WASHINGTON — A House committee exploring economic competition between the U.S. and China on Thursday released a damning report connecting retail giants Shein and Temu to a disproportionate number of import violations.
The Chinese e-commerce companies exploit trade loopholes to import goods into the U.S. without paying import duties or making shipments subject to human rights reviews, according to findings released by the House Select Committee on the Chinese Communist Party.
The report found that the brands, which garner most of their consumer base from social media, are likely responsible for over 30% of packages shipped daily to the U.S. under a so-called de minimis provision of Section 321 of the Tariff Act of 1930, which waives import tariffs if the fair retail value of the shipment does not exceed $800. The imports accounted for nearly 600,000 shipments a day as of last year and are likely higher now, according to the findings.
Lawmakers argue the tariff violations give Temu and Shein unfair advantages over U.S. retailers. Temu's valuation is estimated at over $100 billion, while Shein was recently valued at $64 billion.
The report, which is a continuation of the committee's investigation into forced Uyghur labor issues that began with a May letter campaign to Nike, Adidas, Shein and Temu, is the first recording of these findings, according to the committee. Temu is operated by Chinese parent company Pinduoduo.
Both companies have faced allegations of human rights abuses: Shein for alleged forced labor in its supplier factories in the Uyghur region and Temu for allegedly failing to develop compliance with the Uyghur Forced Labor Prevention Act, the committee reported.
In addition to the reduced tariffs, lawmakers say the loophole also enables the companies to provide less comprehensive data to U.S. Customs and Border Protection — including UFLPA compliance screening — due to the large volume of small packages valued under $800.
"These results are shocking: Temu is doing next to nothing to keep its supply chains free from slave labor," Mike Gallagher, a Wisconsin Republican and chair of the House CCP Committee, said in a statement. "At the same time, Temu and Shein are building empires around the de minimis loophole in our import rules — dodging import taxes and evading scrutiny on the millions of goods they sell to Americans."
Shein has denied forced labor allegations and said it has "implemented a robust system to support UFLPA compliance."
"As a global company, our policy is to comply with the customs and import laws of the countries in which we operate. SHEIN continues to make import compliance a priority, including the reporting requirements under U.S. law with respect to de minimis entries," a Shein spokesperson told CNBC.
Temu did not immediately respond to a request for comment on the report but has previously said it is "not the importer of record with respect to goods shipped to the United States."
Temu has asked its more than 80,000 Chinese suppliers to accept language preventing the shipping of goods made with forced labor to the U.S. but has taken few measures to address the tariff violations beyond the "boilerplate" language, the lawmaker said.
American retailers, meanwhile, pay millions in import duties a year. Clothing brand Gap paid $700 million in 2022 in duties, H&M paid $205 million and wedding retailer David's Bridal paid over $17 million that year, according to the report.
The committee's investigation is still ongoing.