Chinese “fast fashion” companies could be using a U.S. import loophole exempting inexpensive packages from customs scrutiny to sell slave-made products directly to Americans, a forced labor expert told Congress on Tuesday.
The warning that de minimis packages, those worth less than $800, may evade enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) followed similar concerns arising in a report published last week by the U.S.-China Economic and Security Review Commission, which identified the Chinese women’s clothing giant Shein as a company of particular concern regarding forced labor violations.
The Commission report noted that Shein, currently responsible for 50 percent of fast fashion sales in America, appeared to be in “direct violation” of the UFLPA by reportedly using cotton sourced from Chinese government Uyghur slave operations.
Anasuya Syam, the human rights and trade policy director for the Human Trafficking Legal Center, testified before the Congressional-Executive Commission on China (CECC) on Tuesday regarding the implementation of the UFLPA. The CECC is a bicameral commission that frequently serves as a platform to address human rights concerns in the communist country.
“There is no doubt that the UFLPA is already making waves in global supply chains and changing business practices,” Syam noted in her written statement, but expressed concern that U.S. Customs and Border Protection (CBP) “may be missing shipments – illegally transshipped or otherwise – containing inputs from Xinjiang that could be entering the United States from other countries.” She also specifically highlighted concerns that the agency is not tracking de minimis shipments, increasingly popular through direct-to-consumer sales by companies such as Shein.
“De minimis shipments refer to goods that are imported into the United States and are exempt from certain taxes and duties because their value falls below a certain threshold. Currently, the de minimis threshold for the U.S. is $800,” Syam explained. “These are typically direct-to-consumer shipments that receive almost no customs scrutiny or inspection.”
“A strategy for circumventing enforcement of the UFLPA might be to break up a shipment that is clearly subject to all reporting requirements into multiple de minimis packages. And companies are doing just that,” Syam continued. “On November 20, 2022, Bloomberg reported that Xinjiang cotton was found in apparel shipped by fast fashion giant Shein to U.S. consumers, based on the results of a laboratory test.”
“There are many other companies with similar direct-to-consumer business models that may be implicated in Xinjiang forced labor. Our concern is that these companies are evading UFLPA enforcement by exploiting this loophole,” she concluded.
The UFLPA, which went into effect in June, declares all goods originating in East Turkistan, what the Chinese Communist Party refers to as the Xinjiang Uyghur Autonomous Region (XUAR), as presumed products of forced labor unless proven otherwise. Companies seeking to bring products from East Turkistan into America must prove—the law requires—with “clear and convincing” evidence that the product supply chain did not include slave labor to receive permission to import them.
Since at least 2017, Chinese dictator Xi Jinping has imprisoned as many as three million people in East Turkistan in concentration camps, where survivors say they faced communist indoctrination, extreme torture, gang rape, and slavery.
Human rights organizations have documented the open sale of Uyghur people as slaves on the Chinese internet and implicated hundreds of global brands in the purchase of goods tainted with slave labor from East Turkistan. As cotton is one of East Turkistan’s top exports, the fashion industry is particularly lucrative for China’s Uyghur slave industry.
Following its implementation, the Chinese government branded the UFLPA “evil” and claimed it had caused a chilling effect on regional trade.
Syam’s testimony on Chinese direct-to-consumer fashion companies echoed concerns raised in a report published last week by the U.S.-China Economic and Security Review Commission, a Congressional body that describes its mission as to “monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China.”
The report in question focused mostly on Shein, currently China’s most lucrative “fast fashion” enterprise in America. Like Syam, author Nicholas Kaufman noted Bloomberg’s reporting unveiling the presence of Xinjiang cotton in Shein clothing as a sign that the company, “and perhaps other Chinese fast fashion firms[,] appear to be sourcing goods in violation of the Uyghur Forced Labor Prevention Act.”
“The investigation by Bloomberg News tracing cotton fibers to Xinjiang highlights not only the platform’s likely violation of U.S. law but also that the U.S. government does not have tools to effectively screen most e-commerce shipments from China,” Kaufman wrote. “Packages that enter the United States, including the millions that enter below the de minimis threshold [worth less than $800], are frequently not inspected.”
“Those that are inspected are often subject to rudimentary visual checks without the technology or screening to trace fabric origin and other violations,” the report continued. “Without the proper staffing and technological tools, U.S. customs officials are poorly positioned to identify and cease low-cost shipments that violate U.S. laws and regulations.”
The commission report noted that the average Shein package falls far under the $800 de minimis limit, worth only about $11. Their low value not only appears to allow the packages to avoid UFLPA inspection, the report continued, but it also “means Shein is exempt from the standard 16.5 percent import duty and 7.5 percent tariff specific to China.”
According to CECC Chairman Rep. Chris Smith (R-NJ), CBP has seized over $961 million worth of goods since the UFLPA went into effect. The witnesses at Tuesday’s hearing agreed that the law was having significant effects on global trade despite several glaring shortcomings.
“It is critical to note that while we still have a long way to go before we intercept all products made in whole or in part in the Uyghur Region, the UFLPA is indeed working as it was intended,” Professor Laura Murphy of Sheffield Hallam University told the CECC on Tuesday.
“In the short nine months that the UFLPA has been in effect, we have seen a swift and decisive enforcement response. Customs and Border Protection has indicated that it has refused at least 424 shipments entry into the United States after investigating their links to Uyghur forced labor.”
Murphy, like Syam, identified several challenges regarding the implementation, including companies operating in China moving around goods to obfuscate supply chains, changing subsidiary names to avoid reputational damage if caught trading in slave goods, and even the problem of companies actively trying to abide by the law refusing to say so “out of fear of retaliation in China.”