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But there are labor and customs problems that appear to be making the fast fashion behemoth think twice.
It’s been long-rumored and long-denied by the company, but it’s getting close to official: Chinese fast fashion giant SHEIN is going public.
Or is it? Who knows! SHEIN executives won’t say. But Reuters reports the behemoth retailer is in talks with major investment banks about lining up funding for its initial public offering and is considering the New York Stock Exchange and Nasdaq for its market debut.
There are a pair of big reasons SHEIN is being cagey about when and even if to do an IPO in the U.S., and both involve serious scrutiny it’s drawing from federal lawmakers.
The first reason involves mistreated workers, which isn’t the kind of thing shoppers want to be reminded of when they’re wearing your clothes. Credible reports have detailed labor law violations in the Chinese apparel factories that contract with the company, and others reports have tied SHEIN to supply chains utilizing actual forced labor in China’s Xinjiang province.
In fact, a bipartisan group of members of the U.S. House of Representatives have demanded SHEIN submit to an independent labor audit as a condition of having an IPO in the United States. In May they wrote to the head of the Securities and Exchange Commission, asking that it “set forth regulations and mandate SHEIN to certify via independent verification that the company does not use Uyghur forced labor as a condition of being registered to issue securities in the United States.”
There’s a U.S. law against importing anything into the States from Xinjiang, of course: The Uyghur Forced Labor Prevention Act. But SHEIN is skirting that law’s supervision entirely because of a lax American trade rule, which brings us to the second reason the company is sweating its IPO decision: Lawmakers are considering legislation to tighten the trade rule and seriously cramp SHEIN’s business model.
Because it ships orders directly to American customers from China, SHEIN – which grew from $10 billion in sales in 2020 to $100 billion in 2022 – can use the cartoonishly high U.S. “de minimis” tariff exemption to send packages valued at $800 or less and avoid virtually all customs inspections and applicable tariffs.
By leaning on that $800-or-less de minimis threshold, “they’re exempt from taxes, tariffs, following rules and regulations, product safety, forced labor,” said Rep. Earl Blumenauer (D-OR) last week on the Alliance for American Manufacturing ‘s podcast. “They’re all exempt.”
“There are examples where, in some cases, there are packages that weigh 500 pounds that declare a value of $1,” continued the congressman, who is a sponsor of the House’s de minimis reform legislation. “I mean, it’s just ludicrous. There’s no excuse for it.”
The suspect labor record and a reliance on a trade rule being targeted by lawmakers suggests SHEIN may be sitting atop an unsustainable business model. And we haven’t even mentioned the sustainability questions that come from churning out ultra-cheap clothing that doesn’t last, clogs landfills and takes a ton of energy to create.
Despite it all, the company was valued at $60 billion as recently as March. And as AC/DC says: Money talks. So the urge the global apparel behemoth feels to go public and make even more money is definitely there.