Virginia Rep Demands Accountability in Wake of Shein IPO News
The giant Singapore-based e-tailer Shein still hasn’t confirmed the filing of an initial public offering here in the United States, but the mystery IPO has prompted a member of congress to demand officials step up their use of isotopic testing to snag offenders of the Uyghur Forced Labor Prevention Act (UFLPA).
Rep. Jennifer Wexton, Democrat from Virginia, penned a sternly written letter to Secretary of Homeland Security Alejandro Mayorkas asking him to account for the $1.3 million paid for the testing of just 86 samples of apparel and footwear, of which 15 percent were positive for cotton from Xingjiang, the region known for labor abuses.
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Citing “significant resources” allocated to the DHS for testing, Rep. Wexton demanded to know why the sample was so small, why the tab was so excessive, how the provider was chosen and if the rates the government paid were competitive.
A third demand in the letter, which was a follow-up to a post she made Tuesday on X, got specific about manpower, as in, is there enough? “How many Homeland Security Investigations agents and CBP (Customs and Border Protection) specialists have been trained specifically on isotopic testing?” she wrote. “Please include the number of trainings, dates, and the number of personnel trained out of total personnel in these categories.”
She asked for answers within 30 days. In addition, she demanded unredacted copies of all documents related to a Freedom of Information Act (FOIA) request made by the Reuters News Agency that revealed the numbers. She noted that 15 percent of the 86 samples tested positive for Xinjiang cotton, on par with what CBP’s contract testing company, the New Zealand-based Oritain, self-reported from tests conducted on 1,000 randomly selected cotton items the previous year.
A spokesperson for the DHS said the agency will respond to Wexton’s letter through official channels, and “will continue to respond appropriately to Congressional oversight.”
Shein has been maneuvering for a valuation of nearly $100 billion, Bloomberg reported last month. But in May, the company was valued at closer to $60 billion, about half the $124 billion market capitalization of Zara parent Inditex, according to InFront Analytics. Shein also has gone on record saying it no longer sources any cotton from China.
When the possibility of a Shein IPO was first made public in reports last year Rep. Mike Gallagher, Republican of Wisconsin, and chairman of the House Select Committee on the Chinese Communist Party, threw in his two cents. He debunked the company’s claims that they take supply chain visibility seriously, saying on X that it is not supported by the materials produced to the committee in its bipartisan investigation.
“We are continuing to carefully examine Shein’s regulatory and compliance programs, and I would encourage investors and banks underwriting this reported IPO to do the same,” he wrote at the time.
Kim Glas, president and CEO of the National Council of Textile Organizations (NCTO) took a longer view. In a statement Thursday she demanded a stop to “slave labor products still bleeding into the U.S. market,” a fact which underscores the “weaknesses of our government’s efforts to enforce the law.”
CBP enforcement efforts in the textiles sector have been on the decline, she said, and if that continues, critical items like personal protective equipment and military products will be in short supply as China continues to exploit the government’s ineffective enforcement efforts and reap the rewards of its predatory trade practices.
Shein, known for its rapid turnover and ultralow prices like $10 dresses and $12 shoes, claims unequivocally that they have “zero tolerance for forced labor,” and do not use Xinjiang cotton. In a statement to Sourcing Journal, the company said it was complying with U.S. law in requiring its contract manufacturers to only source cotton from approved regions. It claimed that last month only 1.7 percent of its cotton tested positive for cotton from unapproved regions, compared to an industry average of 14 percent, according to Oritain.
“In infrequent cases when cotton from unapproved regions is detected,” the statement said. “we take immediate action such as suspending production, halting shipments to the U.S. and removing U.S. product listings.”
Oritain, meanwhile, confirmed its extensive testing work for Shein, noting the presence of “about 9 percent prohibited origin cotton in the general US/EU market, even among many well-known American brands. Shein’s findings of prohibited origin cotton across thousands of tests are significantly less than that,” it said in a statement. It would not give details of its contract with the U.S. government. Oritain is considered by many as one of the premier testing firms the traceability space.
Goods produced partially or entirely in Xinjiang are banned in the U.S., and Shein will have to step up its oversight of the supply chain if it expects to withstand the rather harsh scrutiny and proceed with a U.S. IPO. According to reports, Goldman Sachs, JPMorgan Chase and Morgan Stanley are serving as lead underwriters.
Republican attorneys general from more than a dozen states have urged the SEC to require a third party audit of its supply chain before any IPO can be issued. To not use due diligence with Shein, which now has partnerships with Forever 21, Misguided, Alice McCall and Christian Siriano as well as Paul Smith and Skechers, would be “formalizing the company’s huge success and our society’s inability to control it,” Elizabeth L. Cline, author and professor of fashion policy at Columbia University previously told Sourcing Journal. “The sad fact is that as long as fast fashion is making people a lot of money—now including investors and American banks—it’s going to remain dominant.”
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