure that forced labour is not implicated in its supply chains.
    4. However, while Walmart Canada generally denied the allegations in the complaint, it did not provide a specific response. There is a conflict in the available information that warrants a limited investigation. Specifically, Walmart Canada’s denial is contradicted by the ASPI report and the Murphy report that purport to identify manufacturers in Walmart Canada`s supply chain that are linked to forced labor.
    5. While the availability of relevant information may be limited, the Ombud may seek assistance from experts to research and analyze publicly available data. In her investigation report, the Ombud can comment on how the availability of information affects the ability to make findings.
    6. The availability of effective remedy may be impacted by Walmart’s participation in the complaint process including the implementation of any recommendations made by the Ombud, if appropriate. This will have to be assessed at the end of the investigation.
    7. An investigation is not likely to lead to an unacceptable risk to the Complainants and others given that no individuals are named.
    8. Despite its current decision not to participate in the complaint process, Walmart Canada will have an ongoing opportunity to provide further relevant information during the investigation, including regarding the results of the audit of its suppliers’ factories. As noted by Walmart Canada, it requires its suppliers to obtain audits of suppliers’ factories from internationally recognized, independent, third-party audit programs performed by qualified independent auditors.
  3. While the CORE will proceed with an investigation through independent fact-finding, mediation is available at any stage of the complaint process at the Ombud’s discretion and with the agreement of the parties.

Annex-1

Complainants: A coalition of 28 organizations

  1. Canadians in Support of Refugees in Dire Need (CSRDN)
  2. Alliance Canada Hong Kong
  3. Anatolia Islamic Centre
  4. Canada Tibet Committee
  5. Canadians Against Oppression & Persecution
  6. Canadian Council of Muslim Women (CCMW)
  7. Canadian Council of Imams (CCI)
  8. Canada-Hong Kong Link
  9. Doctors for Humanity
  10. East Turkistan Association of Canada
  11. End Transplant Abuse in China (ETAC)
  12. Human Rights Research and Education Centre, University of Ottawa
  13. Human Concern International (HCI)
  14. Islamic Circle of North America Canada (ICNA)
  15. Islamic Society of North America (ISNA)
  16. Justice for All
  17. Lawyers for Humanity
  18. Muslim Association Canada (MAC)
  19. National Council of Canadian Muslims (NCCM)
  20. Raoul Wallenberg Centre for Human Rights
  21. Canadian Security Research Group
  22. Share 2 Care (S2C)
  23. Stop Uyghur Genocide Canada
  24. Toronto Association for Democracy in China
  25. Union of Medical care and Relief Organizations-Canada (UOSSM)
  26. Uyghur Refugee Relief Fund
  27. Uyghur Rights Advocacy Project
  28. Vancouver Society in Support of Democratic Movement
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