Riddle Me This: When Is Cheap Stuff Too Expensive?
When the Cheap
Stuff Is Made By Slave Labor in China:
The Terror of Temu, Part 3
Preface: How I Got Here. Revised 07/11/2024
Before the research that resulted in this three part series, my only knowledge of Temu came from ads on websites. I still can't remember if I saw ever the Temu Super Bowl ad. I mute and then ignore most television advertising. Nevertheless, I had created a website for a tool inventor who had patented an adjustable one size fits all socket wrench. I wanted to ascertain if his design had been copied. Plus, I had spent time online looking up competing adjustable socket wrenches. Website tracking being what is, webpages I had visited were peppered with ads for Temu that offered its own adjustable wrenches that were listed at real cheap prices. Over time, though Google had blessed me with no more Temu ads.
In June, read and wrote about the brushing scam that named Temu as a main culprit. So it seemed that Google tracking decided that I might enjoy reading some additional news about Temu. An article about the Grizzly Reports findings showed up. After that, I had read an article online about Temu that seemed to be more puff journalism than a honest evaluation of the benefits and risks of using the Temu app. So I endeavored to learn what else was being said about Temu.
As a result of that search, the onion that was Temu began to get peeled back. The first layer that was pulled back was the Grizzly Research report on Temu that is a source cited in all three lawsuits discussed in the first two posts of this series. Admittingly, my first assumption that Grizzly Research was primarily a IT security researcher given the technical detail of its findings about Temu. I quickly learned, however, that Grizzly Research was a short seller that could profit if PDD Holdings share value declined. That fact did not discount the Grizzly Research for me, nor for Arkansas Attorney General Griffin and other litigants.
Nonetheless, I became highly motivated to find any additional research that would support the Grizzly Research report. What I found is that I wasn't the only writer sourcing the Grizzly work. And thereby came the information about the several lawsuits filed against Temu for its lack of common security protocols the majority of more well known online resellers employ.
As my research progressed, came the knowledge that is the topic of this Part 3 of this series. In 2023, a bi-partisan committee in the House of Representatives had found solid evidence that many products Temu imports into America are made by forced labor, a polite way of saying slave labor.
Source:
THE SELECT COMMITTEE ON THE CHINESE COMMUNIST PARTY
In June 2023, The Select Committee on the Chinese Communist Party
released an 11 page report on how Temu was abusing its
status as an importer of small value shipments to not only skirt US
Customs and tariffs, but also to hide from both Uncle Sam and its
customers that many products Temu exports to the US are made by forced labor "of the
Uyghur people and other minorities." [Findings, pg. 3]
The committee's key interest was in the possible abuse by Temu and another Chinese importer, Shein, of what is known as the "de minimus" rule. Specifically, as per the report:
... the Committee asked questions related to Temu and Shein’s
use of Section 321 of the Tariff Act of 1930, known as the de minimis
rule, which allows importers to avoid customs duties on incoming
packages that are valued at less than $800. In addition, because
of the overwhelming volume of small packages and lack of actionable
data... “in 2022, CBP cleared over 685 million de minimis shipments with
insufficient data to properly determine risk.”[Ibid]
Due to its policies of shipping an enormous volume of good under the de minimus rule, Shein and Temu paid zero import duties on its products. Clearly, this affords the two Chinese resellers a considerable price advantage when compared to competing merchants. The chart at the right shows the difference between what Shein and Temu paid in import duties during the year 2022 compared to what other retailers paid. [Ibid, pg. 7, figure 4] Herein lies the basis for one of The Committee's accusations against Temu.
Key Finding 2: Temu’s business model, which relies on the de minimis provision, is to avoid bearing responsibility for compliance with the UFLPA and other prohibitions on forced labor while relying on tens of thousands of Chinese suppliers to ship goods direct to U.S. consumers. [Ibid. pg. 8]
When The Committee asked Temu about how it intends to comply with the Uyghur Forced Labor Prevention Act (UFLPA), Temu replied that because "there are about 80,000 sellers that list products on Temu", so Temu was not the actual importer of record. Therefore, the UFLPA did not apply to Temu. [Ibid.]
