Politicians to Shein: Not So Fast on U.S. Expansion

Shein, the ultrafast fashion retailer widely popular among Generation Z and millennial shoppers, faces demands from more than a dozen state attorneys general to answer questions about its business practices as the company’s U.S. expansion continues.

The Republican attorneys general of 16 states sent a letter to Gary Gensler, the chair of the Securities and Exchange Commission, expressing concerns about the company’s plans to file for an initial public offering in the United States, which many investors expect to happen soon. They urged the agency to order Shein, which was founded in China in 2012 and now has its headquarters in Singapore, to undergo an independent process, as a requirement of filing, to prove that it does not use forced labor.

The market for U.S. public listings has recently shown some signs of life, after more than a year of subdued activity in which companies shied away from volatile markets and slowing economic growth. Companies like the chip maker Arm Holdings and the food-delivery firm Instacart have recently filed to go public, signaling that the market could be becoming more favorable for listings. Shein has not commented on potential I.P.O. plans.

“It is apparent that Shein is attempting to launch an I.P.O. before the end of this calendar year,” the letter from the attorneys general said. “An I.P.O. of this magnitude — involving a foreign-owned company that is facing credible concerns about its core business practices — cannot move forward on self-certification alone.”

A Shein spokeswoman said the company would “continue to engage with U.S. federal and state officials to answer their questions.”

The letter was sent on the same day Shein announced that it was taking a financial stake in Forever 21’s parent company and that it might sell its low-priced apparel, which includes $5 tops and $10 dresses, at Forever 21 stores at malls across the United States.

For nearly a year, Shein has been dogged with accusations that it uses forced labor in the Xinjiang region in China. The U.S. government has banned imports from the area because of human rights abuses against the Uyghurs, a predominately Muslim group. Bloomberg reported last year that some Shein apparel was made with cotton from Xinjiang. Shein has denied that it uses forced labor.

Shein, which has historically been tight-lipped about its business model, has become more vocal about it this year, opening itself to more scrutiny surrounding its operations.

In April, the company held a summit to celebrate its independent designer program, which was formed after creators accused the company of ripping off their work. (Independent designers were contacted in late 2020 about the program, but the company didn’t roll it out until 2021.) Around the same time, a group called Shut Down Shein emerged. In June, the company invited influencers to tour one of its factories in China, which generated a backlash on social media by people who considered the trip a means to obscure real concerns about the conditions of factory workers.

Then there are the geopolitical issues. The relationship between the U.S. government and some Chinese-owned companies, like Shein and TikTok, has grown more contentious. Commerce Secretary Gina Raimondo, who is in China this week, said the United States was not seeking to sever economic ties with China, but she emphasized concerns over national security, intellectual property theft and other issues.

The group of state officials who sent the letter to the S.E.C. was led by Austin Knudsen, Montana’s attorney general, who has also led the charge in pushing the U.S. government to look more closely at TikTok’s expansion.

This is not the first time that politicians have prodded the S.E.C. about Shein. In May, two members of Congress wrote the securities regulator requesting that as stipulation of an initial public offering, the company must first provide proof through a third-party that it doesn’t use Uyghur forced labor.