Attorney General Knudsen leads 16-state coalition sounding alarm on SHEIN business practices
HELENA – Montana Attorney General Austin Knudsen led a 16-state coalition of attorneys general in sounding the alarm on the China-founded, fast-fashion retailer SHEIN’s business practices – which includes reports of forced labor – and their potential Initial Public Offering (IPO) launch later this year.
In a letter sent Thursday to SEC Chair Gary Gensler, the attorneys general urge the SEC to require any foreign-owned company to certify via a truly independent process that it is compliant with Section 307 of the Tariff Act of 1930, which prohibits the import of any product manufactured wholly or in part by forced labor as a condition of being listed on a U.S. based securities exchange.
The attorneys general point out that SHEIN has been credibly accused of exploiting forced labor and violating the Uyghur Forced Labor Prevention Act (UFLPA). Testing done by Bloomberg News last year found significant scientific evidence that cotton produced in the Xinjiang Autonomous Region was present in clothing sold by the company.
“American exchanges should have a zero-tolerance policy for foreign companies that seek access to our markets but refuse to follow our laws, especially when the implicated laws are meant to prevent serious human rights abuses,” the attorneys general wrote. “We believe in upholding the rule of law and protecting our economy. Lip service is not enough; in this case, the U.S. Securities and Exchange Commission must ‘trust, but verify’ that every such company is complying before it receives the privilege of being listed on an American securities exchange.”
While SHEIN claims to have a self-financed and managed certification process that claims it demonstrates compliance with U.S. law, self-certification is not enough. Especially with the company’s documented history of lying about its labor practices.
The attorneys general also highlight SHEIN’s exploitation of trends, which can blur the lines of intellectual property and copyright and avoid customs duties which have contributed to its rapid growth. Additionally, the company collects an enormous amount of data on American consumers, which it uses in complex algorithms to fine-tune its offerings and bring new products to market faster than its competitors.
The U.S. House of Representatives Select Committee on the Chinese Communist Party is investigating SHEIN’s business practices for UFLPA. The Committee has found that because most products shipped from SHEIN to American consumers fall under Section 321 of the Tariff Act of 1930, also known as the “de minimis exception,” which allows importers to avoid customs duties on incoming packages that are valued at less than $800 and are less likely to face the same customs scrutiny as other retailers.
Attorneys general from Alaska, Arkansas, Georgia, Idaho, Iowa, Louisiana, Mississippi, Missouri, Nebraska, North Dakota, Oklahoma, South Carolina, Tennessee, Utah, and Virginia also signed Attorney General Knudsen’s letter.
Click here to read the letter.