Shein’s IPO filing is sparking fresh talk in Washington that the fast-fashion company deserves considerable scrutiny for possible links to forced labor in China and other problems, even as it has made efforts to respond to critics.
“If the fast-fashion giant Shein wants to go public in the U.S., they should have to prove to American consumers that their products are not sourced from forced labor,” said Democratic Rep. Jennifer Wexton of Virginia in a statement.
“As Congress builds on our bipartisan work to crack down on Uyghur forced labor in China, we must take action to hold Shein accountable,” she added.
Wexton and a Republican colleague, Rep. John Rose of Tennessee, spearheaded a May letter from two dozen House lawmakers that called for the Securities and Exchange Commission to “mandate Shein to certify via independent verification that the company does not use Uyghur forced labor as a condition of being registered to issue securities in the United States.”
Shein — founded in China but now based in Singapore — is among the companies that have drawn flak for having supply chains that potentially rely on China’s Xinjiang region, where Uyghur Muslims have been detained. Congress attempted to address this issue by passing the Uyghur Forced Labor Prevention Act in December 2021, but China hawks say more needs to be done.
Shein, for its part, said in a statement that it has a “zero-tolerance policy for forced labor and requires its contract manufacturers to “only source cotton from approved regions.” The company also said a tracing startup, Oritain, found only 2.1% of Shein’s cotton “tested positive for unapproved cotton” in July, below an industry average of 12%. In such cases, production, shipments and product listings get halted, the company said.
In addition, Shein said it’s “eager to engage and continue to be transparent will all stakeholders, including Representative Wexton and her staff, in discussions that will help us continue to add value to the U.S. economy, support our American workers, and bring industry-wide benefits to consumers.” The company has disclosed spending $1.51 million on Washington lobbying in this year’s first three quarters, up from just $280,000 in all of last year, according to OpenSecrets data.
Critics haven’t sounded won over by the sourcing details provided by Shein. Sixteen Republican attorneys general criticized the company in an August letter to the SEC for “touting a purported self-financed and managed certification process that it claims demonstrates compliance with U.S. law.”
“Such self-certification is insufficient,” the AGs wrote. “Shein has a documented history of lying about its labor practices.”
Rose, the GOP congressman who worked with Wexton on their letter to the SEC, had some positive things to say about Shein’s responsiveness to his concerns, but added that he needs to see the company take more action.
“I recently held a productive meeting with Shein’s vice chair Marcelo Claure during which he conveyed Shein’s commitment to address and rectify the issues and concerns I have raised regarding its ties to China’s Communist Party and forced labor in the Xinjiang Uyghur Autonomous Region,” Rose told MarketWatch in a statement, referring to the billionaire tech entrepreneur who became a Shein executive earlier this year.
“While I was encouraged by what I heard, there is still much work to be done. Shein must allow continuous, credible, and independent verification that the company does not use Uyghur forced labor before it is allowed to register on the U.S. exchange and continue to move more manufacturing out of China. Saying the right things in public statements and private meetings is a good step, but doing what is right is what counts.”
An SEC spokeswoman said the agency wouldn’t comment on individual entities, but pointed to its guidance warning companies that they may need to describe how their “business segments, products, lines of service, projects, or operations are impacted by the Uyghur Forced Labor Prevention Act (UFLPA), that, among other matters, prohibits the import of goods from the Xinjiang Uyghur Autonomous Region.”
The head of the House’s China committee is also among the lawmakers sounding skeptical about Shein’s IPO, saying the company wasn’t responsive as his panel conducted an investigation this year.
“Shein’s public claims that they take ‘visibility across our entire supply chain seriously’ is not supported by the materials produced to the committee in its bipartisan investigation,” Rep. Mike Gallagher, a Wisconsin Republican who chairs the House Select Committee on the Chinese Communist Party, said in a statement. “We are continuing to carefully examine Shein’s regulatory and compliance programs, and I would encourage investors and banks underwriting this reported IPO to do the same.”
Additional criticism of Shein has come from Republican Sen. Marco Rubio of Florida, who in a July letter pointed to accusations of intellectual-property theft and how the company benefits from a “trade loophole known as de minimis entry.” That refers to how shipments worth $800 or less are able to avoid tariffs and U.S. Customs and Border Patrol scrutiny.
Shein in July called for the de minimis exemption to get a “complete makeover to create a level playing field for all retailers,” but didn’t say what specific reforms it would support. Rubio has teamed up with Republican and Democratic lawmakers to back a bill that would stop Chinese shipments from taking advantage of the loophole, and there’s other bipartisan legislation on the issue as well.
In a statement this week, Rubio said: “Shein is fundamentally a Chinese company and investors should approach Chinese offerings with extreme caution. Its attempt to go public should prompt a closer look at its business practices, especially its links to slave labor and its evasion of U.S. customs laws. Both foreign and domestic companies must follow our laws and align with our values in order to access our markets. I will closely monitor Shein’s disclosures in the lead-up to its IPO.”
Shein and other fast-fashion players also have attracted scrutiny over their environmental impact. The company has responded in part by rolling out what it describes as a “comprehensive strategy for addressing social and environmental challenges and making a positive impact as the company evolves.”
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