Lawmakers point to possible major violations of US law by Temu, a popular Chinese shopping platform, accusing it of providing an uncontrolled channel that allows forced labor goods to flow into the United States.
In a report released Thursday, the Chinese Communist Party’s House of Representatives Special Committee said Temu, a fast-growing website that sells electronics, makeup, toys and clothing, has failed to have “even the semblance of a meaningful compliance program.” for its supply chains and probably “regularly” shipped forced labor products to the United States.
The report stems from an ongoing investigation into forced labor in supply chains that touch China. Lawmakers said the report was based on responses provided to the committee by Temu, as well as fast-fashion retailers Shein, Nike and Adidas.
The report included a particularly damning assessment of Temu, saying there was an “extremely high risk that Temu’s supply chains could be contaminated by forced labour”. The site advertises itself under the slogan “Shop like a billionaire” and is now the second most downloaded app in the Apple Store.
The report also criticized Shein’s use of an import method that allows companies to bring products into the United States duty-free and with less scrutiny by customs, as long as the packages are shipped directly to consumers and are under $800 in value. Some lawmakers are pushing to block this so-called de minimis shipping channel for companies that source goods from China.
Lawmakers said they were troubled by what the bipartisan committee’s investigation has uncovered so far and called for Congress to review import loopholes and strengthen forced labor laws.
“Temu is doing next to nothing to keep its supply chains free of slave labor,” said Rep. Mike Gallagher, a Wisconsin Republican who chairs the committee. “At the same time, Temu and Shein are building empires around the de minimis gap in our import regulations: they evade import tariffs and evade control of the millions of goods they sell to Americans.”
“The initial findings of this report are worrying and underscore the need for full transparency for companies that may benefit from the CCP’s forced labor,” said Rep. Raja Krishnamoorthi, an Illinois Democrat and a co-author of the report, referring to the Communist Party of China.
Temu, which began operations in the United States in September, told the committee it now makes millions of shipments to the United States annually through a network of more than 80,000 suppliers who sell directly from Chinese factories to US consumers. The site sells clothing, temporary tattoos, modeling clay, electronics, and other items directly to consumers at reasonable prices, around $3 for a baby bodysuit, $6 for sandals, and $8 for a vacuum cleaner.
The report also included new data showing that Temu and Shein are making heavy use of the de minimis rule, shipping together nearly 600,000 such packages daily to the United States.
The shipping method allows retailers to sell their goods to consumers at cheaper prices as they are not subject to duties, taxes or government fees that apply to traditional retailers who typically ship goods in bulk abroad.
De minimis shipping also requires far less information to be disclosed about the products and the companies involved in the transaction, making it more difficult for U.S. Customs officials to track down packages containing narcotics, counterfeits, and forced labor goods. The number of de minimis packages entering the United States more than tripled between 2016 and 2021, reaching 720 million at the time.
Annualized, the shipments reported by Shein and Temu would account for more than 30 percent of the de minimis shipments that came into the United States last year and nearly half of those packages from China, the report said.
Both Shein and Temu have consistently taken market share from brick-and-mortar US retailers and wowed younger consumers by investing in sophisticated e-commerce technology and offering hundreds more new products than the competition. Shein was the third most popular e-commerce site among teens, behind Amazon and Nike, according to a report by Piper Sandler this spring.
As their popularity grew, so did Congress’ control of the companies given their ties to China. Originally based in China, Shein has relocated its headquarters to Singapore. Boston-based Temu is a subsidiary of PDD Holdings, which relocated its headquarters from China to Ireland this year.
Lawmakers are questioning their relationship with the Chinese government, as well as the companies’ ability to screen their supply chains to ensure they do not contain Xinjiang-sourced materials or products. Last year, the US imposed a ban on products from Xinjiang, citing the use of forced labor in factories and mines in the region.
The Chinese government has cracked down on Uyghurs and other ethnic minorities in Xinjiang, including the organized use of forced laborers to pick cotton; work in mines; and produce electronics, polysilicon, and auto parts. Because of this, the US government now assumes that all locally sourced materials were manufactured using forced labor unless proven otherwise.
Temu and Shein initially did not comment on the report. Shein previously stated that it has zero tolerance for forced labor, does not source cotton from Xinjiang, and fully complies with all U.S. tax and trade laws.
Laboratory tests commissioned by Bloomberg News in November found some Shein garments were made from Xinjiang cotton. Shein did not dispute those findings, but said in a statement to Bloomberg that the company has taken steps in all global markets to comply with local laws and has hired another lab, Oritain, to test its materials.
The congressional report also criticized Temu’s failure to set up a compliance or audit system that could independently verify that its vendors were not sourcing products from Xinjiang.
Temu told the committee that it has a reporting system through which consumers and sellers can submit complaints and that it requires its sellers to sign a code of conduct that includes a “zero tolerance” policy for the use of coercive, prescribe contract or detention labor . Temu’s Code of Conduct also states that the company reserves the right to inspect factories and warehouses to ensure compliance.
However, the code makes no mention of Xinjiang or the U.S. ban, and Temu told the House committee that it does not ban vendors from selling Xinjiang-made products, the report said.
Temu also argued that using dropship means the U.S. consumer, and not Temu, bears the ultimate responsibility for complying with the ban on Xinjiang-sourced goods.
“Temu is not the importer of record with respect to goods shipped to the United States,” the report said.
Customs attorneys said it wasn’t entirely clear which party would be liable for complying with the US ban, but any company that facilitates the importation of goods from Xinjiang could face civil or criminal penalties.
Also pictured in the committee’s report was a keychain that was listed on Temu’s website this month and read “Xinjiang cotton pendant.” The key fob itself is in the shape of a cotton swab, and the report said the Xinjiang label “could refer to the materials, the supplier, the pattern, or the origin of the product.”
Temu’s “policy not to ban the sale of products that explicitly advertise their Xinjiang origin, even in the face of increasing congressional and public scrutiny on related issues, raises serious questions,” the report said.
The New York Times could not verify whether the product was made from Xinjiang cotton, which is prohibited under US law. The Times found an identical product for sale on a Chinese wholesale site, said to be made in Henan Province outside of Xinjiang.
A Times review of information shared by Temu sellers on Chinese social media sites also found that Temu did not require sellers to provide detailed information about where their products were made or which companies made them.
Vendors who provided tips about Temu’s product review process online gave several reasons why Temu often rejected new listings: for example, if the price was too high, the samples didn’t match the photos, or the goods didn’t come with consumer warnings. But no one raised concerns about ties to Xinjiang or the US import ban.
Jordyn Holman provided coverage from New York.