US continues its beef with China: Shein and Temu are the latest targets

• The US-China Economic and Security Review Commission’s report accused Shein and Temu of possible data risks, sourcing violations, and intellectual property infringements.
• The release coincided with Montana’s move to become the first US state to pass a bill that makes it illegal to download TikTok in the state.

Following TikTok’s fate in the US, many had expected Washington to set their sights on other Chinese platforms that have gone global. As anticipated, Shein and Temu have just fallen under the radar of US officials. In a report published on April 14, the US-China Economic and Security Review Commission, affiliated with the US Congress, blamed quick fashion platform Shein and shopping app Temu for “data risks, sourcing violations, and trade loopholes.”

Like the multiple reports produced in the US, the USCC one follows the years-old logic that everything from China is risk-laden. The risks listed are often the same, such as data and privacy. 

The report by USCC, titled “Shein, Temu, and Chinese e-Commerce: Data Risks, Sourcing Violations, and Trade Loopholes,” details the challenges posed by Chinese “fast fashion” platforms, including exploitation of trade loopholes; concerns about production processes, sourcing relationships, product safety, and use of forced labor.

“These platforms primarily rely on US consumers downloading and using Chinese apps to curate and deliver products. The primary focus of this Issue Brief is first mover Shein, about which the most data is available, with additional discussion of Temu, which has rapidly expanded its US market presence in the past year,” the report stated.

Shein, Temu, and the myriad of issues the US sees

The USCC believes those firms’ commercial success has encouraged both established Chinese e-commerce platforms and startups to copy its model, posing risks and challenges to the US regulations, laws, and principles of market access. 

The report also highlighted that Shein had surpassed its competitors, such as Zara and H&M, saying that its growth was supported by what it claimed to be “controversial practices,” such as analysis of consumers’ search history and fast supply chains. 

“Investigations in 2022 alleged that Shein failed to declare that it had sourced cotton from Xinjiang for its products, a violation of the Uyghur Forced Labor Prevention Act,” the report added. “Shein and Temu also exploit trade de minimis import exemptions, through which firms make shipments to the US that are below a US$800 value and are therefore not subject to import duties,” the USCC stated.

The USCC believes Shein and similar firms are a case study of Chinese e-commerce platforms outmaneuvering regulators to grow a dominant US market presence. To explain how significant Shein is in the US, the USCC found that Shein’s market share of fast fashion sales in the US rose from 18% in March 2020 to 40% in March 2022.

By November 2022, Shein accounted for 50% of all fast fashion sales in the US, ahead of brands H&M (16%) and Zara (13%). “After surging past Tiktok, Instagram, and Twitter to briefly become the most downloaded app in the US in May 2022, Shein maintained its growing popularity,” the report added. 

As of March 2023, Temu and Shein rank in the top five free apps on the Apple Store, ahead of retailers Amazon and Walmart. Due to that, the USCC said, “numerous other established and emerging Chinese e-commerce firms seek to penetrate the US market by modeling their strategies on Shein and Temu’s businesses.”

Separately, on April 14, Montana became the first US state to pass a bill that makes it illegal to download the app in the state. Before that, last month Temu’s sister app Pinduoduo was suspended by Google Play following complaints about the presence of malware to bypass user security permissions and access private messages, according to the report.

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