Fast fashion retailer Shein is keeping its costs low in part because it’s skipping out on US import tariffs according to a report from the House Select Committee on the Chinese Communist Party.
The report says Shein and other online retailers like Temu ship thousands of cheap products from China to the US every day without paying import duties.
The reason is due to a loophole in US trade law called the "de minimis" provision that exempts companies from paying tariffs on products worth less than $800 — if they are shipped directly to individual customers.
Last year, 685 million shipments met this criteria, according to data from US Customs and Border Protection. Shein and Temu alone likely account for more than 30% of packages, according to the report.
In fact, Temu reportedly told the committee no products from the more than 80,000 suppliers listing products on its site are sold for $800 or more.
A bipartisan group of lawmakers would like to see that change. Republicans Bill Cassidy and JD Vance, along with Democrat Tammy Baldwin proposed a bill last week that would eliminate the "de minimis" provision. However, a similar bill proposed by Democratic Representative Earl Blumenauer failed to pass Congress last year.
Another concern about retailers like Shein and Temu is labor law compliance. Lawmakers pointed to the Uyghur Forced Labor Prevention Act (UFLPA) which prohibits international imports manufactured by forced labor, namely in the Xinjiang region of China.
Shein claims it does not use manufacturers in Xinjiang, and Temu's code of conduct prohibits suppliers from using forced labor (but does not prohibit them from sourcing products based on region).
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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