Congress spotlights 'serious' forced labor concerns with Chinese shopping sites

WASHINGTON - Lawmakers have flagged what they believe are significant violations of U.S. laws by Temu, the popular Chinese shopping site, and accuse it of being a channel unchecked that allows goods produced with forced labor into the United States.

The House Select Committee on Chinese Communist Party released a report on Thursday that said Temu - a rapidly expanding site which sells electronic goods, makeup, clothing and toys - had failed to'maintain even the façade of a meaningful program' in its supply chain and likely shipped products made using forced labor into the United States on an 'ongoing basis'.

The report is a result of a continuous investigation into forced labour in supply chains that involve China. The report, according to lawmakers, was based upon responses provided by Temu as well as the fast-fashion retailer Shein and Adidas.

The report gave a particularly harsh assessment of Temu. It said that there was an "extremely high" risk that Temu’s supply chains were contaminated with slave labor. The website advertises under the slogan'shop as if you were a billionaire.' It is the second most downloaded app on the Apple store.

The report also criticised Shein's use a method of importing that allows companies to import products duty-free into the United States and with less scrutiny by customs as long as they are sent directly to customers and have a value less than $800. De minimis is a shipping channel that some lawmakers want to shut down for Chinese companies.

The bipartisan investigation of the committee by lawmakers has revealed some disturbing findings. They said that Congress should examine import loopholes, and strengthen laws against forced labor.

Mike Gallagher (R-Wis.) who chairs the committee said that Temu was doing little to ensure its supply chains were free of slave labor. Temu, Shein and other companies are building their empires by exploiting the de minimis loophole of our import laws. They avoid import taxes and do not have to be scrutinized for the millions and millions of products they sell in the United States.

Temu began operating in the United States in September last year. The company told the committee it brought millions of shipments to the United States each year through a network that includes more than 80,000 suppliers who sell directly from Chinese factories into U.S. consumer markets. The site offers clothing, temporary tattoos (including henna), modeling clay, electronics, and other products at low prices. For example, a baby romper costs $3, sandals cost $6, and a vacuum costs $8.

The report contained also new data that showed Temu's and Shein's heavy usage of the de minimis rules, which together accounted for nearly 600,000 packages sent to the United States each day.

Shipping allows retailers to offer their products at lower prices to consumers, as they do not have to pay duties, taxes, or government fees that are charged to traditional retailers who typically ship goods overseas in bulk.

De minimis shipping requires that far less information be provided about the products involved and the companies in the transaction. This makes it more difficult for U.S. Customs officials to detect packages containing narcotics or goods produced with forced labor. De minimis packages entered the United States in 720 million numbers between 2016 and 2021.

The report stated that, at an annualized rate of more than 30%, the shipments reported in the report by Shein and Temu represent nearly half of the packages imported into the United States from China last year.

Shein and Temu both have taken over the market from brick-and mortar retailers in the United States and gained younger customers by investing in advanced e-commerce technologies and offering hundreds of new products. According to a Piper Sandler study published this spring, Shein is the third most popular online retailer among teenagers behind Amazon and Nike.

Due to their links with China, the companies have come under increasing scrutiny by Congress. Shein, originally based out of China, has now moved its headquarters to Singapore. Temu is a Boston-based subsidiary of PDD Holdings. PDD Holdings moved their headquarters from China to Ireland this year.

The relationship between the Chinese government and the companies has been questioned, as have the companies' abilities to vet their supply chain to ensure that they do not contain products or materials from Xinjiang. The U.S. banned products from Xinjiang last year due to the use of forced labor by the region in mines and factories.

In Xinjiang, the Chinese government has cracked down on Uyghurs, as well as other ethnic minorities. This includes organized forced labor in cotton picking, mines, and manufacturing electronics, polysilicon, and car parts. The U.S. government assumes that all materials made in the region were produced with forced labor, unless proven otherwise.

Shein stated in a press release that they had zero tolerance towards forced labor. They also had a robust system of compliance, which included a code, independent audits and robust tracking technology. The company stated that it provided detailed information to a House committee, and would continue to respond to its questions.

'We do not have contract manufacturers in Xinjiang,' the company said. As a global business, we adhere to the import and customs laws of all countries where we do business.

Temu has not responded to a comment request.

Bloomberg commissioned laboratory tests in November last year that found some Shein clothes were made from cotton from Xinjiang. Shein did not dispute these findings, but in a Bloomberg statement, it said that the company had taken steps to comply with local laws in all markets and had hired another lab to test their materials.

The report from the Congress also criticized Temu for failing to establish a system of compliance or auditing that could independently verify whether its sellers did not source products from Xinjiang.

Temu informed the committee that they had a system for consumers and sellers to report complaints. They also said that Temu asked their sellers to sign codes of conduct that specified a "zero tolerance policy" regarding the use of penal, forced or indentured labor. In its code of conduct, Temu also states that the company reserves all rights to inspect warehouses and factories to ensure compliance.

The report stated that the code did not mention Xinjiang nor the U.S. Ban, and Temu informed the House Committee that it didn't prohibit vendors from selling goods made in Xinjiang.

Temu further argued that by using direct shipping, it was the U.S. consumers, and not Temu themselves, who would be ultimately responsible for adhering the the ban on Xinjiang products.

The report cited Temu as saying that it was not the importer on record for goods shipped to the United States.

Customs lawyers stated that it was unclear which party would be liable to comply with the U.S. embargo but any company facilitating importation of goods out of Xinjiang may face civil or criminal sanctions.

This article was originally published in
The New York Times
.