US-China Economic and Security Review Commission Staff Take Aim at Shein

A staff report from the U.S.-China Economic and Security Review Commission says that Congress should consider that "current customs and tariff levels disproportionately benefit Chinese e-commerce firms," and that packages sent to U.S. consumers "are frequently not inspected. Those that are inspected are often subject to rudimentary visual checks without the technology or screening to trace fabric origin and other violations."

The fabric screening the report refers to is DNA testing to see if cotton in a fabric was harvested in Xinjiang. If the cotton was, it is not allowed into the U.S., because it is presumed it was planted or harvested with Uyghur forced labor.

The report, published April 14, also alleges that companies like Shein and its fellow Chinese direct-to-consumer fast fashion companies "routinely violate U.S. IP rights laws, and the consequences they face are insufficient to deter future violations."

The report noted that the House of Representatives, in the previous Congress, passed a bill that would have carved out Chinese packages from de minimis because of these issues, but that it did not survive the conference process with the Senate.

"Using data analysis of its users’ search history and a consolidated and high-speed supply chain, 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," the report says. It suggests that it has succeeded in part because of labor exploitation in its supply chain -- such as an investigative journalism piece that found "workers in Shein factories working 18-hour workdays with one day off a month, clear violations of both Chinese labor laws and Shein’s own supplier Code of Conduct."

The report also cited a Bloomberg News investigation that tested Shein apparel and found some contained Xinjiang cotton (see 2211210071).

"Shein and similar companies present a range of challenges to U.S. interests, including difficulties monitoring supply sources and obstacles in ensuring fair market practices with U.S. competitors. These companies also exploit trade de minimis import exemptions, through which firms make shipments to the United States that are below an $800 value and are therefore not subject to import duties. Taken together, Shein and similar firms serve as a case study of Chinese e-commerce platforms outmaneuvering regulators to grow a dominant U.S. market presence," the report said.

The report said that in 2022, more than 10% of Chinese imports by value entered the U.S. as de minimis shipments.

Shein does not sell inside China, the authors noted. Although they did not say Congress should consider Shein's exports' safety profile in legislation, it did say that another investigative journalism piece "found Shein clothing materials containing high levels of potentially hazardous chemicals, including lead, perfluoroalkyl (PFA), and phthalates."