Briefing on Recent New Policies Regarding Cross-border E-commerce

Preamble

In the article Discussion on the Application of E-Commerce Law to Overseas E-Commerce Operators, we mentioned that there have established several guidelines on support and encouragement of cross-border e-commerce development at the recently-held State Council’s executive meeting. In order to implement relevant spirits of the State Council’s executive meeting, related ministries have released a number of regulatory policies for cross-border e-commerce in succession, including Notice on Improving the Supervision over Cross-border E-commerce Retail Imports (hereinafter referred to as “Notice on Supervision”) jointly released by six ministries including Ministry of Commerce, Notice on Improving Tax Policies for Cross-border E-commerce Retail Importation (hereinafter referred to as “Notice on Tax”) jointly released by three ministries including Ministry of Finance, Announcement on Adjustment of List of Goods under Cross-border E-commerce Retail Importation (hereinafter referred to as “The List”) jointly released by thirteen ministries including Ministry of Finance, and Announcement No. 194 [2018] of the General Administration of Customs—Announcement on Matters concerning the Supervision of Retail Imports and Exports in Cross-Border E-commerce (hereinafter referred to as “Customs Announcement”). Such new policies will be formally implemented from 1 January 2019, and this article will briefly introduce the provisions thereto concerning cross-border e-commerce enterprises and cross-border e-commerce platforms, as well as other main contents thereof.

I Cross-border E-commerce Enterprises

1. Definition

The Notice on Supervision clarifies the definition of cross-border e-commerce enterprises for the first time: cross-border e-commerce enterprises mean enterprises being registered overseas that sell imported goods through cross-border e-commerce retail from overseas to the domestic [1] consumers, and are the owners of goods. In accordance with this definition, cross-border e-commerce enterprises shall meet the following requirements:

1.1 being registered overseas;

1.2 the object of sales of goods being domestic consumers;

1.3 selling imported [2] goods in cross-border e-commerce retail from overseas (hereinafter referred to as “Imported Goods);

1.4 being the owners of Imported Goods.

2. Responsibilities

Pursuant to the Notice on Supervision and Customs Announcement, main responsibilities of cross-border e-commerce enterprises shall include:

2.1 ensuring the quality and safety of goods, delegating a domestic market entity[1]  to undergo customs registration procedures where such domestic entity is located, to truthfully declare with the customs, to take in charge by law, as well as to assume joint and several liabilities;

2.2 protecting the rights and interests of consumers, including but not limited to exposure of product information, returns and refunds of goods, recall of defective goods, and compensation for the infringement to consumers caused by product quality defects; particularly establishing a recall system for substandard or defective goods, including immediately stopping selling the goods, recalling the sold goods and handling them properly, and reporting to the customs;

2.3 working together with cross-border e-commerce platforms to give risk notifications on those eye-catching positions of the websites, and  consumers cannot order or buy the goods unless agreeing with such notifications. The notifications shall at least include the following contents:

2.3.1 Goods comply with the relevant standards or technical regulations of the place of origin, but consumers shall bear the risks regarding the difference between such standards/regulations and China's standards on their own;

2.3.2 Goods are directly purchased from overseas. If they do not bear Chinese label, consumers may check the goods' Chinese electronic label through the websites;

2.3.3 Consumers shall buy products for their personal use only and the products shall not be re-sold;

2.4 establishing a risk prevention and control mechanism for product quality and safety;

2.5 establishing and improving a product quality traceability system for the imports through bonded online shopping, which shall trace at least the information of the whole logistics process, with efforts made to encourage tracing the information of overseas consignors and producers;

2.6 transmitting to the customs in real time the electronic data of trading on imported goods through cross-border e-commerce retail affixed with an electronic signature. Enterprises may declare the goods to the customs on their own or delegate an agent to declare, and assume corresponding responsibilities.

II Cross-border E-commerce Platforms

1. Definition

In accordance with the Notice on Supervision, cross-border e-commerce platforms mean operators registered in domestic China that provide to both parties to transactions (consumers and cross-border e-commerce enterprises) such services as webpage space, virtual transaction venues, transaction rules, match-making and information releasing, and establish the information network system where both parties to transactions can conduct transactions independently. It is worth noting that the cross-border e-commerce platforms defined by the Notice on Supervision shall be domestic market entities. Namely, e-commerce platforms registered overseas like Tmall Global and JD.HK shall establish domestic entities to operate relevant e-commerce platforms through business reorganization or registration of domestic subsidiaries.

