Lawmakers are increasing their scrutiny on Shein after it submitted a private request to go public last week.
- IMPORTANT NOTES
- After secretly filing to go public, Chinese-founded fast fashion company Shein has drawn increased scrutiny from lawmakers.
- Rep. Blaine Luetkemeyer asked the SEC to keep Shein from going public, and if it didn’t, he proposed legislation that would block it from trading.
- Lawmakers are concerned that Shein is utilizing forced labor in its supply chain and taking advantage of US trade regulations.
One major committee member has even threatened to introduce legislation to prevent the shop from trading if the Securities and Exchange Commission does not reject its application. Rep. Blaine Luetkemeyer, R-Mo., said in a video address Tuesday that Shein “warrants extreme caution from regulators, customers, and investors” as the fast-fashion behemoth prepares to begin trading on U.S. markets as early as next year.
In an interview, he stated that the SEC must “do their job” and block Shein from trading on US markets due to suspicions that the store employs forced labor and violates US trade regulations. “Urge the SEC to conduct a thorough examination of Shein’s business and management before allowing it access to our capital markets,” Luetkemeyer said in the video, which was viewed.
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“Accessing U.S. markets and capital is a privilege, and we rely on the SEC to root out undeserving companies,” he went on to say. “I sincerely hope the officials at the commission will review Shein to ensure American capital does not fund crimes against humanity.” If the SEC approves Shein’s initial public offering, Luetkemeyer said that Congress might take a variety of alternative steps to punish her. They include legislation that would prohibit Shein from dealing in the United States or preventing its shipments from entering the nation.
“Everything’s on the table, let’s put it that way, and I think we’ll see what action Shein wants to engage in,” Luetkemeyer said.
Luetkemeyer is a Republican member of the newly constituted House Select Committee on the Chinese Communist Party. The committee’s chairman, Rep. Mike Gallagher, R-Wisconsin, “shares Rep. Luetkemeyer’s concerns about companies benefiting from America’s capital markets despite clear and present concerns about human rights abuses and national security risks,” a legislative aide told. Gallagher is also interested in strengthening enforcement of the Uyghur Forced Labor Prevention Act and reforming the trade loophole known as the de minimis rule, according to the aide.
According to Luetkemeyer, the committee is examining Shein for its use of forced labor and de minimis. Under the de minimis rule, parcels worth less than $800 are not subject to import charges and are not subject to the same scrutiny from US Customs, which is entrusted with inspecting packages to ensure things from prohibited locations do not enter the nation.
Shein frequently ships its items straight to American consumers via its network of Chinese vendors, allowing it to circumvent such monitoring. The corporation has stated that it favors de minimis reform but has not specified what those changes should entail.
“We want to make sure that we get to the bottom of this and expose what’s going on, and document it in a way that the SEC can’t ignore,” he said.
The SEC informed us that it does not comment on specific firms. The Republican effort to prevent Shein from doing business in the United States comes as politicians from both parties intensify their criticism of the Chinese-founded store. Rep. Jennifer Wexton, D-Va., has also asked for a deeper investigation into Shein. She said in a statement last week that lawmakers “must take action to hold Shein accountable” because products made from forced labor “have no place in the American marketplace.”
While Shein’s IPO file has received increased scrutiny, it is uncertain if the Republican-controlled House or the Democratic-controlled Senate would have enough support to adopt legislation restricting the company’s capacity to trade or do business in the United States. According to Luetkemeyer, the concerns about Shein are “not partisan,” and he believes legislative action against the firm would get widespread support. According to people familiar with the situation, Shein has confidentially filed to go public in the United States and may be ready to begin trading next year.
The company, which was recently valued at $66 billion, has seen a stratospheric rise in recent years, but it is coming under increased scrutiny from lawmakers, who believe the corporation can provide such low pricing because it employs forced labor and abuses de minimis. It has spent nearly a year on a charm offensive in an attempt to change those notions and win over regulators and Wall Street.
Shein has previously stated that its low prices are driven by its inventory-light business style and ability to spot emerging trends. However, it has admitted that some of its raw materials came from prohibited zones infamous for forced labor. “Forced labor is strictly prohibited at Shein.”We take transparency throughout our whole supply chain seriously, and we are devoted to human rights. To ensure compliance with US law, we require our contract manufacturers to acquire cotton only from permitted regions. According to a Shein spokesman, “as of November 2023, only 1.7% of our cotton tested positive for unapproved cotton.”
“According to global supply chain tracing firm Oritain, these amounts are much lower than the industry average of 14%,” said a spokeswoman for the company. “In infrequent cases when cotton from unapproved regions is detected, we take immediate action such as suspending production, halting shipments to the United States, and removing U.S. product listings.”
When questioned if those shipments are also stopped and deleted from product listings in other parts of the world, a Shein representative stated, “our policy is to comply with the customs and import laws of the countries in which we operate.” Because of evidence of genocide, torture, and forced labor against the Uyghur ethnic group in the region, the United States has prohibited the import of cotton and other items made in Xinjiang, China, since 2021. Other countries have not yet enacted such rules.
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