Changes in Cross Border E-commerce (CBEC) Policy in 2016

2016 witnessed an array of cross border e-commerce (CBEC) policy changes.

New taxation policy:

Since April 8 2016, China implemented a new tax system for CBEC commodities. The new tax system was formulated based on the limits on the permitted total value of individual consumer transactions and the aggregated annual purchasing total for all goods purchased via CBEC respectively (see ChemLinked News).

Two limits:

The value of a single order should not exceed 2,000 RMB;
The value of personal annual purchasing should not exceed 20,000 RMB.

Purchases with a value falling within the two limits specified above will be levied at the new tax rate, which is 70% of value-added tax and consumption tax (tariff is exempted). Otherwise, CBEC commodities are subject to full tax (tariff + value-added tax + consumption tax), which is also levied on products imported through standard channels.

For cosmetics, the value-added tax rate is 17%, the tariff rate is 2%-10% depending on the imported country. Cosmetic consumption tax has been reduced to 15% from 30% since Oct 1 and and is only applicable for "high-end cosmetics" which refer to high-end makeup cosmetics, skin care cosmetics and cosmetic kits with an after-tax wholesale price in excess of 10 RMB/ml(g) or 15 RMB/piece (see ChemLinked News).

Purchasing value

New tax

Tax rate for cosmetics

Per order value ≤ 2000 RMB (after tax);

Annual purchasing value ≤ 20,000 RMB (after tax)

70% * (value-added tax + consumption tax)

22.4% (for high-end cosmetics)

11.9% (for normal cosmetics)

Per order value > 2000 RMB (after tax)
Annual purchasing value > 20,000 RMB (after tax)

Tariff + value-added tax + consumption tax

2%-10% of Tariff + 32% (for high-end cosmetics)

2%-10% of Tariff + 17% (for normal cosmetics)

CBEC positive list

On April 6, two days before the implementation of the new tax system for CBEC goods, China Ministry of Finance (MOF) together with 11 other departments including the CFDA published the "List of CBEC Retail Imported Goods" to define the scope of goods permitted for import via CBEC (see ChemLinked News). Seven days later, MOF appended the CBEC positive list with 151 types of commodities but no cosmetics categories were included (see ChemLinked News).The first list totally includes 1142 commodities, of which there are 20 kinds of cosmetics:

No.	Tax Code	Name	Note
305	33012999	Essential oil other than oranges fruit oils	Products in the inventory of dual use items and technique import and export license management and list of imported and exported wild animals and plants are excluded; Cosmetics imported for the first time excluded
306	33013090	Other perfume cream	Products in the list of imported and exported wild animals and plants are excluded; Cosmetics imported for the first time excluded
308	33019090	Fatty and fixed oil, wax and similar products containing concentration essential oil produced by the method of floral absorption or impregnation method; terpene by-product after terpenes is removed from essential oil (oranges of fruit excluded), essential oil aqueous solution and water distillate	Cosmetics imported for the first time excluded
309	33030000	Perfume and floral water	Cosmetics imported for the first time excluded
310	33041000	Lip cosmetics	Products in the list of imported and exported wild animals and plants are excluded; Cosmetics imported for the first time excluded
311	33042000	Eye cosmetics	Products in the list of imported and exported wild animals and plants are excluded; Cosmetics imported for the first time excluded
312	33043000	Nail cosmetics	Cosmetics imported for the first time excluded
313	33049100	Powder (compress and not compress)	Cosmetics imported for the first time excluded
314	33049900	Other make-up, cosmetics and skin care products	Products in the list of imported and exported wild animals and plants are excluded; Cosmetics imported for the first time excluded
315	33051000	Shampoo	Products in the list of imported and exported wild animals and plants are excluded; Cosmetics imported for the first time excluded
316	33052000	Hair perm products	Cosmetics imported for the first time excluded
317	33053000	Hair styling products	Cosmetics imported for the first time excluded
318	33059000	Other hair care products	Cosmetics imported for the first time excluded
323	33071000	Shave products	Cosmetics imported for the first time excluded
324	33072000	Body deodorants and antiperspirants	Cosmetics imported for the first time excluded
325	33073000	Bath salts and other bath products	Cosmetics imported for the first time excluded
328	33079000	Depilating agents, other perfume preparations and cosmetic cleansing products	Cosmetics imported for the first time excluded
329	34011990	Soaps for other use	Cosmetics imported for the first time excluded
332	34012000	Soap with other shapes	Cosmetics imported for the first time excluded
333	34013000	Preparations used for cleansing skin	Cosmetics imported for the first time excluded

After the release of the positive list, many cosmetic companies were confused as to the practical meaning of "cosmetics imported for the first time are excluded". On April 14 2016, MOF explained that in the future cosmetics sold through CBEC shall obtain administrative license or filing certificate based on the rule stipulated by the Regulations concerning the Hygiene Supervision over Cosmetics "cosmetics imported for the first time shall obtain the administrative license granted by the CFDA (filing for non-special use cosmetics)" (see ChemLinked News).

The honeymoon period for CBEC is over. Many companies are now reassessing their China market plans and many have already withdrawn from the market while others are busy readjusting their product portfolios to comply with China's new CBEC policies although a grace period has been granted (see ChemLinked News).

Customs Clearance of Entry Commodity (CCEC)

According to the note in the positive lists, a Customs Clearance of Entry Commodity (CCEC) is mandatory for bonded commodities entering the bonded area, while direct-purchasing commodities are exempted from CCEC requirements.

During general trade customs procedures, to obtain a CCEC, importers or its agent should apply for inspection to CIQ by submitting dossiers like packing lists, invoice, bill of lading, country of origin, sanitary certificate, test report, certificate of free sale, Chinese label, etc. Cosmetics approval from CFDA is also one of the mandatory requirements. If everything is verified, CIQ issues the CCEC to the applicant for customs clearance.

It has been stated by AQSIQ that CBEC commodities are goods instead of personal articles and thus require a CCEC. Only 36% of goods in the positive list are included in the "Catalogue of Import and Export Commodities Subject to Mandatory Inspection and Quarantine" which require the CCEC while the rest don't. (see ChemLinked News).

AQSIQ has introduced several facilitation measures to increase the efficiency of clearance of CBEC commodities:

The CCEC will be issued when goods enter the warehouses instead of being issued package by package, to reduce the clearance time;
The CCEC information will be available online to further improve the clearance efficiency.

Grace period

In May China GAC released a notice granting a grace period until 11 May 2017 for CBEC trade (see ChemLinked News). To help enterprises to adapt to the new policy, the MOC and related departments have agreed to extend the grace period to the end of 2017 (see ChemLinked News).

During the grace period, pilot cities (including Shanghai, Hangzhou, Ningbo, Zhengzhou, Guangzhou, Shenzheng, Chongqing, Tianjin, Fuzhou and Pingtan) will continue to supervise CBEC imports like before. CBEC commodities via bonded warehouse mode or CBEC direct shipping mode don't need to obtain the CCEC and provide the Chinese labels, and cosmetics can still be imported via CBEC without pre-market approval by CFDA.