Two people hold two Shein bags after entering SHEIN’s first physical store in Madrid, Spain, June 2, 2022.
Cezaro De Luca | Europa Press | Getty Images
WASHINGTON — Bipartisan lawmakers are urging the nation’s top markets regulator to require Chinese fast-fashion giant Shein to reveal potential forced labor practices ahead of the corporate’s possible initial public offering in america.
The fast-fashion company has come under fire for accusations of mistreatment of Uyghurs, a marginalized group in China, and for allegedly falsifying reports of forced or underpaid labor of its supplier factories, a few of that are positioned within the Xinjiang Uyghur Autonomous Region of China.
The alleged practices violate the 2021 Uyghur Forced Labor Prevention Act, Reps. Jennifer Wexton, D-Va., and John Rose, R-Tenn., wrote in a letter Monday to Securities and Exchange Commission Chairman Gary Gensler.
“As a world company, Shein takes visibility across our entire supply chain seriously. We’re committed to respecting human rights and adhering to local laws and regulations in each market we operate in,” a Shein spokesperson told CNBC. “Our suppliers must adhere to a strict code of conduct that’s aligned to the International Labour Organization’s core conventions. Now we have zero tolerance for forced labor.”
The SEC didn’t immediately reply to a request for comment.
The representatives are leading a bipartisan group, including 22 other lawmakers, in demanding the SEC require that Shein independently confirm that it doesn’t use forced labor before being allowed to issue securities within the U.S. The $64 billion company is preparing for a possible IPO later this 12 months.
“While Shein claims its products don’t utilize Uyghur forced labor and it really works with third parties to audit its facilities, experts counter a majority of these audits are easily manipulated or falsified by state-sponsored pressure,” the lawmakers wrote to Gensler. “Other experts argue that it is suitable to presuppose that any product made within the XUAR is made with forced labor.”
Goods manufactured in that area of China are usually not entitled to entry into the U.S. under the 2021 act.
The lawmakers also asked Gensler to notify national securities exchanges registered under Section 6 of the Securities Exchange Act of the requirement. Section 6 outlines the applying process for registration as a national securities exchange.
Shein’s business model relies heavily on promoting to Gen Z buyers on mobile apps, comparable to TikTok, and thru social media influencers.
The corporate, whose de facto holding company is positioned in Singapore, hired its first federal lobbyists in 2022 with goals to expand its distribution into the U.S. market, in accordance with Politico.
The lawmakers’ letter echoes concerns from outside groups. Independent coalition Shut Down Shein has also called on the SEC to disclaim IPO registration to Shein unless it provides proof of compliance with the Uyghur Forced Labor Prevention Act.
“Access to U.S. capital markets is a privilege, not a right, and mustn’t be given freely to corporations who threaten U.S. national security with nefarious business practices, and who’re making Americans complicit of their violation of U.S. law,” Chapin Fay, executive director of Shut Down SHEIN, has written.
– CNBC’s Gabrielle Fonrouge contributed to this text.
