Latest Report on Uyghur Conditions: U.S. Congress Steps Up to Hold Shein Accountable
In recent times, the issue of Uyghur forced labor has been thrust into the spotlight, raising global concerns about human rights violations in China's Xinjiang Uyghur Autonomous Region (XUAR). A bipartisan group of 22 U.S. House of Representatives members have taken a decisive step to address this concern, urging the Securities and Exchange Commission (SEC) to hold the popular Chinese fashion retailer, Shein, accountable for any potential use of forced labor in its supply chain.
The letter, led by Representatives Jennifer Wexton of Virginia and John Rose of Tennessee, calls on the SEC to require Shein to certify that none of its products made in China employ Uyghur forced labor. Joining the cause are several other representatives from both sides of the aisle, including Jake Auchincloss (D-MA), Earl Blumenauer (D-OR), Eric A. “Rick” Crawford (R-AR), and others.
The lawmakers firmly believe that being able to issue and trade securities on domestic exchanges is a privilege, and companies seeking this privilege must demonstrate a commitment to upholding human rights globally. Hence, they are urging the SEC to mandate that Shein provides independent verification of its supply chain to ensure it does not utilize Uyghur forced labor.
The concerns surrounding Shein and other Chinese fast-fashion companies like Temu stem from the increasing reliance on Chinese manufacturers and suppliers. A Bloomberg analysis also found scientific evidence linking cotton from the Xinjiang region to clothing sold by Shein in 2022. This has raised alarm bells since Xinjiang has been implicated in the organized use of forced labor in various industries, including cotton picking and electronics manufacturing.
As Shein plans to go public with an IPO later this year, lawmakers see an opportunity to establish regulations that would ensure the company's compliance with the Uyghur Forced Labor Prevention Act, which was enacted to prevent the use of forced labor from the Xinjiang region. Especially when Shein has outpaced competitors—including Zara and H&M—to take a dominant position in the U.S. market, a business model that other Chinese firms are seeking to replicate. Clothing e- commerce is a surging Chinese industry; chinese state media outlet Sixth Tone reported that there are more than ten other startup-style Chinese firms founded since 2019 emulating Shein’s business model and expanding their U.S. presence, including Cider, Urbanic, ChicV, Doublefs, Cupshe, and JollyChic.
And there doesn’t seem to be a stop in sight for either Shein or Temu. A Shein spokesperson denied any use of Uyghur forced labor and stated that the company has no suppliers in Xinjiang. However, the bipartisan group of representatives remains determined to seek independent verification of these brands to ensure transparency and accountability.
Apart from concerns over forced labor, Shein and similar fast-fashion platforms have also faced criticism regarding copyright infringement accusations and lawsuits for violations of intellectual property rights. The issue brief released by research staff of the U.S- China Economic and Security Review Commission highlighted the challenges posed by fast fashion brands to U.S. interests, including difficulties in monitoring supply sources, ensuring fair market practices, and exploiting trade de minimis import exemptions.
The situation also underscores the broader issue of U.S.-China relations, where tensions remain high, and where there is an increased effort to restrict technology linked to foreign entities. While Shein claims to have built tracing systems to ensure compliance with U.S. laws and regulations, the lawmakers still have emphasized the need for further independent verification to address human rights concerns. Temu, which had started operating in the United States in September, informed the committee that it facilitates the delivery of millions of shipments into the country each year which come from over 80,000 suppliers by selling from Chinese factories to American consumers.
By utilizing the “de minimis” shipping approach, fast fashion brands like Shein and Temu have been able to offer goods at cheaper prices. This trade loop hole has allowed imported packages valued under $800 to enter into the United States duty-free. Since Shein clothing and accessories average about $11 per item this means that Shein not only benefits from de minimis, but it is also exempted from the standard 16.5% standard duty and the 7.5% tariff specific to China.
However, this shipping method has raised concerns due to its implications. De minimis trading requires less information to be disclosed about the products and the companies involved in the transactions. This lack of transparency makes it challenging for U.S. customs officials to identify packages containing narcotics, counterfeit items, or products made with forced labor.
Conceringly, the volume of de minimis packages entering the United States has significantly increased, more than tripling between 2016 and 2021, with a total of 720 million such packages in 2021. Combined, Temu and Shein on an annualized basis, constituted over 30 percent of the de minimis shipments in 2022 and almost half of those originating from China.
Ultimately, the latest report on Uyghur conditions has propelled the U.S. Congress to hold Shein accountable for potential ties to forced labor in China's Xinjiang region. The bipartisan effort reflects the collective concern over human rights violations and the need to ensure companies comply with ethical standards before accessing U.S. markets. As the scrutiny on Shein and similar companies intensifies, it remains to be seen how the situation will unfold and what measures will be taken to uphold human rights and fair market practices in the fast-fashion industry.