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Takehome:
China will increase the number of comprehensive cross-border e-commerce (CBEC) pilot zones by 22, bringing the new total number of CBEC zones to 35.
The CBEC grace period will end on December 31st 2018.
During the State Council executive meeting held on July 13th China has determined to:
Expand CBEC pilot zones to cities which already have a sound e-commerce foundation and great potential for the development of import and export trade, with priority given to central-west and north-east regions. 22 cities including Beijing, Hohhot, Shenyang, Changchun, Harbin, Nanjing, Nanchang, Wuhan, Changsha, Nanning, Haikou, Guiyang, Kunming, Xi’an, Lanzhou, Xiamen, Tangshan, Wuxi, Weihai, Zhuhai, Dongguan and Yiwu have been designated to establish new zones following the establishment of the first zone in Hangzhou in 2015 and the addition of other 12 zones in 2016.
Further simplify administrative and approval procedures on logistics, storage, customs clearance, improve supporting policies such as customs clearance integration, information sharing and others and strengthen regulatory innovation to promote international trade liberalization and facilitation.
Expand the import of foreign products, encourage enterprises to speed up the construction of overseas warehouse and global marketing network, build well-known brands and explore new markets to facilitate the stable development of cross-border trade and boost international competitiveness.
Reach24h Interpretation:
♦ Future Trends
The constant expansion of comprehensive CBEC pilot zones and the increase of pilot cities, coupled with the recently released documents Opinions on Expanding Import and Promoting Balanced Development of Foreign Trade suggests China is going to speed up the release of detailed supervision plan and the amendments to CBEC positive list. We expect further opening up and release of supporting policies going forward. According to statistics released by China General Administration of Customs (GAC), the total retail import and export volume through customs CBEC platforms has grown continuously over the last three years and reached 90.24 billion yuan in 2017, with year-on-year growth of 80.6%.
The customs clearance time of cross-border trade has also been significantly shortened after the customs clearance sheet requirements were repealed by GAC after recent institutional reform. Additionally, trade of cosmetics through this channel is a feasible and profitable way for ethically inclined SMEs to do business in China circumventing mandatory animal testing.
CBEC has 2 different systems named 1) comprehensive CBEC pilot zones and 2) pilot cities. There is some overlap between these two but currently the transition policies only apply to the 15 pilot cities.
| Total number (up to now) | Established by | Differences |
Comprehensive CBEC pilot zones | 35 cities have been designated to establish pilot zones：
| MOF | Generally, the pilots will:
|
Pilot cities | GAC | Bonded cosmetics imported and sold online through these cities are regarded as personal particles and exempt from cosmetic filing/registration procedures and customs clearance sheet requirements. |
♦ Will they won’t they? The Chronology of CBEC Reform Flip Flops
CBEC policies and supervision plan have been subject to several delays and changes which has led to widespread uncertainty amongst industry.
The first delay:
On March 24th 2016, MOF, GAC and SAT issued Notice on Tax Policy for CBEC Retail Imports ending the preferential treatment of CBEC packages as personal parcels and changing parcels rate from four levels (10%, 20%, 30% and 50%) to three levels (15%, 30% and 60%). Right after the Notice came out, 2 Positive lists of Imported Commodities in CBEC Retail were issued restricting the scope of goods permitted to be traded via CBEC and stipulating the necessary customs clearance, quarantine, license, registration/filing and certification requirements of cosmetics, infant formula powders, medical devices and special food.
The policy was decided to be implemented on May 11th 2017 in ten pilot cities.
The first delay:
However, in November 2016, considering retailers made no preparations for the adaptation of the new policies, the grace period was postponed to the end of 2017.
The second delay:
In September 2017, the grace period underwent the second delay and was extended until the end of 2018 and the pilot cities subjected to transition policies were expanded to another five cities starting from January 1, 2018.
The CBEC grace period is about to expire but currently there is no clear release date for supporting administrative rules and regulations. Furthermore, it is still unknown whether the upcoming CBEC supervision plan and positive lists will clarify taxation requirements, regulatory compliance requirements or expand the single transaction limit?
♦ Advice for Cosmetic Stakeholders:
Cosmetic stakeholders shall note that the 2.5 year transition period will come to an end in 5 months. During the next 5 months cosmetic companies should assess the feasibility of standard regulatory compliance to ensure market readiness if CBEC administrative rules require compliance with national standards, laws etc.
During the period, cosmetic stakeholders shall strengthen self-regulation.
On the ground that CBEC cosmetics are subject to greatly facilitated market access, expedited clearance times and exempted filing/registration requirements, trade of cosmetics through this channel will be a feasible way for overseas enterprises to test China’s markets and assess the feasibility of more comprehensive entry.
ChemLinked will continue to focus on the issue and keep you informed of any significant developments.
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