On November 28, 2019, several Chinese authorities, including the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance, the General Administration of Customs (GAC), the State Administration of Taxation and the State Administration for Market Supervision, jointly issued a Circular on Improving Supervision of Crossborder E-Commerce Retail Imports, effective from 1 January 2019. GAC subsequently issued a Circular [2018] No. 194 to implement the aforementioned regulation, also effective from January 1, 2019 (both circulars are collectively referred to as the “New CBE Regulations”).

The New CBE Regulations reflect the longstanding policy objective of the Chinese government to divert cross-border e-commerce sales from the less regulated, shady channels, such as the commonly-known “Daigou”, to the closely supervised CBE channel. The policy tools for achieving this objective include the increased incentives for the relevant parties to transact through the CBE channel. Meanwhile, to clamp down on the possible abuse of these incentives, the New CBE Regulations show clear commitment to strengthening enforcement against illicit operations, in particular, those aimed at exploiting the tax reduction benefit of the CBE program. In addition, in order to provide greater protection to Chinese consumers in terms of product quality and safety, the New CBE Regulations explicitly hold the overseas sellers and their designated Chinese “responsible parties” jointly and severally liable. Having regard to these changes, all participants in the CBE supply chain, including the overseas sellers, will now need to take prudent and compliant measures, such as due diligence on designated Chinese parties, to avoid being subject to enforcement against illicit business activities and eliminate potential legal liabilities under the New CBE Regulations.

Our Client Alert discusses what the new rules are under CBE and the potential impact to overseas sellers.  These include a discussion of:

Benefits of the CBE

  • Pre-importation registration waiver
  • Value limit relaxation
  • Tariff exemption and tax reduction
  • Expanded “positive lists”.
  • FTZ distribution centre
  • “Safe harbour” against retaliatory tariffs.

New compliance challenges and responsibilities faced by the overseas sellers

  • After-sales services and consumer protection responsibility
  • Customs compliance
  • General product safety and quality requirements

Implications for overseas sellers

If you have any questions on the topics covered or need further clarification on any particular issue, please do not hesitate to get in touch with your usual contact at Baker McKenzie FenXun, or any of the lawyers listed: Zhenyu Ruan, Frank Pan or Tina Li.