The House Select Committee on the Chinese Communist Party has released a report linking Chinese e-commerce companies Shein and Temu to a significant number of import violations. The report alleges that the companies exploit trade loopholes to import goods into the US without paying import duties or making shipments subject to human rights reviews. The findings have raised concerns about unfair competition and have reignited concerns over allegations of human rights abuses.
The Report’s Findings
The report found that Shein and Temu, which have significant followings on social media, are likely responsible for over 30% of packages shipped daily to the US under Section 321 of the Tariff Act of 1930. This provision waives import tariffs if the fair retail value of the shipment does not surpass $800. The imports accounted for almost 600,000 shipments a day last year and are likely higher now, according to the findings.
The report alleges that the tariff violations give Temu and Shein an unfair advantage over US retailers. Temu’s valuation is estimated at over $100 billion, while Shein was recently valued at $64 billion. The House Select Committee on the Chinese Communist Party argues that the loophole also allows the companies to provide less comprehensive data to US Customs and Border Protection, including Uyghur Forced Labor Prevention Act (UFLPA) compliance screening, because of the high volume of small packages valued under $800.
Human Rights Abuses and Allegations
Shein has faced allegations of forced labor in its supplier factories in the Uyghur region, while Temu has been accused of failing to develop compliance with the UFLPA. Both companies have also been accused of human rights abuses. The committee reported that Temu is doing next to nothing to keep its supply chains free from slave labor, while Shein has denied allegations of forced labor.
Temu, which is operated by Chinese parent company Pinduoduo, has asked its more than 80,000 Chinese suppliers to accept language prohibiting the shipping of goods made with forced labor to the US. However, the company has taken few measures to address the tariff violations beyond “boilerplate” language, according to the lawmakers.
Impact on American Retailers
American retailers pay millions of dollars in import duties each year, while Shein and Temu allegedly avoid these duties. Clothing brand Gap paid $700 million in 2022, H&M paid $205 million, and wedding retailer David’s Bridal paid over $17 million that year, according to the report. The findings have raised concerns about the impact on US retailers and the fairness of competition.
The House Select Committee on the Chinese Communist Party’s investigation into forced Uyghur labor issues began with a May letter campaign to Nike, Adidas, Shein, and Temu. The report is the first recording of these findings, according to the committee, and the investigation is still ongoing. The allegations of import violations and human rights abuses are likely to prompt further scrutiny of the e-commerce giants and the US-China economic relationship.