2. Responsibilities

Pursuant to the Notice on Supervision, main responsibilities that cross-border e-commerce platforms shall bear include:

2.1 going through customs registration procedures where they are located, taking in charge, and cooperating in follow-up management and law enforcement;

2.2 transmitting to the customs in real time the electronic data of transactions on imported goods through cross-border e-commerce retail affixed with an electronic signature, reviewing the authenticity of transactions and of consumers' identities, and assuming corresponding liabilities;

2.3 establishing a sound management system regarding transactions, consumers protection, and processing of unhealthy information, etc. Authenticating the identities of cross-border e-commerce enterprises that apply for entering the platforms and publicizing the information of the entities’ identities, consumer evaluation and complaint on their websites, and providing to the regulatory departments such information as enterprises entering the platform; signing agreements with cross-border e-commerce enterprises that apply for entering the platform, and determining the responsibilities, rights and obligations of both parties;

2.4 creating mutually independent blocks or channels to provide separate platform services to cross-border e-commerce enterprises or domestic e-commerce enterprises (where enterprises entering the platforms include both overseas and domestic enterprises), or giving obvious signs to distinguish imported goods through cross-border e-commerce retail from non-imported goods, so as to avoid misleading consumers;

2.5 establishing a consumer dispute settlement and consumer rights protection system; assisting consumers in protecting their lawful rights and interests, and conducting advance compensation;

2.6 establishing a risk control mechanism in product quality and safety, and promptly publicizing risk monitoring information of goods and pre-warning information issued by relevant regulatory departments; urging cross-border e-commerce enterprises to reinforce risk prevention and control in quality and safety, including encouraging them to recall and handle goods and suspending the cross-border e-commerce businesses of those that fail to take active measures in recalling and handling goods;

2.7 establishing a risk control system that prevents false transactions on and re-selling of imported goods through cross-border e-commerce retail; intensifying efforts in monitoring abnormal transactions and taking proper measures to control the risks arising thereof;

2.8 effectively managing the products for sale on the platforms according to the requirements of the regulatory departments, closing down the webpages displaying and selling the imported products that are prohibited from entering into China in the form of cross-border e-commerce retail, and reporting relevant conditions to the competent departments.

III Other Main Contents of New Policies on Cross-border E-commerce

1. Two Other Kinds of Participants in Cross-border E-commerce

Apart from cross-border e-commerce enterprises and cross-border e-commerce platforms, the Notice on Supervision defines two other kinds of participants in cross-border e-commerce:  domestic service providers that accept the entrustment of cross-border e-commerce enterprises to provide such services as declaration, payment, logistics and warehousing and accept the follow-up supervision of relevant competent departments as well as assume corresponding responsibilities, and domestic consumers who purchase imported goods.

As to domestic service providers, banking institutions providing payment services shall possess the Financial Business Permit. Non-banking payment institutions shall possess the Payment Business License, with the scope of payment services covering “Internet payment”, and logistics enterprises shall obtain the Express Delivery Business Permit. Furthermore, those service providers offering services of payment, logistics and customs declaration shall go through customs registration procedures where they are located, and be responsible for the authenticity of the data and declaration lists that they provide to the regulatory departments. Logistics enterprises shall also provide to the customs the access to their real-time tracking information sharing interface, and conduct domestic delivery services of imported goods through cross-border e-commerce retail strictly according to the logistics information produced during the transaction process. Where the actual delivery information in China is inconsistent with the declared logistics information during the customs clearance process, the delivery service shall be terminated immediately and such situation shall be reported to the customs in a timely manner. Surely, in the actual operation of cross-border e-commerce, apart from the aforesaid domestic service providers, there are other domestic service providers specializing in providing services like establishment and maintenance of flagship stores as well as other services like technics, promotion, after-sale service and call center for cross-border e-commerce enterprises (the so-called “TP” in the industry). Such domestic service providers play a quite important role in the development of cross-border e-commerce, but they do not need to obtain particular business permits, therefore, they do not fall in to the scope of regulation of the new policies on e-commerce.

2. Tax

As the above form shows, in accordance with the Notice on Tax, the single transaction limit for cross-border e-commerce retail import will be raised from RMB2,000 to RMB5,000, and the annual transaction limit will be raised from RMB20,000 to RMB26,000. In addition, the Notice on Tax makes special provision about the circumstance where the dutiable price of an item exceeds the single transaction limit: the item may be imported via the cross-border e-commerce retail channel and levied tax according to relevant regulations if all the following conditions are met:

-the dutiable price exceeds RMB5,000 but is less than RMB26,000;

-there is only one item in the order. However, if the total amount for annual transactions exceeds RMB26,000, the transaction shall be imported via general trade channel and levied tax.

3. Resale

Both the Notice on Supervision and Notice on Tax stipulate that, the imported goods can only be used by consumers themselves and shall not be resold. Furthermore, bonded imports purchased online shall not be allowed to adopt the mode of "online purchase of bonded goods + offline self-collection" outside the Customs special supervision area in principle.

4. Responsibilities of Government Authorities

4.1 Customs

In accordance with the Notice on Supervision and Customs Announcement, main supervision responsibilities of customs on cross-border e-commerce include:

4.1.1 monitoring the risks in quality and safety for imported goods through cross-border e-commerce retail, including conducting necessary quarantines by law before sales of goods and issuing risk warnings according to actual conditions; establishing an emergency handling mechanism of major quality and safety risks for imported goods, ordering relevant enterprises to take measures to remove or reduce risks of defective goods, supervising the unsold defective goods as commodities, and holding liabilities of the relevant operating entities by law; optimizing and improving the supervisory measures for imported food products through cross-border e-commerce retail, and conducting risk prevention and control in food quality and safety.

