Temu, Shein Avoiding Tariffs, Ignoring UFLPA - House Report

An interim report from the House Select Committee on the Chinese Communist Party released yesterday highlights the practices of Chinese online retail platforms Temu and Shein – including avoiding tariffs and failing to prevent forced labor sourcing.

The committee launched an investigation on May 2, focusing on these and other companies' compliance with the Uyghur Forced Labor Prevention Act and their use of the de minimis provision of the Tariff Act of 1930.

The report shows that Temu and Shein, operating under the de minimis rule, likely account for more than 30 percent of all packages shipped to the United States daily and almost half of all such shipments from China. The de minimis provision allows for importers to avoid customs duties on incoming packages valued at less than $800. The report indicates that these two companies shipped almost 600,000 packages to the United States daily, totaling about 210 million packages a year, avoiding any import duties.

The report criticizes Temu’s business model, noting that the company sidesteps responsibility for compliance with the UFLPA by maintaining that it is “not the importer of record with respect to goods shipped to the United States.”

Both Temu and Shein were found to lack robust compliance systems to ensure that the goods they sell are not produced with forced labor. For instance, Temu's compliance plan hinges on its Chinese third-party sellers' adherence to a “Third Party Code of Conduct”, and there are no auditing mechanisms in place to verify the enforcement of this code.

In addition, the committee's report reveals that Temu “does not expressly prohibit third-party sellers from selling products based on their origin in the Xinjiang Autonomous Region.” Xinjiang is the center of allegations concerning the use of Uyghur forced labor, and under the UFLPA, import of goods made with forced labor from the region is effectively prohibited.

The committee emphasizes that these findings are interim, with their investigation still ongoing. As this report brings to light potential violations of human rights and US trade laws, further scrutiny of these companies is expected.