SHEIN Filed for an IPO. Will the Fast Fashion Behemoth Hold Up Under Even More Scrutiny?

By Cathalijne Adams
Nov 28 2023 |
Photo by Focal Foto via Creative Commons

The e-commerce retailer has built its business on shadowy supply chains.

Fast fashion retailer SHEIN has confidentially filed for an initial public offering (IPO) in the United States, according to reports. Should its IPO move forward, the company will be beholden to public shareholders and expected to offer greater transparency — something that will likely prove challenging since its success has been built on murky supply chains and the exploitation of a U.S. trade loophole that may soon close.

Let’s backtrack.

Founded in China in 2008, SHEIN catapulted to supremacy in the apparel industry during the pandemic when its e-commerce platform enabled shoppers to indulge in buying binges from the safety of their homes. Since then, SHEIN’s rock-bottom prices have reshaped the fashion industry and established a culture of throwaway clothing that has serious environmental consequences. A 2022 report found that SHEIN’s use of virgin polyester contributes the same amount of CO2 as nearly 180 coal-fired power plants.

SHEIN has seemingly also contaminated U.S. markets with forced labor goods. A Bloomberg investigation tied its clothing to cotton from China’s Xinjiang region, where the Uyhgur people have been brutally oppressed and conscripted into forced labor camps by the state. Despite the Uyghur Forced Labor Prevention Act being in effect, these garments made their way into the U.S., according to Bloomberg.  

These allegations and reports of exploitative labor conditions have prompted rare bipartisan consensus.

This May, Reps. Jennifer Wexton (D-Va.), John Rose (R-Tenn.) and 22 other Members of Congress urged the U.S. Securities and Exchange Commission to require SHEIN to certify its products do not utilize Uyghur forced labor through independent verification before the company be allowed to register on the U.S. exchange.

“We strongly believe that the ability to issue and trade securities on our domestic exchanges is a privilege, and that foreign companies wishing to do so must uphold a demonstrated commitment to human rights across the globe,” wrote the Members in their letter.

Meanwhile, the company is also facing a federal anti-racketeering lawsuit for allegedly copying designers’ work without their knowledge.

All of these issues present serious obstacles to SHEIN’s IPO. However, if the company does go public in 2024, it could face a starkly different economic outlook should the de minimis loophole in U.S. Customs law be closed.

Right now, de minimis preferences allow shipments with goods valued at less than $800 to enter the U.S. without inspection of duties. It’s an exemption that was intended to make the customs process easier for tourists bringing souvenirs home. SHEIN was the first company to seize upon the business advantages of the de minimis loophole by shipping products directly to consumers and has profited enormously. (Fast fashion mainstay H&M paid $205 million in import duties in 2022. Gap paid $700 million. David’s Bridal paid more than $17 million. SHEIN? $0.)

The U.S. House Select Committee on the Chinese Communist Party estimates that de minimis imports account for nearly 600,000 shipments every day. These uninspected packages could be introducing goods made by forced labor into the U.S. market and have been said to ferry fentanyl in as well.

The Import Security and Fairness Act, introduced in the U.S. House of Representatives by Reps. Earl Blumenauer (D-Ore.) and Neal Dunn (R-Fla.) and in the U.S. Senate by Sens. Sherrod Brown (D-Ohio) and Marco Rubio (R-Fla.) in 2023, would prohibit shipments from countries that are both non-market economies and on the U.S. Trade Representative’s Priority Watch list from utilizing de minimis. Tell your Members to support the legislation.