A U.S. government commission issued a new brief outlining data risks and potential legal violations by several popular Chinese fast fashion e-commerce companies, such as Shein and Temu. In particular, the report alleges that Shein uses consumer data in various ways to unfairly outpace competitors while also diving into concerns about counterfeit goods, forced labor, and product safety. While the latter concerns are legitimate, the report’s critique of Shein’s use of data as a threat to U.S. consumers is misguided and fails to consider the consumer benefits of data-sharing. Instead of creating fear over data-sharing practices, policymakers should focus on how to better address the legitimate concerns the report raises.
The report from the U.S.-China Economic and Security Review Commission (USCC) primarily highlights business practices that help Shein dominate the fast fashion industry, a part of the clothing industry that sells inexpensive and quickly produced clothes. Shein uses an integrated supply chain to quickly bring small batches of desired items to the market, instead of purchasing items in bulk from manufacturers. For example, a supplier partnered with Shein may produce as few as 50 clothing items for a first order to accelerate production and delivery. Shein also relies heavily on social media marketing, and half of Gen Z and millennial consumers made purchases directly from social media in 2022. By November 2022, Shein accounted for 50 percent of all fast fashion sales in the United States, ahead of competitors like H&M and Zara.
However, the report wrongly considers Shein’s use of customer data as an area of concern. Shein uses customer data and search history, combined with advanced AI, to predict fashion trends and patterns. The company also requests its app users share data and activity from other apps, including social media, in exchange for discounts or special offers. This data allows Shein to identify trends, produce products that U.S. consumers want, and market those products directly to the consumer. None of these actions pose risks to consumers, and consumers can choose to not share specific data, such as data from social media accounts, with the company. Moreover, law enforcement can prosecute companies that mishandle consumer information. For example, in 2022, New York fined Shein’s parent company, Zoetop, $1.9 million for failing to protect credit card and user information during a cyberattack.
That said, some of the labor and supply chain practices Shein exhibits do raise legitimate concerns, and policymakers should consider how advanced technologies can help address them. For one, Shein’s quick and small production schedule raises concerns about forced labor, and the report alleges violations of the Uyghur Forced Labor Prevention Act, which prohibits the use of cotton from China’s cotton-growing Xinjiang region in imported clothing. The report also alleges violations of Chinese labor laws, unsafe lead levels in products, the environmental impacts of fast fashion apparel, and extensive copyright and trademark infringement. Policymakers should support the Department of Homeland Security’s (DHS’) plan to implement AI to screen cargo shipments and ensure this technology is used to screen individual packages by providing funding and training to ensure that customs officials have the technology and staffing to screen and trace fabric origins to ensure products do not violate forced labor laws. Policymakers should also support the use of AI and advanced technology to prevent counterfeit goods from entering the United States, by increasing inspection and screening of individual goods and seizure of any illegal or counterfeit items. Finally, if policymakers wish to limit Shein’s access to the U.S. market because China limits U.S. companies’ access, they should consider doing so without creating fears about data use.
Products imported into the United States do not require customs inspections and tariffs when they are below the de minimis threshold of $800. Since Shein items cost an average of $11 per item, most of the items it sells falls into this category. Packages that fall below the de minimis threshold are generally not inspected, which allows violations to slip by. Congress should direct DHS to investigate the extent to which goods sold on these platforms use forced labor or infringe IP and consider mitigation measures, including increased screening or adjustments to the de minimis threshold.
Unfounded concerns about data use disparage legitimate businesses practices, ignore the benefits that these apps provide to consumers, and draw the focus away from legitimate concerns about product safety, forced labor, and counterfeit goods. Focusing on legitimate harms, not creating concerns about data, is the path forward to protecting U.S. consumers.