Chinese fast fashion clothing companies Temu and Shein exploit a loophole in U.S. import rules to dodge import taxes, and Temu does virtually nothing to ensure compliance with anti-forced labor laws, an interim report from the Select Committee on the Chinese Communist Party said.
"The initial findings of this report are concerning and reinforce the need for full transparency by companies potentially profiting from CCP forced labor. Our Select Committee heard from experts under oath that these practices persist to this day, and we intend to strengthen laws like the Uyghur Forced Labor Prevention Act to put an end to them once and for all," U.S. Rep. Raja Krishnamoorthi (D-IL) said in a press release.
"These results are shocking: Temu is doing next to nothing to keep its supply chains free from slave labor," Committee Chairman Mike Gallagher (R-WI) said in the press release. "At the same time, Temu and Shein are building empires around the de minimis loophole in our import rules -- dodging import taxes and evading scrutiny on the millions of goods they sell to Americans. We need to take a hard look at this loophole that is being abused to tilt the playing field against American companies."
The interim report is the result of questionnaires the committee sent in May to the two companies and to Nike and Adidas.
The "de minimus loophole," Section 321 of the Tariff Act of 1930, allows importers to avoid customs duties on incoming packages valued at less than $800. Temu and Shein send their products to the U.S. through tens of thousands of small companies to avoid taking responsibility for compliance with the UFLPA, a committee press release said. Temu and Shein are using the de minimus rule so much that their products account for an estimated 30% of all de minimus imports to the U.S., or nearly 600,000 packages per day, the report said.
The UFLPA was enacted in 2022, to prohibit the importation of goods linked to forced labor in China, which has long been implicated in subjecting individuals to atrocities, including "imprisonment, torture, rape, forced sterilization, and the widespread exploitation of the Uyghur people in forced labor," the committee was told in testimony at a March 23 hearing.
"These initial and interim findings – which reveal Temu’s failure to maintain even the façade of a meaningful compliance program, and the true scale of both Shein and Temu’s use of the de minimis provision – raise serious concerns about the continued presence of products made with forced labor contaminating American imports," Gallagher and Krishnamoorthi said in a joint statement cited in the press release. "American consumers should know that there is an extremely high risk that Temu’s supply chains are contaminated with forced labor. And all companies operating in the United States have an obligation to clean up their supply chain and ensure that they are not contributing to the CCP’s genocide of the Uyghur people by facilitating the sale of goods made with forced labor."
