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Shein faces pressure to prove it doesn’t use forced labor

Shein e-commerce distribution center.

Fast-fashion giant Shein is under scrutiny from US state officials over the employment of forced labor.

The officials demand proof the company doesn't employ forced labor before it proceeds with its rumored initial public offering.

Attorneys general from 16 US states sent a letter to Gary Gensler, the Chair of the US Securities and Exchange Commission (SEC).

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They urged the agency to ensure Shein and other foreign companies adhere to US laws before being allowed to trade on American exchanges. 

The letter was initiated by Montana's Attorney General Austin Knudsen and co-signed by 15 other Republican attorneys general.

Given allegations regarding its business practices, it expressed concerns about Shein's IPO plans.

The letter was sent on the same day that Shein announced its investment in Sparc Group, the parent company of Forever 21.

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It noted "an IPO 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." 

The letter urged the SEC to mandate that any foreign-owned firm seeking a listing on US-based securities exchanges independently certifies compliance with Section 307 of the Tariff Act of 1930.

The act prohibits imports of products manufactured wholly or in part by forced labor.

Shein accused of using forced labor from China

Shein has been accused of using forced labor from China's Xinjiang region.

The company's supply chain has a significant presence in the region.

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However, US law prohibits imports from Xinjiang due to human rights abuses against the Uyghur population in the region. 

Shein is also under investigation by the House Select Committee on the Chinese Communist Party.

It has also faced accusations of evading US tariff laws.

The letter referenced a Bloomberg report from the previous year that demonstrated, through independent testing, some Shein clothing was made with cotton sourced from Xinjiang.

To address these concerns, Shein has contracted the supply chain tracing firm Oritain.

Thge firm has since conducted 2,111 tests between June 2022 and July 2023. 

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These tests identified 46 positive results, indicating cotton originating from banned regions at a rate of 2.1 percent.

Shein's goal is to reduce these positive test results to zero.

To achieve this, it conducts monthly testing at all 40 of its mills and has ceased purchasing cotton from China entirely.

Oritain, an independent firm, confirmed the results and noted that Shein's performance was better than the fashion industry's average. 

Despite these efforts, Shein still encounters significant hurdles.

It faces allegations of forced labor, posing a major obstacle as it seeks to expand in the US and proceed with its IPO plans.

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