Temu, Shein dodge tariffs and customs scrutiny on their shipments, investigation finds

Temu, Shein dodge tariffs and customs scrutiny on their shipments, investigation finds

June 27, 2023

 

Dive Brief:

  • Fast fashion giants Temu and Shein have avoided paying certain import tariffs and providing detailed customs data because of how they ship their low-priced products, U.S. lawmakers found in an investigation published Thursday.
  • The report is part of an ongoing look into the sourcing and labor practices of some fashion companies by the U.S. House Select Committee on Strategic Competition between the United States and the Chinese Communist Party.
  • The investigation, which is still ongoing, found that Temu and Shein shipments are likely to avoid customs screening for compliance with the the Uyghur Forced Labor Prevention Act by sending them overseas in small shipments.

Dive Insight:

The report found that Shein and Temu are able to avoid customs scrutiny on their shipments to the U.S. due to the de minimis provision of the Tariff Act of 1930, which today mostly exempts packages worth less than $800 from being reviewed. This disproportionately benefits these retailers because their average products sell for just $11 and are shipped individually, directly to consumers.

Shein and Temu are likely responsible for more than 30% of all packages shipped to the U.S. each day under the de minimis provision, and they likely represent nearly half of such shipments to the U.S. that originate in China — or about 600,000 packages a day, the committee’s investigation found.

Further raising the risk of imported products tied to forced labor, Temu does not ban third-party sellers on its marketplace from sourcing products tied to China’s Xinjiang Autonomous Region, which is associated with forced labor of the Uyghur people, according to the report. It also does not conduct audits or have a system in place to ensure compliance with the UFLPA.

Investigators found that the only measure Temu takes to ensure its shipments to the U.S. aren’t made with forced labor is that its suppliers agree to boilerplate terms and conditions on the matter.

Temu didn’t respond to Fashion Dive’s request for comment ahead of press time.

In a statement to Fashion Dive, a Shein spokesperson said the company is cooperating with the investigation, adding that the company does not tolerate forced labor and has implemented a system to support compliance with the law.

“We have no contract manufacturers in the Xinjiang region,” the spokesperson said. “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.”

Forced labor has been top of mind for lawmakers when considering Shein and Temu. In May, a separate group of 24 lawmakers wrote a letter to the Securities and Exchange commission asking it to halt a potential Shein IPO bid.

Also in May, lawmakers asked Shein and Temu, along with Nike and Adidas, to detail their compliance with the Uyghur Forced Labor Prevention Act, a 2021 law banning products from Xinjiang region in China.

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