Slaves to Fashion: Chinese Firms Cited for Labor, Other Violations

Chinese "fast fashion" platforms like Shein and Temu are expanding rapidly in the United States, raising concerns about exploitation of trade loopholes, sourcing relationships, product safety, and forced labor.

These companies, which rely on U.S. consumers using Chinese apps to curate and deliver products, have outpaced competitors like Zara and H&M, turning fast fashion into a $106.4 billion industry in 2022.

A report released by the US China Economic Security Review Commission details the concerns, highlighting the merchants’ rapid growth, policy concerns, and reccomendations.

Labor, Legal and Environmental Concerns

Investigations in 2022 alleged that Shein failed to declare sourcing cotton from Xinjiang for its products, a violation of the Uyghur Forced Labor Prevention Act. Further reports suggest illegal labor conditions among suppliers of Chinese fast fashion firms and health hazards and environmental risks associated with Shein products. Additionally, Shein and other Chinese fast fashion firms have faced numerous copyright infringement accusations and lawsuits for intellectual property rights violations.

De Minimis Exemption

These companies present challenges to U.S. interests, including difficulties monitoring supply sources and ensuring fair market practices with U.S. competitors. They also exploit trade de minimis import exemptions, allowing them to avoid import duties on shipments to the United States valued below $800. As a result, Shein and similar firms have become a case study in Chinese e-commerce platforms outmaneuvering regulators to grow a dominant U.S. market presence. This practice costs the U.S. Department of the Treasury an estimated $10 billion a year in lost tariffs.

U.S. Market Share

Shein's market presence has grown significantly in the United States over the last three years. The company's aggressive digital and social media advertising campaigns, coupled with the expansion of online buying during the COVID-19 pandemic, led to Shein capturing 50% of all fast-fashion sales in the U.S. by November 2022. In May 2022, Shein's app briefly became the most downloaded app in the country, surpassing TikTok, Instagram, and Twitter.

Past Congressional Efforts on Chinese e-Commerce include Senators writing stern letters to the company seeking information on Shein’s alleged sourcing of Xinjiang cotton.  The COMPETE Act of 2022, sought to close the de minimis loophole, but was sidelined thanks to lobbying pressure from Amazon and the package delivery industry.  Amazon’s Marketplace is the largest single beneficiary of the de minimus exemption.

Last Fall, CBP's John Leonard reportedly got laughs and applause from an audience of importing officials with the joke: "China has a free-trade agreement with the U.S. -- it's called de minimis.

[More about de minimis update here]