Chinese online retailer Temu has agreed to settle data privacy claims brought by the US state of Texas and accept new obligations related to product safety.

The settlement applies to WhaleCo, operating as Temu, and its parent, PDD Holdings.

It requires personal information belonging to Texas shoppers to be held on servers in the US that are owned and controlled by American entities.

The agreement also limits access to that information by people and organisations based in China, apart from access needed for essential business operations.

Temu will pay Texas $3m and faces annual penalty of $8m for any future data security violations.

The court-enforceable agreement introduces yearly independent reviews of products sold through Temu.

The audits must seek to identify goods containing dangerous chemicals or materials.

Where an item is confirmed to contain hazardous substances, Temu must take it off sale, prohibit the vendor and its connected storefronts from operating, contact affected Texas buyers, and provide complete refunds.

The case followed a lawsuit filed by Texas Attorney General Ken Paxton in February 2026.

Texas alleged that the company “unlawfully deceived consumers by exposing Texans’ sensitive personal data to the CCP [Chinese Communist Party]”.

It also referred to reports concerning potentially harmful chemicals in products sold on the platform.

The items identified included apparel, household goods, baby products, and children’s toys, with per- and polyfluoroalkyl substances (PFAS) among the substances mentioned.

The state said Temu had more than 82.4 million active users in the US as of September 2023.

Paxton said: “Through this victory, we can now ensure that Temu cannot harvest Americans’ sensitive data and expose it to the Chinese Communist Party. Texans can now rest assured that Temu cannot sell products containing toxic and dangerous chemicals that threaten the health of the American people.”

In July, Iowa’s Attorney General sued the owner of Temu, alleging deceptive data collection, routing of user information to China and consumer fraud.

Attorney General Brenna Bird filed the petition in Polk County District Court in the US under the Iowa Consumer Fraud Act against PDD Holdings and WhaleCo.