Sixteen state attorneys general are pressing the federal government to instate regulations that would force the Chinese-owned online retailer Shein to address allegations it relies on slave labor ahead of its possible inclusion on the U.S. stock exchange.
The state officials, led by Republican Montana attorney general Austin Knudsen, want the U.S. Securities Exchange Commission, which regulates the U.S. stock market, to implement a rule that would mandate all foreign-owned companies submit to an independent third-party probe into their labor practices, according to a letter sent Thursday to the SEC and obtained by the Washington Free Beacon.
Shein, a $64 billion company that has become the world’s largest online fashion retailer, has long been dogged by accusations it relies on cheap slave labor from China’s Uyghur population. Amid speculation the company is eyeing a spot on the U.S. stock exchange, the attorneys general say the Biden administration has a responsibility to block this bid unless Shein can prove it is not using forced labor and unsafe working conditions in its factories.
"An IPO [initial public offering] of this magnitude—involving a foreign-owned company that is facing credible concerns about its core business practices—cannot move forward on self-certification alone," write the state officials, including those from Virginia, Louisiana, Nebraska, and Oklahoma, among others. "Various government, watchdog, and media reports have alleged that [Shein’s] rise has been ‘made possible by forced labor, human rights violations, stealing other designers' work and the peddling of clothing made with potentially hazardous materials.’"
While Shein initially declined to comment on reports alleging its materials were sourced from China’s Xinjiang province, the site of mass human rights abuses and forced labor camps, the company has recently touted its own "third-party analyses" showing materials like cotton are not coming from this region.
The state officials say Shein’s claims cannot be trusted and that the Biden administration needs to halt the company’s IPO until it can prove its products are not made using Uyghur slave labor.
"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 state officials write. "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."
Shein has also benefited from a loophole in American trade law "that allows importers to avoid customs duties on incoming packages that are valued at less than $800," the attorneys general note.
The House Committee on China, which is investigating Shein’s business practices, determined earlier this year that the company’s reliance on this loophole has allowed its shipments into the United States to face less scrutiny by customs officials. Because of this, questions linger about whether Shein’s products are violating the Uyghur Forced Labor Prevention Act, a law meant to stem the flow of such Chinese products into the country.
Shein, the state attorneys say, "refuses to engage with U.S. government officials and is instead touting a purported self-financed and managed certification process that it claims demonstrates compliance with U.S. law."
But "such self-certification is insufficient," they write, when Shein "has a documented history of lying about its labor practices."
A 2021 Reuters investigation showed that Shein "falsely stated on its website that conditions in the factories it uses were certified by international labor standards bodies."
Concerns over these allegations has led Shein—like other Chinese companies such as TikTok—to hire Washington, D.C.-based lobbyists "to whitewash its image," according to the state officials.
Shein did not respond to a request for comment but has repeatedly denied using slave labor, telling NBC News in late June that its "policy is to comply with the customs and import laws of the countries in which we operate."