4.1.2 including the enterprises engaging in cross-border e-commerce retail imports to the scope of customs credit management and implementing differential customs clearance management based on credit levels, including providing convenience to those high-integrity enterprises on customs clearance and imposing strict measures on dishonest enterprises; uploading the information of advanced certified enterprises and dishonest enterprises to the National Credit Information Sharing Platform, releasing them to the public through www.creditchina.gov.cn and the National Enterprise Credit Information Publicity System, implementing joint incentives and imposing joint punishments.

4.1.3 investigating and punishing cross-border e-commerce enterprises, platforms and domestic service providers suspected of smuggling or violating the regulations of customs supervision, including dealing with the cases on suspicion of smuggling or violation of regulations by law; and if a crime is constituted, criminal liabilities shall be affixed. For those who use the information of other citizens' identities to engage in illegal activities in cross-border e-commerce retail imports, the customs shall deal with them as smuggling or violation of regulations, and transfer them to relevant departments for handling by law. For those that are not suspected of smuggling and are found to participate in the aforesaid activities for the first time, the customs shall hold an interview with them or suspend their businesses and order them to rectify; and if they are again found of violation of regulations, they shall not be allowed to engage in any businesses of cross-border e-commerce retail imports for a certain period of time, and be transferred to other relevant administrative departments for investigation and punishment.

4.2 Market Regulatory Departments

In accordance with the Notice on Supervision, the market regulatory departments shall urge cross-border e-commerce enterprises and cross-border e-commerce platforms to eliminate the potential risks of sold goods, and recall the goods by law. Where enterprises and individual businesses sell such goods in domestic market that are on the List but without legal import certificates or are displayed on relevant certificates as being purchased through cross-border e-commerce retail imports, the market regulatory departments shall carry out investigation and punishment.

4.3 People's Governments at Pilot Cities

In accordance with the Notice on Supervision, the People's governments at all pilot cities [3] shall be responsible for the pilot work of supervision policies on cross-border e-commerce retail imports in their respective regions. All major issues and situations during the pilot work shall be reported to the Ministry of Commerce and other relevant competent departments in a timely manner.

4.4 Newly-added Goods on the List

The List further expands the scope of goods enjoying preferential policies (zero tariffs within the quota, import value-added tax and consumption tax levied at 70% of the statutory tax payable), and 63 tax items in great demand are newly-added, including grape sparkling wine, beer brewed from malt, fitness equipment etc.

It is to be observed that the application scope of Customs Announcement is imports and exports of cross-border e-commerce retails, which means that domestic enterprises selling cross-border e-commerce retail goods to overseas consumers shall also be regulated by it. Furthermore, we construe that among this series of new policies on cross-border e-commerce, Customs Announcement is a refinement and supplement to the other new policies including further clarification on the responsibilities of each participant in cross-border e-commerce and refinement of provisions on tax administration (including but not limited to relevant tax items of imported goods, declaration currency, procedures and time of tax paying, etc.). In addition, it provides detailed stipulations on customs clearance management, workplace, quarantine, inspection, logistics and returns of goods as well as risk prevention and control in relation to cross-border e-commerce, which will undoubtedly provide a relatively explicit operation guidance for main participants in cross-border e-commerce.

Conclusion

Premier Li Keqiang pointed out in the State Council’s executive meeting that our policies must provide a stable expectation for cross-border enterprises, further opening-up, unleash the growth potential of consumption and boost the steady growth of foreign trade. Therefore, we are grounded to believe that the cross-border e-commerce market will enter into a period of rapid development. We will pay close attention to the latest regulatory trends to provide valuable references for relevant institutions and professionals.

[1]“Domestic Agent of Cross-border E-commerce Enterprise” defined in Customs Announcement, which means the domestic agent enterprise entrusted by overseas registered enterprises conducting cross-border e-commerce retail import business.

[2] The term "domestic" or "overseas" in this article refers to areas inside China's customs territory or outside China's customs territory.

[3] The Notice on Supervision: For the purpose of this Notice, “cross-border e-commerce retail imports” mean a type of consumer behaviors by which Chinese consumers buy goods from abroad through third-party cross-border e-commerce platform operators and have the bought goods transported into China under the “imports through bonded online shopping” (Code of customs supervision mode: 1210) or the “imports through direct purchasing” (Code of customs supervision mode: 9610).

[4] The Notice on Supervision: This Notice shall apply to the cross-border e-commerce retail imports in 37 cities (regions) including Beijing, Tianjin, Shanghai, Tangshan, Hohhot, Shenyang, Dalian, Changchun, Harbin, Nanjing, Suzhou, Wuxi, Hangzhou, Ningbo, Yiwu, Hefei, Fuzhou, Xiamen, Nanchang, Qingdao, Weihai, Zhengzhou, Wuhan, Changsha, Guangzhou, Shenzhen, Zhuhai, Dongguan, Nanning, Haikou, Chongqing, Chengdu, Guiyang, Kunming, Xi'an, Lanzhou, and Pingtan.