‘Fast Fashion’ Retailer Forever 21 Blames Slave-Linked Chinese Brands for Bankruptcy Filing

(Breitbart)  Forever 21, a mall-staple clothing store mostly targeting young women, blamed the rise of Chinese slave-linked shopping applications such as Shein and Temu for a prodigious drop in its profits in a bankruptcy filing on Sunday.

CNBC, reporting on remarks by an official with the company operating the Forever 21 stores, relayed that the company cited a particular grievance against a shipping loophole known as the de minimis exception in which packages shipped from abroad worth $800 or less are not subject to duties, tariffs, or inspection for compliance with American anti-slavery laws.

While Forever 21 had to factor in these normal shipping costs for its prices, as it imports its inventory in bulk, Shein and Temu have not, as they ship directly to consumers. In 2023, the U.S.-China Economic and Security Review Commission, a Congressional body, estimated that the average Shein package shipped at the time was worth $11; despite inflation, neither Shein nor Temu’s average package sizes have increased enough since then to approach the $800 limit.

The bankruptcy filing’s specific mention of the harm caused to American companies by Chinese exploitation of the de minimis loophole reinforces what critics of Shein, Temu, and similar websites have argued for years: that the loophole allows foreign companies to out-compete American rivals on an unequal playing field in which the Chinese companies can benefit from the Communist Party’s systematic support for slavery — a critical pillar of the ongoing genocide of Uyghurs and other Turkic people in occupied East Turkistan — as well as China’s lack of respect for intellectual property and repression of labor rights groups.

President Donald Trump signed an executive order that would have effectively eliminated the de minimis loophole. The order abruptly halted acceptance of any packages from China by the United States Postal Service (USPS), creating a chaotic situation that prompted Trump to grant a short grace period for American government officials to organize a plan for how to collect duties and inspect packages previously exempt from scrutiny through de minimis.

“The ability for non-U.S. retailers to sell their products at drastically lower prices to U.S. consumers has significantly impacted the Company’s ability to retain its traditional core customer base,” Stephen Coulombe, a co-chief restructuring officer with Forever 21’s operating company, reportedly asserted regarding Forever 21’s bankruptcy filing.

“Certain non-U.S. online retailers that compete with the Debtors, such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers,” Coulombe continued. “Consequently, retailers that must pay duties and tariffs to purchase product for their stores and warehouses in the United States, such as the Company, have been undercut.”

The bankruptcy filing is the second in recent memory for Forever 21. It is expected to result in all of its brick-and-mortar stores shutting down in the United States, but the brand will continue to exist online and internationally. CNBC noted that the Forever 21 operating company owes “more than $100 million to dozens of clothing manufacturers, primarily located in China and Korea.”

Forever 21 attempted to leverage Shein’s popularity to improve its financial situation with a partnership with the company announced last year. In May, Shein announced that it had secured an agreement in which Forever 21 stores would agree to receive returns for Shein and process them. Those using the system to return products would “receive a same-day discount on their next Forever 21 purchase,” enticing them to patronize Forever 21, as well.

The de minimis exception has been in effect since 1938 and was originally limited to packages worth $200 or less. The administration of former President Barack Obama increased that limit to $800 in 2015. According to U.S. Customs and Border Protection, which is responsible for handling these packages, America documented a 600-percent increase in the number of shipments that enjoyed de minimis protection between the 2015 and 2023 fiscal years, largely fueled by sales on Shein and Temu.

In addition to concerns that these companies were using the tactic of shipping individual sales to customers directly without a middle entity buying in bulk to avoid duties and tariffs, human rights groups and Congress began warning in 2023 that de minimis could allow Chinese suppliers to access American markets with products whose supply chains were tainted by slavery. The United States implemented the Uyghur Forced Labor Prevention Act (UFLPA) in 2022 that created a rebuttable presumption that anything imported from occupied East Turkistan, which China calls its “Xinjiang Uyghur Autonomous Region,” was made with slave labor.

The law was passed in response to the imprisonment of as many as 3 million people in East Turkistan in concentration camps, many of whom were enslaved in the camps or later sold as slaves to factories nationwide online. The landmark investigative report Uyghurs for Sale, by the Australian Strategic Policy Institute (ASPI), linked 83 internationally known brands — including companies such as Apple, Nintendo, Lacoste, and BMW — to suppliers using Uyghur slaves. The report found evidence that China sold tens of thousands of slaves to factories outside of East Turkistan, selling them online in “batches.”

Products that fall under de minimis could avoid scrutiny under this law, however. In June 2023, the House Select Committee on the Chinese Communist Party concluded in a report called “Fast Fashion and the Uyghur Genocide” that shoppers patronizing Shein and Temu are at an “extremely high risk” of consuming slavery-linked products.

“Temu is doing next to nothing to keep its supply chains free from slave labor,” committee chair Rep. Mike Gallagher (R-WI) asserted. “At the same time, Temu and Shein are building empires around the de minimis loophole in our import rules — dodging import taxes and evading scrutiny on the millions of goods they sell to Americans.”

The de minimis loophole currently remains active as part of President Trump’s grace period to allow the government to organize a method of collecting duties and tariffs on previously exempt products. On March 7, a coalition of unions, human rights groups, and American trade advocates sent a letter to the president urging him to once again close the loophole.

According to the letter, “The de minimis rule… originally intended for use by tourists bringing back souvenirs from abroad, today is exploited by conglomerates and mass retailers to ship counterfeit clothing and medicines, unsafe baby products and toys, knock-off auto parts, goods made with forced labor, and other problematic items directly to consumers’ homes, undercutting domestic manufacturers and retailers and millions of Americans who make and sell goods here.”

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