Fast Fashion Can Take a Hit in the US-China Squab. What That Means to Shein, Temu.

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Fast mode could be another flash point in a US-China battle that has soured due to the popularity of China’s Shein, for one the world’s largest online retailerand newcomer Temu is attracting increased attention in the US

As country relations have soured, bipartisan support for a closer look at relations between countries has grown. Congressional questioning Shou Zi Chow, TikTok’s CEO for everything from content on the video app serving millions of Americans to whether the Chinese government can gain access to its users’ data is highlighting politicians changing focus.

Shein, a giant in fast fashion started in China and based in Singapore, and Temu, known for its insanely low prices and discounts, are some of the companies focused on short recently of the US-China Economic and Security Commission. The group advises Congress on matters relating to relations between the two countries.

The report, by Nicholas Kaufman, a policy analyst at the commission, raises concerns about Shein, Temu, and other Chinese digital startups. It focuses on their production processes, intellectual property rights, product safety, sources and potential uses of forced labor, as well as concerns about the data security of American users.

The focus on fast fashion is the latest indication that the ripples from the changing US-China relationship could reach far beyond critical areas like semiconductors.

Shein takes visibility across our entire supply chain seriously. For more than a decade, we have been providing on-demand and affordable fashion, beauty and lifestyle products to customers, lawfully and with utmost respect for the communities we serve, a spokesperson for Shein said by email. Gathering did not respond to requests for comment.

Given the rapidly increasing market share of Shein and other Chinese e-commerce companies in the US, the US government should be vigilant in ensuring that these companies comply with US laws and regulations and are not given an unfair advantage over US companies, Kaufman said in a brief.

Shein, owned by Singapore’s Roadget Business, accounts for roughly half of fast fashion sales in the US, beating out European rivals such as

Inditex

s (ITX) Zara and Sweden

H&M
.

Part of Shein’s success comes from a business model that relies on tracking and analyzing user data to determine fashion trends, according to the brief. That makes clothes produced and shipped in about five to seven days, versus three weeks for rivals. Some users are helping with the intelligence gathering effort, sharing their data and activities on other social media apps, in order to get discounts.

Online discount site Meet, which advertised at the Super Bowl, quickly gained popularity and the app was downloaded. The manufacturing and shipping process is similar to Sheins, and it also relies on social media for sales.

Shein and similar companies put forward several related patterns and practices, wrote Kaufman. He cited reports that the company had been using regionally sourced cotton using forced labor and other exploitative labor practices and said it was difficult to monitor their source of supply and whether these companies were procuring goods in violation of the Uyghur Forced Labor Prevention Act.

They offer a case study of a Chinese e-commerce platform beating regulators to grow a presence in the dominant US market, he wrote.

For example, Kaufman said, an average Shein merchandise costs $11, making him exempt from China-related import duties and tariffs. In addition, the company’s shipments are small enough to fall below the level that would require customs inspection, allowing direct shipments and avoiding control over the sourcing of its cotton, Kaufman wrote.

Congress has essentially banned any imports from Xinjiang over concerns about forced labor, though tracking where products come from is difficult, analysts say. Several senators wrote to Shein’s leadership in February seeking information about the alleged sourcing of Xinjiang cotton.

With the Congress split, the chances of passing laws related to the textile industry in the near future are limited. But the pressure on Chinese companies is likely to increase, especially for companies whose business it is to collect US data.

The profile of this problem is steadily increasing, and even if it doesn’t result in apparel industry-specific regulation, we could see more supply chain policy prescriptions, said Anna Ashton, director of China corporate affairs and US-China relations at Eurasia Group. The second possible or even likely angle of attack has to do with data privacy vulnerabilities presented by Chinese retail websites.

Correction & Amplification: Roadget Business Singapore is the parent company of Shein. An earlier version of this article erroneously said that the Hong Kong company Zoetop, the former owner of Shein, was the parent company.

Write to Reshma Kapadia at [email protected]