Congress Targets One of Gen Z's Favorite Fashion Retailer

Congressional lawmakers are going after one of Gen Z's favorite fashion retailers as part of an investigation into the use of forced labor in supply chains that involve China.

Shein, a Chinese-based online retailer known for its relatively inexpensive apparel, was one of the two major retailers that the House Select Committee on the Chinese Communist Party are accusing of violating U.S. trade law.

In a report released Thursday, the committee said Shein and Temu, a rapidly-growing Chinese online megastore, built their empires by relying "heavily" on the "de minimis" loophole, which critics argue gives foreign e-commerce companies an unfair advantage because import packages valued under $800 are not charged duties, taxes or fees.

In a Thursday statement, a Shein spoeksperson told Newsweek, "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."

One of the key reasons why Shein has become the world's largest fashion retailer is its affordability, which has helped Shein attract millions of Gen Z consumers. A 2022 brand report from Morning Consult found Shein to be "the standout apparel brand for Gen Z." The retailer was viewed favorably by 44 percent of Gen Z consumers, compared to 22 percent of all adults—a gap that Morning Consult noted to be "higher than for any other apparel brand."

Founded in 2008, Shein rose to global prominence during the pandemic, when the online-only retailer reportedly made $10 billion in revenue, according to a Bloomberg report. As its popularity soared, the company has come under criticism over its business model on American tariffs and has faced allegations that its products rely on the forced labor of Chinese Uyghurs.

In an effort to clean up its reputation, Shein hired Washington lobbyists this year and relocated its headquarters from Nanjing, China, to Singapore.

"We are committed to respecting human rights and adhering to local laws in each market we operate in," Peter Pernot-Day, the retailer's head of strategy and corporate affairs, told Politico earlier this month.

However, congressional lawmakers said that Shein and Temu were likely responsible for almost 600,000 packages shipped to the U.S. daily under the loophole, or 30 percent of packages shipped under the de minimis provision.

"At an annualized rate, this totals about 210 million packages sent to the United States every year not subject to any import duties," the report said.

The report is likely to bolster congressional support for the bipartisan bills introduced last week, which aim to address the de minimis loophole by targeting the price advantage of Chinese shippers and increasing their operational costs.

Two bipartisan bills have been proposed—one looking to bar "nonmarket economies," like China and Russia, from being eligible for the rule, and another seeking to require more oversight on companies with ties to China.

Although the first bill, sponsored by Representative Earl Blumenauer, does not mention a company by name, the Oregon Democrat said, "Shein is probably the most obvious example of a company that has exploited the de minimis loophole the most."

Congressional lawmakers have also gone after another Gen Z favorite, social media app Tik Tok, over concerns that the app's China-based parent company ByteDance poses a national security risk. Earlier this year, Congress held several high-profile hearings featuring Tik Tok's CEO Shou Zi Chew, who repeatedly denied that the app shares data with the Chinese Communist Party and tried to argue that the platform remained safe for American users.

Tik Tok, along with Shein, was one of the five brands that earned double-digit leads in favorability with Gen Z consumers when compared with millennials in the Morning Consult 2022 brand report.

Update 06/22/23 5:12 p.m. This story was updated with comment from Shein.