US States Urge SEC to Probe Shein’s Forced Labor Compliance

Republican attorneys general from 16 different states in the United States have banded together to call on the Securities and Exchange Commission (SEC) to investigate the fast-fashion retailer Shein’s supply chain. Shein was founded in China. As Congress members focus on Chinese firms that seem to be at odds with American foreign policy goals, this request comes amid rising tensions between the United States and China.

The letter, which was sent to the SEC last week, puts Shein under more pressure as it mulls making an initial public offering (IPO). Shein moved its headquarters to Singapore, but the majority of its products are still made in China, where issues with forced labor have garnered widespread attention.

The letter’s main argument is that the SEC should require independent audits for foreign companies that are listed on American exchanges, like Shein. These audits are designed to make sure that U.S. regulations against the importation of items made using forced labor are being followed. Shein, a retailer well known for its reasonably priced apparel and household items, has previously stated its commitment to a zero-tolerance approach to forced labor. The business, however, has not yet provided any immediate remarks regarding the letter or its IPO prospects.

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Prior to Shein’s possible IPO this year, in May, 24 U.S. congressmen urged the SEC to postpone it until the company could certify that it does not use forced labor in its operations. Despite these worries, Shein has had great success growing its market share in the United States. The business built a warehouse in Indiana in 2022 to handle the escalating demand and quicken deliveries. According to recent statistics, the warehouse has grown by 20%.

It is worth noting that Indiana State Attorney General Todd Rokita, a Republican, did not add his signature to the collective letter sent to the SEC. Meanwhile, news emerged in July that Shein was collaborating with multiple investment banks in preparation for a potential U.S. IPO, and discussions had taken place with both the New York Stock Exchange and Nasdaq.

As the battle between China and the U.S. continues, the fate of Shein’s potential IPO hangs in the balance, hinging on the outcome of the SEC’s investigation into the company’s compliance with forced labor regulations.