China promotes cross-border B2C e-commerce by suspending new customs supervision requirements
On 26 May 2016, the General Administration of Customs in the PRC ("Customs") suspended the registration and filing requirements for certain products imported and sold to Chinese customers through cross border e-commerce for the first time by issuing the new Circular on Relevant Matters Concerning Implementation of New Supervision Requirements on Cross Border E-commerce Retail Imports (the "New Rules").
We discuss below the changes which the New Rules are expected to make for cross-border e-commerce operators.
- On 8 April 2016, a new import tax regime was introduced by the PRC government to bring the duties and taxes on cross border e-commerce imports above an individual de minimis volume into line with the general import tax regime. At the same time, the Customs introduced a "white list" for products imported and sold to Chinese customers through cross border e-commerce under the new tax regime. Under the new regime, a registration or filing with the relevant PRC authorities is required to be completed for certain cosmetic products, infant formula milk powder, medical equipment and special-purpose foods (including health food and food formulated for special medical purposes) within the white list ("First Time Products") before they are first imported into China. These rules have encountered strong opposition from industry players in light of the heavy cost and administrative burdens imposed.
- The New Rules suspend the implementation of certain requirements under the new tax regime for a one-year transition period ending on 11 May 2017 (including 11 May 2017) with respect to the purchase of goods through cross border e-commerce. During this transition period:
- Customs will not examine clearance documents relating to these goods when they enter Customs-supervised areas or (Type B) bonded logistics centres; and
- the requirements to make registration or filing for the First Time Products will be suspended.
- The relaxation is not solely limited to the use of a bonded warehouse structure for import of goods and applies nationwide during the transition period to goods imported via a direct shipping model, where the goods are distributed to Chinese customers directly from overseas without going through a bonded warehouse.
While not altering the applicability of new tax regime which is effective from April 2016, the New Rules are expected to give more time for industry players to adapt to the new Customs supervisory requirements during the period of suspension. The New Rules are expected to facilitate the conduct of cross-border import and domestic distribution activities in China’s e-commerce zones, which include major cities such as Shanghai, Hangzhou, Tianjin, Chongqing and Shenzhen.