The House committee investigating economic competition between the U.S. and China has released a highly critical report linking retail giants Shein and Temu to a significant number of import violations. These Chinese e-commerce companies exploit trade loopholes to avoid paying import duties and evade human rights reviews. The report reveals that Shein and Temu, which heavily rely on social media for their consumer base, are likely responsible for more than 30% of daily shipments to the U.S. under the de minimis provision of the Tariff Act of 1930. This provision exempts imports from tariffs if their fair retail value is below $800. Last year alone, the report estimates that these imports accounted for nearly 600,000 shipments per day, and the number is expected to be even higher now. This unfair advantage gives Temu and Shein an edge over U.S. retailers. Temu’s estimated valuation exceeds $100 billion, while Shein is valued at $64 billion.
The committee’s report, a continuation of its investigation into forced Uyghur labor issues, sheds light on these findings for the first time. In May, the committee sent letters to Nike, Adidas, Shein, and Temu regarding their concerns about forced labor of Uyghurs. It also highlights that both Shein and Temu have been accused of human rights abuses, with Shein allegedly involved in forced labor in its supplier factories in the Uyghur region and Temu failing to comply with the Uyghur Forced Labor Prevention Act.
Aside from the avoidance of tariffs, the loophole exploited by these companies allows them to provide less comprehensive data, including compliance screening for the UFLPA, to U.S. Customs and Border Protection because of the high volume of small packages under $800.
“These findings are astonishing. Temu is turning a blind eye to slave labor in its supply chains,” said Mike Gallagher, the chair of the House CCP Committee. “Meanwhile, Temu and Shein are taking advantage of the de minimis loophole in our import rules, evading import taxes and scrutiny on the millions of goods they sell to Americans.”
Neither Temu nor Shein has provided an immediate response to the report. Temu claims it is not the importer of record for goods shipped to the U.S., while Shein denies allegations of forced labor. Temu has asked its over 80,000 Chinese suppliers to agree to language prohibiting the shipment of goods made with forced labor to the U.S., but the committee states that it has done very little to address the tariff violations beyond this token effort.
American retailers, in contrast, pay millions of dollars in import duties each year. For example, Gap paid $700 million in duties in 2022, H&M paid $205 million, and David’s Bridal paid over $17 million.
The committee’s investigation is still ongoing.
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