Shein Rival Selling Xinjiang-Linked Products in the US, Analysis Finds

Sunglasses. Sandals. Children’s clay. A bath mat. These are some of the Xinjiang-made items that a supply-chain intelligence firm says are making their way to U.S. consumers through Temu, in contravention of a law that bars goods originating in whole or in part from the controversial region, where the Chinese government is conducting human rights abuses against Uyghurs and other Muslim minorities.

Tel Aviv-based Ultra Information Solutions told Bloomberg Wednesday that it found at least 10 items made or sold by Xinjiang businesses on the U.S. version of the sprawling third-party marketplace, whose Shanghai-headquartered parent company, PDD Holdings, also owns popular e-commerce platform Pinduoduo.

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Temu, which sells a broad range of items, from clothing to cookware to electronics, went live in the United States in September. Five months later, it splashed out on a 30-second Super Bowl commercial featuring a woman who is blown away by Temu’s heavily discounted offerings, including a slinky red gown that cost her just $9.99. “I feel so rich. I feel like a billionaire,” her inner monologue riffs to a syncopated beat.

Since then the company, whose name derives from its motto, “Team Up, Price Down,” has rapidly gained traction, beating Amazon, Shein and Walmart to become America’s most-downloaded shopping app. By March, it had hit 50 million installs in the United States, according to mobile research firm Apptopia.

Meanwhile, Temu is giving the more established Shein, which is also facing scrutiny for links to forced Uyghur labor, a literal run for its money. Last month, U.S. spending on Temu was 20 percent higher than the fast-fashion giant, reported Bloomberg Second Measure, which analyzes credit and debit card transactions.

Ultra said that Temu’s relative opacity regarding its vendors makes it challenging, if not outright impossible, to pin down the origins of the items it sells, let alone identify the manufacturers who produced them. Unlike Pinduoduo, Temu doesn’t provide vendor details, a move that Ram Ben Tzion, Ultra’s co-founder and CEO, said cannot be unintentional.

Using its Publican vetting technology to analyze products that Temu and Pinduoduo had in common, Ultra said that it was able to peg Temu vendors with a “very high” likelihood of operating in Xinjiang and in close proximity to known forced labor camps. A pair of Yeezy-style sides with identical photos on both sites, for instance, was traced to Aksu City Touhao Daily Goods Store, a 25-minute drive from a reeducation center, in Xinjiang’s northern Aksu district.

“The findings in our report highlight the challenge of enforcing UFLPA and other trade policies and regulations,” Ben Tzion told Sourcing Journal, using an acronym for the Uyghur Forced Labor Prevention Act, which imposes a rebuttable presumption that all goods with inputs from Xinjiang are the product of forced labor and therefore aren’t eligible to enter U.S. shores.

“The volume of shipments, and Temu’s efforts to hide seller identity, make it impossible,” he added. “The only way for effective enforcement and compliance is checking 100 percent of shipments, using digital vetting technology.”

Adrian Zenz, senior fellow in China Studies at the Victims of Communism Memorial Foundation, said that this is exactly what researchers like him have predicted: Chinese companies churn out items in Xinjiang, potentially using forced Uyghur labor, and then peddle them overseas without indicating the origin.

“In that way, Made in China becomes a front for masking forced labor,” he said.

The Aksu-made footwear that Ultra highlighted is an especially apt example of this, Zenz said. In Chinese state documents, shoes are listed among the products made by both Uyghurs released from the detention camps as well as agricultural workers who are taken from their fields and forced to work in factories.

“In fact, you can search Temu.com using Chinese keywords such as ‘Xinjiang cotton’—新疆 棉花—and you get search results,” he said. “When you then examine the HTML source code of the resulting product websites, the text ‘新疆 棉花’ is embedded in a hidden way as a search keyword.”

Neither Temu nor PDD Holdings responded to a request for comment.

Many e-commerce shipments from China are able to evade examination by Customs and Border Protection (CBP) because they’re dispatched to individual consumers in small, low-value packages, falling under the $800 de minimis threshold that triggers requirements such as reporting the country of origin and manufacturer. CBP processed 685 million de minimis shipments in fiscal year 2022 alone, including Shein products that a Bloomberg investigation found contained traces of Xinjiang cotton.

