Products made in China’s western province of Xinjiang are being sold to U.S. consumers through the online shopping platform Temu, in breach of a U.S. ban that forbids goods from the region due to links to forced labor, according to research by a global supply chain verification firm.
Temu, owned by PDD Holdings Inc., which operates Chinese ecommerce site Pinduoduo, launched in the U.S. in September. It quickly became the most downloaded app on Apple Inc.’s U.S. App Store. Its marketplace carries clothes and home decor at rock-bottom prices. The company is aiming to take on global retail behemoths like Amazon.com Inc. and Ebay Inc.
But Tel Aviv-based Ultra Information Solutions says it found at least 10 items made or sold by businesses located in Xinjiang that are also available in the U.S. on Temu, where their company links and origins are obscured. Ultra used its digital vetting platform Publican to compare products sold on Temu, such as sandals, sunglasses and other items, with those sold by the parent company inside China.
“It’s a systematic violation of U.S. trade policies,” said Ultra co-founder Ram Ben Tzion.
Representatives for Temu and PDD didn’t reply to multiple requests for comment.
Import bans in the US
Citing what the U.S. State Department has called “horrific abuses” against the Uyghur people of Xinjiang, who are predominantly Muslim, federal officials banned the importation of cotton from the region in 2021. It expanded the law and its enforcement to all Xinjiang products last year under the Uyghur Forced Labor Prevention Act. Statements from former detainees and reports from an array of researchers and advocacy groups have alleged that the Chinese government put more than 1 million people in detention camps in the region and that laborers in fields and factories were forced or coerced. The Chinese government has said the camps are for re-education purposes.
In the U.S., Temu has grown in popularity with two advertisements aired during the Super Bowl in mid-February. Its 30-second spot — which cost millions to produce and air — features a trendy shopper twirling and dancing in an array of outfits with the tag line “Shop Like a Billionaire.” The ad has since been viewed on YouTube 341 million times. Temu is chasing Shein, the Chinese fast-fashion behemoth with estimated U.S. sales of $8 billion last year. If it succeeds, it would join only a handful of Chinese internet services to have become popular in the U.S. market, including Alibaba Group Holding Ltd.’s AliExpress and ByteDance Ltd.’s TikTok.
Alibaba owns Taobao, No. 1 in the Digital Commerce 360 database of Global Online Marketplaces. It also owns Tmall (No. 2). Amazon ranks No. 3, and Ebay is No. 6.
Temu’s growth
PDD became successful in China as a dollar-store version of Chinese online retailers Alibaba and JD.com Inc., selling lower-priced goods. Its domestic app Pinduoduo is a marketplace that recruits suppliers to offer various products. Temu operates a similar model but goes a step further and handles delivery, promotion and after-sales services for merchants on its platform, as its Chinese parent seeks to expand in the U.S. and European markets quickly.
It opened an office in Boston to serve the U.S. and Canada, where it launched in February. Temu also operates in Australia and New Zealand. According to data analytics firm YipitData, U.S. Temu sales grew 6% on a weekly basis during the last week in May, the most recent data available, with an average of $34 an order.
Product origins
The vetting platform Publican couldn’t find conclusive evidence that any of the products sold on Temu and PDD were made with forced labor, only that the companies that produced them are located in Xinjiang.
“However, their proximity means there is a probable risk, not just a theoretical risk,” Ben Tzion said.
Publican’s supply-chain vetting has been contracted to more than 35 government agencies, including tax, customs and law enforcement in South America, Africa and elsewhere with a goal of interdicting fraudulent and illegal shipments, he said.
In addition to sunglasses and sandals, Publican also found children’s clay, a ring, wall paneling, rice storage containers, a car-window ice scraper, colanders and a bathmat sold on the PDD and Temu sites. The PDD-available items were identified as coming from companies in Xinjiang.
Ultra said it wasn’t paid for its research and it wasn’t commissioned by any third party.
“It was our initiative to illustrate how our technology can be a critical component in the enforcement of UFLPA as well as other trade-related compliance challenges,” Ben Tzion said.
Compliance
Shipments from China sold directly to consumers can bypass the U.S. ban on Xinjiang products because they fall below an $800 value threshold that triggers reporting requirements to U.S. Customs and Border Protection. Bloomberg testing on Shein garments shipped to the US on two occasions last year found that their cotton came from Xinjiang.
US lawmaker response
An April report from the Congressional U.S.-China Economic and Security Review Commission said Shein and Temu pose “risks and challenges to U.S. regulations, laws, and principles of market access” resulting from such direct-to-consumer sales. Republican Representative Mike Gallagher, chair of the House Select Committee on the Chinese Communist Party, and the panel’s top Democrat, Raja Krishnamoorthi, sent letters to Temu, Shein and two other companies in May seeking to determine whether they are importing products derived from forced labor in China.
The U.S. Department of Homeland Security named two new Chinese companies it will be restrict from sending goods to the U.S. under the UFLPA. The additions bring the total to 22 Chinese firms. Customs and Border Protection began enforcing the UFLPA in June 2022. In its first year, the CBP has reviewed more than 4,000 shipments valued at over $1.3 billion, according to the DHS.
Responding to the revised entity list, Republican Representative Chris Smith and Democratic Senator Jeff Merkley said the list is only one part of enforcement. They are co-chairs of the Congressional Executive Commission on China. Forced labor goods with ties to Xinjiang, “such as car parts, solar panels, rayon, and garments from fashion companies such as Temu and Shein continue to enter the US market.”
The representatives said they will work “toward the goal of stopping imports of forced labor-made goods. American consumers should not be unwittingly subsidizing the PRC’s genocide” in Xinjiang.
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