House Committee Highlights Chinese Retailers’ Temu, Shein ‘Extremely High’ UFLPA Risk

Temu purposefully uses a business model based around the $800 de minimis threshold to “avoid bearing responsibility” for UFLPA, the report said. It also doesn’t conduct audits and only requires its suppliers to agree to boilerplate terms and conditions that prohibit the use of forced labor. The report said the company doesn’t “maintain even the facade of a meaningful compliance program."

The report, released June 22, highlights a handful of “key findings” from the committee's ongoing investigation into Chinese fast fashion companies and online marketplaces operating in the U.S. The committee stressed that it continues to “scrutinize” Chinese supply chains’ compliance with the UFLPA -- including the business practices of Shein, Temu, Nike and Adidas -- but released this “interim” report to inform American importers that there is an “extremely high risk that Temu’s supply chains are contaminated with forced labor.”

The committee said Temu and Shein are likely responsible for more than 30% of all daily packages shipped to the U.S. under the de minimis provision, and almost half of those shipments come from China. “The fact that tens of millions of shipments from China are not being sufficiently vetted for UFLPA compliance is contrary to the goals of this landmark legislation,” the report said.

The report comes about two months after the leaders of the House China Select Committee asked Shein and Temu about their use of de minimis and their import compliance procedures (see 2305030077). In response, Temu told the committee that UFLPA requirements don’t apply “directly to Temu’s activities as an online platform operator” because it isn’t the “importer of record with respect to goods shipped to the United States.”

The company also said it’s involved in shipping tens of millions of packages a year to the U.S., lists 80,000 sellers on its website and the majority of its shipments to the U.S. fall under de minimis provision. “In light of the sheer volume of shipments sent to the United States through its website, Temu’s failure to take any meaningful steps with respect to preventing the importation of goods produced with forced labor is striking,” the committee said, adding that Temu “denies responsibility” for UFLPA compliance.

The report said Temu’s compliance plan “relies almost entirely on its China-based third-party sellers.” But Temu also doesn’t have an auditing or compliance program to assess whether those suppliers are complying with U.S. import regulations, Temu told the committee. It relies on a “reporting system” in which consumers, sellers and regulators “file complaints for violations of Temu platform rules.” The company said it hasn’t received any forced labor-related complaints.

“This lack of any complaints highlights the dubious nature of a system that relies solely on external reporting,” the committee said, adding that companies in China that raise questions about forced labor are “routinely penalized” and not likely to report violations of U.S. law. “It is also unclear how American consumers would have relevant information” about forced labor.

The report also noted that Temu doesn’t have a policy to block sales of goods from China’s Xinjiang province, which is “intrinsically linked” to forced labor. The committee said it found at least one product on Temu’s website that openly advertised its connection to Xinjiang: an item labeled “New Handmade Knitted Cotton Pendant with Xinjiang Cotton.”

“Temu’s policy to not prohibit the sale of products that explicitly advertise their Xinjiang origins, even in the face of mounting congressional and public scrutiny on related topics, raises serious questions that warrant -- and will receive -- additional scrutiny,” the committee said.

The committee pointed to the $800 U.S. de minimis provision as “foundational to Shein and Temu’s business models and relevant to the Select Committee’s analysis of each company’s UFLPA compliance regime.” It noted that the U.S. de minimis threshold is more than twice that of most any other country, noting that China’s threshold is $7.

An “overwhelming volume of small packages” and lack of data limit CBP’s ability to intercept and examine every shipment that may have been made with forced labor, the report said, adding that Temu and Shein are responsible for almost 600,000 packages shipped to the U.S. every day under the de minimis rule.

“The fact that the vast majority of products shipped from both Shein and Temu to American consumers fall under the de minimis exception means that these companies avoid customs duties -- making each product cheaper -- and are less likely to face the same level of customs scrutiny that other retailers might face on a formal entry,” the report said.

Temu’s and Shein’s duty-free shipments “stand in stark contrast to the millions of dollars in import duties” paid by other retailers, such as the $700 million paid by Gap, the $205 million paid by H&M and the $19.5 million paid by David’s Bridal last year. “Moreover, these and similar companies’ imports were accompanied by better data, allowing CBP to more effectively enforce the law,” the report said.

The committee said U.S. importers should now know the risks associated with Shein and Temu. “[A]ll companies operating in the United States have an obligation to clean up their supply chain and ensure that they are not contributing to the [Chinese Communist Party’s] genocide of the Uyghur people by facilitating the sale of goods made with forced labor.”

Temu didn't immediately respond to a request for comment. A Shein spokesperson said the company has "zero tolerance for forced labor" and has implemented "a robust system to support UFLPA compliance," including "robust tracing technology," third-party testing and "independent audits." The spokesperson added that Shein has "no contract manufacturers in the Xinjiang region. "If any cotton from an unapproved region is detected, we take immediate action such as suspending production, halting shipments to the United States and removing product listings."

"As a global company, our policy is to comply with the customs and import laws of the countries in which we operate," the spokesperson said in a June 22 email. "SHEIN continues to make import compliance a priority, including the reporting requirements under U.S. law with respect to de minimis entries." The company said it plans to "continue to engage transparently" with Congress.