The US government has its eyes on Shein and Temu now, and here’s why

Getting your Trinity Audio player ready...

In the US, the concern around TikTok has been drawing fresh attention to how Chinese apps like Shein, Temu, and others dominate app stores. While TikTok and Shein have been popular for a long time, the recent ascension of Temu, a discount shopping app first launched in September 2022 in the US, is making a new reality clear: Chinese-made apps are thriving in America.

TikTok’s fate in the US, especially since the Congress hearing, has set the tone for Chinese apps in the US. Considering how fast Chinese platforms are gaining traction and going global, it did not come as a surprise when Shein and Temu fell under the eyes of US officials. 

In a report published on April 14 by a commission affiliated with the US Congress, the US-China Economic and Security Review Commission blamed quick fashion platform Shein and shopping app Temu for “data risks, sourcing violations, and trade loopholes.”

Like the multiple reports produced in the US now and then, the USCC report follows the years-old logic that everything from China is risk-laden. The risks listed are often the same, such as data and privacy. 

The report, titled “Shein, Temu, and Chinese e-Commerce: Data Risks, Sourcing Violations, and Trade Loopholes,” details the challenges posed by Chinese “fast fashion” platforms, including the exploitation of trade loopholes, concerns about production processes, sourcing relationships, product safety, and use of forced labor.

“These platforms primarily rely on US consumers downloading and using Chinese apps to curate and deliver products. The primary focus of this Issue Brief is first mover Shein, about which the most data are available, with additional discussion of Temu, which has rapidly expanded its US market presence in the past year,” the report states.

Shein, Temu, and the myriads of issues the US sees

The USCC believes those firms’ commercial success has encouraged both established Chinese e-commerce platforms and startups to copy their model, posing risks and challenges to US regulations, laws, and principles of market access. 

The report also highlighted that Shein had surpassed its competitors, such as Zara and H&M, saying that its growth was supported by what it claimed to be “controversial practices,” such as analysis of consumers’ search history and fast supply chains. 

“Investigations in 2022 alleged that Shein failed to declare that it had sourced cotton from Xinjiang for its products, a violation of the Uyghur Forced Labor Prevention Act,” the report added. “Shein and Temu also exploit trade de minimis import exemptions, through which firms make shipments to the US that are below a US$800 value and are therefore not subject to import duties,” the USCC stated.

The USCC believes Shein and similar firms are a case study of Chinese e-commerce platforms outmaneuvering regulators to grow a dominant US market presence. To explain how significant Shein is in the US, the USCC found that Shein’s market share of fast fashion sales in the US rose from 18% in March 2020 to 40% in March 2022.

By November 2022, Shein accounted for 50% of all fast fashion sales in the US, ahead of brands H&M (16%) and Zara (13%). “After surging past Tiktok, Instagram, and Twitter to briefly become the most downloaded app in the US in May 2022, Shein maintained its growing popularity,” the report added. 

As of March 2023, Temu and Shein rank in the top five free apps on the Apple Store, ahead of retailers Amazon and Walmart. Due to that, the USCC said, “numerous other established and emerging Chinese e-commerce firms seek to penetrate the US market by modeling their strategies on Shein and Temu’s businesses.”