“This a powerful direct demonstration that the de minimis process is serving as a means for importers to evade UFLPA enforcement,” said Jewher Ilham, forced labor coordinator at Washington D.C.’s Worker Rights Consortium and the daughter of imprisoned Uyghur scholar Ilham Tohti. “It is imperative that CBP begin scrutinizing shipments coming in under the de minimis exception.”

There have been several attempts to close what many describe as a loophole that wasn’t meant to stand against the deluge of cheap, online goods from abroad.

“De minimis was really created in our trade law for people who are traveling overseas trying to bring a trinket back [and] not having to pay a tax,” said Kimberly Glas, president and CEO of the National Council of Textile Organizations, and former deputy assistant secretary for textiles and apparel at the Department of Commerce. “And now it’s become married to e-commerce shipments that are facilitating this illegal exploitation of duty-free trade from anywhere in the world. I don’t think our trade law has kept up with the change in technology.”

As members of Congress have noted, this is akin to giving a free trade agreement to China, she said.

“We have 301 tariffs on China,” Glas added. “And right now we have this workaround, which has become a superhighway for imports into the United States that don’t have to pay a penalty tariff but also don’t have to pay tariffs at all. This is a pervasive problem and needs an aggressive solution now. Or it’s going to stymy onshoring and nearshoring and it’s going to serve as a backdoor and has been serving as a backdoor to forced labor products…because a shopper clicks a button.”

Representative Earl Blumenauer, a Democrat from Oregon, is one of the lawmakers trying to push through legislation that would prohibit importers from non-market economies and countries on the U.S. trade representative’s priority watch list from utilizing de minimis. In May, Democratic Senator Sherrod Brown of Ohio touted the Senate version of Blumenauer’s Import Security and Fairness Act, which he said would ensure that foreign companies would no longer be able to sidestep paying duties and fees to “unfairly compete with Ohio businesses.” And on Wednesday, Senators Tammy Baldwin, a Democrat from Wisconsin, and Bill Cassidy, a Republican from Louisiana, introduced a bill that would prevent China from benefiting from de minimis while reducing the threshold for other trade partners.

“A trade loophole is allowing Chinese companies to import goods in the U.S. with no oversight—letting them bring in cheap, counterfeit goods that undercut American manufactures and traffic drugs into our communities,” Baldwin said in a statement. “Our bipartisan bill will close this loophole to create a level playing field for our Made in America manufacturers, curb illicit drugs like fentanyl from coming into the country and help ensure Americans are not supporting goods made with forced labor.”

Last month, Representatives Mike Gallagher of Wisconsin, the Republican chair of the House Select Committee on the Chinese Communist Party, and Raja Krishnamoorthi of Illinois, its Democratic ranking member, sent letters to Shein and Temu questioning their use of the de minimis provision.

”We are concerned that…use of Section 321 for shipments to the U.S. may provide insufficient customs scrutiny to affirm that…products are not produced in whole or part with forced labor,” they wrote. “We seek additional information regarding this matter.”

A recent Congressional-Executive Commission on China letter to the Department of Homeland Security also mentioned Shein and Temu. So did an April U.S.-China Economic and Security Review Commission brief that called into question the “flags” about their business practices and the possibility that their success might inspire copycats.

“CBP is dedicated to fully enforcing customs laws regarding shipments within the scope of the UFLPA and continues to prioritize enforcement actions against imports produced with forced labor,” an agency representative said. “Goods made with any forced labor inputs are prohibited from entry into U.S. commerce. CBP researches all forced labor allegations on imports, regardless of value, and actively enforces any violations.”

For Louisa Greve, director of global advocacy at the Uyghur Human Rights Project, a Washington, D.C. advocacy group, raising the de minimis level from $200 to $800 in 2016 was a critical error.

“When you’ve got consumer products coming in, direct to consumer, from Shein and Temu, it shows what a horrible mistake it was to raise the de minimis limit, and frankly, overwhelm our own ports enforcement authorities,” she told Sourcing Journal. “Consumers around the world who are starting to face this onslaught of unbelievably cheap goods—everyone needs to ask how can this possibly be a legitimate business?”

China’s “massive” state-sponsored program of forced labor, Greve said, should be a “huge red flag” for any product from a “region of genocide.”

“This loophole must be closed,” she added.

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