A bipartisan group of lawmakers has called on the Securities and Exchange Commission (SEC) to require Chinese fast-fashion company Shein to disclose any potential forced labor practices before its possible initial public offering (IPO) in the U.S. The company has faced allegations of mistreatment of Uyghurs, a marginalized group in China, and falsifying reports of forced or underpaid labor by its supplier factories, some of which are in the Xinjiang Uyghur Autonomous Region of China. These alleged practices violate the 2021 Uyghur Forced Labor Prevention Act.
Reps. Jennifer Wexton (D-Va.) and John Rose (R-Tenn.) led the bipartisan group of lawmakers in a letter to SEC Chairman Gary Gensler, demanding that Shein verify that it does not use forced labor before being allowed to issue securities in the U.S. The lawmakers also requested that Gensler notify national securities exchanges registered under Section 6 of the Securities Exchange Act of the requirement.
While Shein claims that it does not use Uyghur forced labor and works with third parties to audit its facilities, experts have countered that these audits can be easily manipulated or falsified by state-sponsored pressure. The lawmakers argue that it is appropriate to presuppose that any product made in the Xinjiang Uyghur Autonomous Region is made with forced labor.
Shein, a $64 billion company, is preparing for a potential IPO later this year. Its business model relies heavily on advertising to Gen Z buyers on mobile apps like TikTok and through social media influencers. The company’s de facto holding company is located in Singapore, and it hired its first federal lobbyists in 2022 with a goal of expanding its distribution into the U.S. market.
The lawmakers’ letter echoes concerns from outside groups. Independent coalition Shut Down Shein has called on the SEC to deny IPO registration to Shein unless it provides proof of compliance with the Uyghur Forced Labor Prevention Act. Chapin Fay, executive director of Shut Down Shein, has written that access to U.S. capital markets is a privilege, not a right, and should not be given freely to corporations that threaten U.S. national security with nefarious business practices and make Americans complicit in their violation of U.S. law.
Shein has responded to the allegations, saying that it takes visibility across its entire supply chain seriously and is committed to respecting human rights and adhering to local laws and regulations in each market it operates in. The company spokesperson added that their suppliers must adhere to a strict code of conduct that aligns with the International Labour Organization’s core conventions, and that they have zero tolerance for forced labor. The SEC has not yet responded to the lawmakers’ request for comment.
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