Venezuela, Iran, Libya, Syria, Yemen, North Korea, Zimbabwe and others joined Russia and Thailand at the bottom of an annual ranking compiled by the State Department and announced by Secretary of State John Kerry.
Countries in "Tier 3," the lowest category, are those whose governments do not respect international norms or laws on trafficking and "are not making significant efforts to do so," according to the 382-page report.
But the promotion of Malaysia and Cuba one notch from Tier 3 to the "Tier 2 Watch List" drew allegations that President Barack Obama's administration had politicized the rankings to reward favored capitals.
Asked whether Malaysia's role in trade talks played any factor in hiking the Southeast Asian nation out of Tier 3, undersecretary of state for human rights Sarah Sewall insisted: "No, no, no."
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The report said Kuala Lumpur had made "significant efforts" in fighting trafficking.
While Sewall said the May discovery of mass graves believed to be used by Malaysian people-smugglers near the Thai border was a "core concern" for the State Department, it came after the report's review period ended in March.
"They have elevated politics over the most basic principles of human rights," said Senate Democrat Robert Menendez, alleging that the leniency towards Malaysia and Cuba was "a stamp of approval for countries who have failed to take the basic actions to merit this upgrade."
A non-profit coalition of US-based rights groups, the Alliance to End Slavery and Trafficking, was deeply critical, saying Obama's administration "unfairly" upgraded Malaysia by putting trade concerns over human rights.
Russia, where statistics show there are an estimated five million to 12 million foreign workers, has languished in Tier 3 since 2013.