Cross-border e-commerce (CBEC) has been used to supply Chinese consumers for many years. Yet it has been fairly unregulated in many aspects. On the first January 2019, the Chinese government issued, updated and imposed new rules on cross-border trade:

  • The Cross-border E-commerce Retail Imports Regulation (“The Circular”);
  • The Notice of Improving the Tax Policy of Cross-border E-commerce Retail Imports Regulation (“The Notice”); and
  • The Goods List of Cross-border E-commerce Retail Imports Regulation (“Goods List”).

CBEC is defined in the Circular as Chinese domestic consumers purchasing goods from overseas via third party platform operators of CBEC and transporting the goods into the country through net-purchasing bonded imports (B2B2C) or direct purchasing of imports (B2C). The goods purchased must meet the following criteria:

  • Be included on the Goods List, for personal use and fulfill the conditions for the application of the relevant tax policy for the imports; and

  • Either the transactional, payment and logistics electronic information of goods must be able to be cross-checked by the customs authorities for goods that are sold through e-commerce trading platforms or the cross-border express delivery or postal services delivering goods must be able to provide the transactional, payment and other electronic information of goods to the customs authorities and assume the corresponding legal liabilities.

The Circular expressly provides that “goods” are regulated as goods imported for personal use, and the requirements of approval, registration and record that normally apply for first-time imports shall not apply unless:

  • Goods from areas where there are significant health concerns (epidemic areas) in which importing goods is expressly suspended by the relevant authorities;

  • Goods with significant quality and safety risks which have made the relevant goods subject to the relevant authorities’ risk emergency disposal measures.

The Circular establishes the obligations and corresponding legal liabilities for “enterprises”in the import market, which includes but is not limited to foreign enterprises that sell overseas goods to domestic consumers via CBEC platforms, including:

  • Enterprises shall have a responsible agent (an entity registered in China) that shall accept the responsibility of truthful declaration and bear joint liabilities together with the CBEC enterprise;

  • Enterprises shall perform filing with Customs through an entity in China – either the responsible agent in China, CBEC platform or domestic service providers can assist CBEC enterprises with the data submission to Customs.

  • Electronic data of imports transactions with electronic signatures shall be transmitted to Customs authorities in real-time, prevention and control mechanisms shall be established for goods’ quality and safety risks, and a quality tracking system of “bonded import” goods shall be established. The tracking information must cover, at a minimum, the complete logistics tracking data from the foreign departure point to the domestic consumers;

  • Enterprises shall be responsible for product information, goods return and exchange services, establishment of recall systems and compensation mechanisms. Recalls must be carried out in a timely manner when there is a safety or quality risk;

  • Enterprises must remind consumers of risk in a manner which contains the following:
    • The products meet the quality, safety, hygiene, environmental protection and labelling standards of the country of origin that may differ from the ones applied in China. Consumers bear the relevant risk on their own.
    • The products sent directly to the consumers may not have Chinese labelling. In this case consumers should be able to view the Chinese electronic labels of the products through the website.
    • Goods purchased by consumers are for personal use only and may not be re-sold.

For domestic cross-border e-commerce platforms their obligations are similar to the enterprises but with some differences:

  • The transmission of electronic data of imports transactions with electronic signatures should be provided to the customs authorities in real-time, and the authentication of the translations and consumer identifications must be provided by the enterprises. Platforms should formulate management rules applicable in its platform concerning transaction protocols, transaction security, consumers’ rights protection and improper information processing. Platforms should also authenticate the identity of enterprises applying to operate on their platforms and sign contracts with them to clarify the allocation of liabilities arising from product quality, consumer rights protection and other requirements as stipulated in the Circular;

  • Platforms should put in place mechanisms to assist consumers in protecting their rights and interests if damaged when purchasing goods on the platform and fulfilling the responsibility of compensation to the consumer consumers in advance before seeking compensation in turn from the enterprises. If there is an issue with safety the platform shall urge Enterprises to conduct a recall of the goods and take necessary remedial measures. These obligations make it critical for a platform to carefully word their contracts with the enterprises to ensure its rights to pass on its obligations to and make indemnification claims against the enterprises;

  • A control system should be put in place to prevent fake transactions of enterprises and the re-sale of goods as well as monitoring of repetitive purchases by the same buyers, accounts, addresses and phone numbers within a short time period and other abnormal trading behaviours.

The Notice raised the single transaction limit for goods purchased via CBEC from CNY 2,000 to CNY 5,000, and the annual transaction limit will be raised from CNY 20,000 to CNY 26,000.

 

R&P China Lawyers supports international companies to establish cross-border E-commerce channels to China. For more information, please email your usual contact at R&P, Robin Tabbers (tabbers@rplawyers.com) or Maarten Roos (roos@rplawyers.com).