Utah Attorney General Sean D. Reyes and 15 other state attorneys general sounded the alarm on the China-founded, fast-fashion retailer SHEIN’s business practices – including reports of forced labor – and their potential Initial Public Offering (IPO) launch later this year.
In a letter sent Thursday to SEC Chair Gary Gensler, the attorneys general urged the SEC to require any foreign-owned company to certify via a genuinely independent process that it is compliant with Section 307 of the Tariff Act of 1930, which prohibits the import of any product manufactured wholly or in part by forced labor as a condition of being listed on a U.S.-based securities exchange.
The attorneys general pointed out that SHEIN has been credibly accused of exploiting forced labor and violating the Uyghur Forced Labor Prevention Act (UFLPA). Last year’s testing by Bloomberg News found significant scientific evidence that cotton produced in the Xinjiang Autonomous Region was present in clothing sold by the company.
“American exchanges should have a zero-tolerance policy for foreign companies that seek access to our markets but refuse to follow our laws, especially when the implicated laws are meant to prevent serious human rights abuses,” the attorneys general wrote. “We believe in upholding the rule of law and protecting our economy. Lip service is not enough; in this case, the U.S. Securities and Exchange Commission must ‘trust, but verify’ that every such company is complying before it receives the privilege of being listed on an American securities exchange.”
While SHEIN claims to have a self-financed and managed certification process that demonstrates compliance with U.S. law, self-certification is not enough, especially with the company’s documented history of lying about its labor practices.
The attorneys general also highlighted in the letter SHEIN’s exploitation of trends, which can blur the lines of intellectual property and copyright while avoiding customs duties – contributing to its rapid growth. Moreover, the company collects a vast amount of consumer data, which it uses to fine-tune its offerings and launch new products faster than its competitors.
The U.S. House of Representatives Select Committee on the Chinese Communist Party is investigating SHEIN’s business practices for the UFLPA. According to the Committee, SHEIN shipments to American consumers fall under Section 321 of the Tariff Act of 1930, also known as the “de minimis exception,” which allows importers to avoid customs duties on packages valued under $800 and are less likely to be scrutinized by customs officials than other retailers.
Attorneys general from Alaska, Arkansas, Georgia, Idaho, Iowa, Louisiana, Mississippi, Missouri, Nebraska, North Dakota, Oklahoma, South Carolina, Tennessee, and Virginia also signed onto the letter led by Montana Attorney General Austin Knudsen.
