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NEW YORK (AP) — A Congressional report published Thursday offered a blistering critique of popular Chinese retailers Shein and Temu, with lawmakers accusing the latter of failing to maintain “even the façade of a meaningful compliance program” that seeks to prevent goods made by forced labor from being sold on its platform.
In the report, the House Select Committee on the Chinese Communist Party said Temu’s business model essentially allows the company to avoid responsibility in complying with a U.S. law that block imports from China’s Xinjiang region unless businesses can prove the items were made without forced labor.
“American consumers should know that there is an extremely high risk that Temu’s supply chains are contaminated with forced labor,” the report said.
Temu is owned by Pinduoduo Inc., a popular e-commerce site in China. It was launched in the U.S. last year and has grown in popularity by offering cheap goods, from apparel and home products, from China-based sellers.
The report is part of an ongoing Congressional investigation into products offered to American consumers that could be made with forced labor in China. As part of the probe, the committee sent letters in early May to brands Nike and Adidas, as well as Shein and Temu asking for information about their compliance with the anti-forced labor law.
Lawmakers noted they weren’t done with their investigation but wanted to quickly share some of their findings from the Chinese companies with the public.
The report said Temu admitted it “does not expressly prohibit” the sale of goods from Xinjiang and “conducts no audits and reports no compliance system to affirmatively examine” whether its suppliers are observing U.S. forced labor law. It also said the only deterring measure the company reported was making its suppliers agree to “boilerplate terms and conditions” that prohibit forced labor use.
According to documents Temu provided to the committee, the company has more than 80,000 suppliers that fuel its vast e-commerce platform.
The report comes a week after two bipartisan bills were introduced in Congress seeking to make changes to a century-old trade rule - known as de minimis - that benefits both retailers.
Under the provision, imported packages valued under $800 receive tax exemptions and less oversight from U.S. customs. The report said Temu and Shein ship nearly all their packages, most of which are valued under $800, from China directly to consumers. Typically retailers ship overseas goods to a domestic warehouse, pay the required taxes, and then deliver packages to consumers. It said the two companies are likely responsible for nearly half of all de minimis shipments, resulting in a huge tax break and minimal oversight.
Lawmakers also criticized Shein for relying on the provision. Both companies did not immediately respond to a request for comment.