People shop on popular online retailers like Shein and Temu because the prices are low. So low, in fact, that the companies don’t have to pay tariffs when the products are shipped to the US.

A new report by the House Select Committee on the Chinese Communist Party found that fast-fashion companies Shein and Temu are shipping thousands of cheap products from China to the US daily without paying import duties.

Thanks to a loophole in US trade rules, these ecommerce companies are exempt from paying tariffs on products with a retail value less than $800, if they are shipped directly to individual customers. In 2022, more than 685 million shipments fell under this exemption, according to data from US Customs and Border Protection.

The investigation found that Temu and Shein are likely responsible for more than 30% of all packages shipped to the United States every day under the “de minimis” provision, which covers products worth less than $800. Temu told the committee that it has about 80,000 suppliers listing products on its site and that no single product is sold for $800 or more. The investigation did not assign a dollar value to the tariffs the two companies have avoided.

Since few of their shipments require scrutiny, Shein and Temu are less likely to face border control oversight when it comes to labor law compliance. Lawmakers highlighted the Certa Uyghur Forced Labor Prevention Act (UFLPA) which prohibits international imports manufactured by forced labor, particularly in the Xinjiang region of China.

Shein has repeatedly told the media it does not use manufacturers in Xinjiang. Temu’s code of conduct prohibits suppliers from using forced labor but does not prohibit them from sourcing products based on region. Shein and Temu did not immediately respond to Insider’s requests for comment.

On June 15, US lawmakers introduced two bills that would eliminate this tariff loophole.

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