Ah yes I have heard about that. I’d say for the most part, it probably wouldn’t cause any kind of skin reaction in people. I think someone with a skin condition like eczema or urticaria might want to wash the clothing before wearing it, but then they’d probably want to do that anyway to cover all basis in terms of how the clothing has been treated/stores etc prior to being sold.
Don't seep clothes manufacturers abroad also use formaldehyde in the production of clothes. That's why new clothes are so crisp and crease free and fresh and they never feel the same after a wash.