Shein, Facing H&M Lawsuit, Wants AAFA’s Help on De Minimis Reform
Long accused of using the “de minimis” exemption to sidestep tariffs, Shein signaled Tuesday interest in working on a “complete overhaul” of the statute.
The revelation, shared in a letter addressed to the American Apparel & Footwear Association (AAFA), for which it is an affiliate sponsor, arrived a day after Bloomberg first reported that the Swedish fast fashion retailer H&M had sued Shein in Hong Kong for copyright infringement.
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H&M reportedly first filed a writ of summons in July 2021. Details were only made public June 21 at a hearing at the Hong Kong High Court. Another hearing is scheduled for July 31. According to Bloomberg, a court filing included photos of items sold by H&M, including swimwear and sweaters, that the retailer claims Shein copied.
“It is correct that we have an ongoing copyright infringement lawsuit towards Shein filed in Hong Kong,” an H&M spokesperson told Sourcing Journal. “We believe that Shein in multiple cases has infringed on our designs and have therefore filed this lawsuit. As it is still an ongoing case, we choose not to comment further.”
A Shein spokesperson told Sourcing Journal that the company does not comment on pending litigation.
H&M’s decision to file the case in Hong Kong is a “big distinction” from other copyright infringement cases lodged against Shein, Nick Rozansky, a partner at Stubbs Alderton & Markiles in the business litigation and trademark and brand protection practice groups, told Sourcing Journal. This could be because China might refuse to recognize a judgment issued by a Western court, but would have to enforce the ruling of a legal authority under its purview, said Rozansky, who isn’t involved with either company.
News of the litigation comes as Shein faces challenges on multiple fronts. Earlier this month, Temu filed a lawsuit in Massachusetts accusing its fellow Chinese-founded e-tailer of using threats, intimidation and false assertions of infringement to “coerce” manufacturers in China into exclusive agreements. Days before that, three independent artists filed a lawsuit in California claiming Shein’s “egregious” copyright infringement violated the Racketeer Influenced and Corrupt Organizations Act, better known as RICO, “which in my experience is a very uphill battle,” Rozansky said.
If counsel for the plaintiffs behind the corruption lawsuit can get the case to stick, “it can be very, very powerful because there are major penalties associated with RICO,” he said, calling Shein the “800-pound gorilla” rankling the highest and lowest rungs of the fashion world.
U.S. lawmakers, meanwhile, have accused Shein—and Temu—of using Section 321 of the Tariff Act of 1930, known as the “de minimis” exemption, to skirt tariffs. More recently, criticism of the de minimis exemption has grown as politicians worry packages from Shein and Temu are evading scrutiny from custom officials under the Uyghur Forced Labor Prevention Act as well. South Africa is also giving Shein’s practices a second look.
Last year, a Bloomberg investigation found traces of Xinjiang cotton in some Shein items imported into the U.S. In June, a Tel Aviv-based supply-chain intelligence firm found at least 10 items made or sold by Xinjiang businesses that were available in the U.S. through Temu.
Now, it appears Shein, which spent $600,000 on U.S. lobbying activities in the second quarter, wants to be in on any potential de minimis reform. In a letter written to the AAFA, Shein executive vice chairman Donald Tang advocated for what he called “responsible reform of the de minimis exemption.” This reform, he wrote, should create “a more level, transparent playing field” where all retailers “play by the same rules, and where rules are applied evenly and equally.”
“Critics claim the existing framework has fostered an unfair playing field by disadvantaging American companies that can no longer compete on price,” Tang wrote. “Yet, the lack of a universal supply chain management standard means American consumers receive goods every day from other retailers that may not adhere to globally accepted responsible sourcing and manufacturing practices. At Shein, we believe consumers are entitled to know that they are not only getting a fair price when they shop online, but that the products they are receiving are authentic and ethically produced.”
An upstart Shein critic dismissed the de minimis outcry as “hypocrisy,” describing the Christian Siriano collaborator as “the single largest violator of the de minimis rule and a serial human rights abuser.”
“Instead of making changes themselves, they want to distract lawmakers and regulators with a meaningless press release designed to calm investors who know a Shein IPO is a bad bet,” said Chapin Fay, executive director at Shut Down Shein, which launched earlier this year as a coalition of businesses and U.S. consumers advocating against the ultra-fast-fashion juggernaut.
Shein, Fay continued, “can end their use of slave labor immediately, pay reparations to the Uyghur people and start paying the tariffs they have gone to great lengths to avoid, which includes the tariffs on every package they have shipped to America since its inception.
“Until then, lawmakers and regulators must keep up their relentless efforts to Shut Down Shein,” he said.
