China published new regulations on Cross-border E-commerce Retail Imports

The Chinese government published three important regulations setting out the new policies governing cross-border e-commerce near the end of November 2018, including the Supervision of Cross-border E-commerce Retail Imports (“Circular”), the Notice of Improving the Tax Policy of Cross-border E-commerce Retail Imports (“Notice”), and the Goods List of Cross-border E-commerce Retail Imports 2018 (“2018 List”). All three regulations will come into effect on 1 January 2019.

Under the Circular, cross-border e-commerce retail imports (“Imports”) refers to the activity of Chinese domestic consumers purchasing goods overseas via third party cross-border e-commerce, whereby such goods are delivered by way of “bonded imports” or through “direct purchase imports”. All goods bought by way of Imports (“Goods”) must satisfy the following conditions:

1. all Goods must be included in the 2018 List, be for personal use only and satisfy the conditions for the application of the relevant tax policy of the Imports; and
2. either:
   1. for Goods traded through the e-commerce trading platforms connected to the relevant customs authorities (“Customs Authorities”), the transactional, payment and logistics electronic information of Goods must be able to be cross-checked; or
   2. for Goods not traded through the e-commerce trading platforms connected to the Customs Authorities, the relevant cross-border express delivery or postal services delivering Goods must, upon being entrusted by the relevant e-commerce or payment, are able to provide the transactional, payment and other electronic information of Goods to the Customs Authorities, and assume their corresponding legal liabilities.

The Circular explicitly provides that Goods are regulated as articles imported for personal use, and the relevant first-time import requirements of approval, registration and recordal shall not apply to Goods. There are two exceptions whereby the relevant first-time import requirements shall apply to: (i) Goods in the areas in which importing Goods is expressly suspended by the relevant authorities; or (ii) Goods with significant quality and safety risks which have made the relevant Goods subject to the relevant authorities’ risk emergency disposal measures.

The Circular also sets out the obligations and corresponding legal liabilities for the major players in the Imports market, including but not limited to foreign enterprises that sell overseas Goods to domestic consumers via cross-border e-commerce platforms (“Enterprises”), domestic cross-border e-commerce platform operators (“Platforms”), domestic service providers providing customs clearance, payment or logistics services (“Service Providers”), domestic consumers who are also the taxpayers of Goods and the relevant government authorities.

The major obligations imposed upon Enterprises include:

• entrusting a domestic agent to complete the relevant Customs Authorities registrations;

• undertaking the responsibility of the consumers’ rights and interests protection, including but not limited to the disclosure of information on Goods, the provision of a Goods return and exchange service, the establishment of an unqualified or defected Goods recall system and compensation liability for the consumers’ damaged caused by Goods’ quality;

• notifying consumers that: (i) Goods meet the requirements of quality, safety, hygiene, environmental protection, labeling and other standards or technical specifications of its origin but that it may differ from the relevant Chinese standards or specification, therefore consumers shall bear the risks themselves; (ii) Goods have been directly purchased overseas and may not contain Chinese labels, and consumers may check the electronic labeling of Goods online; and (iii) Goods are for personal use only and may not be re-sold; and

• transmitting the electronic data of Imports transactions with electronic signatures to the Customs Authorities in real-time, establish prevention and control mechanisms for Goods’ quality and safety risks, establish and improve the quality tracking system of “bonded import” Goods . The tracking information must cover, at a minimum, the complete logistics tracking data from the foreign departure point to the domestic consumers.

The major obligations imposed upon Platforms include:

• transmitting the electronic data of Imports transactions with electronic signatures to the Customs Authorities in real-time, and checking the authenticity of the translations and consumer identifications. 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;

• actively assisting consumers to protect his/her rights and interests if damaged upon purchasing Goods on the Platform, and fulfilling the responsibility of compensating the consumers in advance even before the responsible Enterprises make the compensation. When quality safety risks occur, Platforms shall urge Enterprises to conduct a recall of the Goods and take necessary remedial measures. All these obligations make it critical for a Platform to carefully design its contracts with the Enterprises to ensure its rights to pass on its obligations to and make indemnification claims against the Enterprises; and

• establishing a risk control system to prevent fake transactions of Enterprises and the re-sale of Goods as well as strengthen the monitoring of repetitive purchases by the same buyers, accounts, addresses and phone numbers within a short time period and other abnormal trading behaviors, such as purchases under a stolen identity, and take corresponding measures for control. In principle, personal collection of any “bonded import” Goods outside of the Customs Authorities’ special supervision zones should not be allowed.

As to the Service Providers, they shall obtain the required administrative licences and permits for the operation of the relevant payment or logistics services, and meet the operational requirements in accordance with relevant laws and regulations.

The relevant government authorities have the power to conduct quarantine inspections prior to the sale of Goods where they deem necessary. The Customs Authorities can establish a credit management system of the relevant Enterprises of Imports, and conduct a differential clearance measures based on the credit level of the Enterprises.

The Circular shall apply under a pilot scheme in 37 cities or areas in China from 1 January 2019. The regulation of “direct purchase imports” outside of the pilot areas might refer to the relevant provisions under this Circular. A grace period extension until 31 March 2019 is provided for any Enterprises that currently do not meet the requirements under this Circular.

Finally, the Notice provides that the single transaction limit for Goods purchased via the Imports will be raised from RMB 2,000 to RMB 5,000, and the annual transaction limit will be raised from RMB 20,000 to RMB 26,000, whilst the newly issued 2018 List will be implemented together with the Circular and the Notice to set out the scope of Goods that can enjoy the favourable cross-border e-commerce policies.

To read the full texts of the three regulations, please follow the links below (in Chinese only): the Circular, the Notice and the 2018 List.