A key issue revolves around products that Temu sells that originate from the north-western Xinjiang autonomous region. As the BBC reported May 14, 2021:
Human rights groups believe China has detained more than a million Uyghurs over the past few years in what the state defines as "re-education camps"... There is evidence of Uyghurs being used as forced labour and of women being forcibly sterilised.
The UFLPA restricts any imports into the USA that originate from this region of China. In its Key Finding Number 3, [pg 9] the report states:
Key Finding 3: Temu conducts no audits and reports no compliance system to affirmatively examine and ensure compliance with the UFLPA. The only measure Temu reported that it takes to ensure that it is not shipping goods to Americans that are produced with forced labor in violation of U.S. law was that its suppliers agree to boilerplate terms and conditions that prohibit the use of forced labor.
The Committee stated that Temu's only response was that Temu requires "its sellers to agree with its website’s “Third Party Code of Conduct,” which includes boilerplate language that the company has “a zero-tolerance policy” for the use of forced, indentured, or penal labor." Temu made no mention of Xinjiang province. The Committee reports that Temu has no mechanism to force its resellers to comply to UFLPA.
Temu admitted to The Committee's investigators "that it does not have a policy in place to prohibit the sale of goods from Xinjiang—the location of the CCP’s ongoing genocide against the Uyghurs—on its platform." Moreover, Key Finding 4 states that "Temu admitted that it “does not expressly prohibit thirdparty sellers from selling products based on their origin in the Xinjiang Autonomous Region.” [Ibid. pg. 10]
Lastly, The Committee found that:
Temu’s policy to not prohibit the sale of products that explicitly advertise their Xinjiang origins, even in the face of mounting congressional and public scrutiny on related topics, raises serious questions that warrant—and will receive—additional scrutiny.
To drive this point home, The Committee offered an item advertised that was "described as a pendant with “Xinjiang Cotton.”"
Many may think that this report is nothing more than the usual China bashing by Republicans and conservatives in Congress. The report was, however, very much a bi-partisan effort. Democratic Ranking Member, Raja Krishnamoorthi, who served on the Select Committee, defended the Committee's findings. In a press release, dated June 22, 2023,, Congressman Krishnamoorthi reiterated the key findings of the report.
The initial findings of this report are concerning and reinforce the need for full transparency by companies potentially profiting from CCP forced labor. Our Select Committee heard from experts under oath that these practices persist to this day and we intend to strengthen laws like the Uyghur Forced Labor Prevention Act to put an end to them once and for all.
As I stated in a previous posting, unlike the ramblings of those bashing Tik-Tok with no real evidence to support their claims, taken as a whole, the complaints made concerning Temu are based on demonstrable facts. Temu technology has been proven to be dangerous to its users. Moreover, its products are the low buck equivalent of blood diamonds.
The issues surrounding Temu continue to occupy Members of Congress. Republican Senator Tom Cotton has urged the Biden Administration to further investigate, and possibly ban, Temu. As I have said before, efforts to ban certain social media apps are misplaced and impractical. So it would be with Temu. The Internet has no real boundaries or borders.
I do agree with Bloomberg's Catherine horbecke when she wrote that US lawmakers, "should also focus on developing comprehensive digital privacy laws and broader oversight of supply chains." Yet, the author seems to dismiss the findings discussed herein. Thorbecke merely mentioned the report, but did no real analysis of its findings. Thorbecke stated that, "The opaque supply chain behind the low prices should raise concerns." Yet, these concerns seem to be outweighed by the fact that "98% of analysts surveyed by Bloomberg, meanwhile, have given PDD a “buy” rating." Slave labor be damned.
In so many ways, American citizens need to regain their souls — and stop selling those souls for a few cheap trinkets.. The American Consumer must take responsibility for taming Temu. The best course of action is for American Consumers to follow the advice of Kim Komando and Uncle Sam.
Gerald Reiff
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