Cross-border e-commerce in China

13 October 2017
By Hao Wu and Robert Ireland, WCO Research Unit


E-commerce – the trade in goods and services via the Internet – has become a growing component of the global economy, and cross-border e-commerce a major topic of discussion for Customs authorities. Accordingly, the WCO has placed this subject high on its agenda, including:

  • creating a dedicated Working Group on E-commerce (WGEC) as a forum for WCO Members and the private sector to discuss strategies for the facilitation and control of cross-border e-commerce transactions;
  • undertaking fieldwork and research to collect and analyse the experiences of WCO Members in this domain.

The first research mission took place in China, a country where the success in e-commerce is palpable and continuing to grow potently. Fieldwork was conducted in Shenzhen, Shanghai and Hangzhou from 21 to 28 March 2017 with the support of China Customs. The objective was to obtain first-hand information that would enable the WCO to develop appropriate standards, instruments and tools on cross-border e-commerce.

In advance of the mission, the WCO had sent a questionnaire to representatives of government agencies and e-commerce companies in China that it had arranged to meet. These included the Customs offices in Shenzhen, Shanghai and Hangzhou, the Commission on Customs and Trade Facilitation of the International Chamber of Commerce (ICC) China, the Committee of Hangzhou Cross-border E-commerce Comprehensive Pilot Area and the Authority of Shenzhen Qianhai, as well as Alibaba, SF Express and YTO Express.

At the meetings, participants presented their experiences in supervising and operating cross-border e-commerce transactions, and discussed the challenges faced and the international instruments and standards needed. The WCO delegation also visited the operational sites of the Customs offices in Shenzhen and Shanghai, as well as the bonded warehouse belonging to the China Merchants Group, Alibaba’s ‘OneTouch Business Service,’ Caohejin Hi-Tech Park, and the logistics hub of SF Express.

A snapshot of China’s cross-border e-commerce industry

E-commerce has been burgeoning in China since 1997. After two decades of continued growth, the e-commerce industry keeps booming while adopting various modes (e.g. B2B, B2C, C2C and O2O). Cross-border e-commerce began to grow significantly in 2011 and is now an important part of Chinese foreign trade. China’s major foreign trading partners in e-commerce are the United States, Russia, Brazil, Spain, the United Kingdom, Australia, France, Italy, Japan, Canada, Germany and South Korea, according to the E-Commerce Connectivity Index (ECI), created by Alibaba.

Cross-border e-commerce transactions, particularly in B2C terms, entails e-transactions, e-payments and logistics. There are a mass of market players in China, including e-platforms (e.g. Alibaba), e-payment operators, e-vendors, warehousing operators, and express shippers (e.g. SF Express and YTO Express), which jointly operationalize massive online transactions and offline deliveries on a day-to-day basis.

In fact, cross-border e-commerce impacts economies in different ways. It (i) enables diversified products from all over the world to be supplied to consumers; (ii) encourages small and medium-sized enterprises (SMEs) to participate in international trade; (iii) improves economic competitiveness; (iv) spurs innovation (e.g. many Chinese e-platforms are utilizing ‘big data’ to analyse and monitor cross-border e-commerce transactions); and (v) creates jobs – according to the Ali Research Institute, the Alibaba Group’s research arm, there are over 2 million people working in the field of e-commerce in China; SF Express, the largest Chinese express shipper, states that it has employed approximately 124,000 staff members.

China’s general policies on cross-border e-commerce

Aware of these benefits, the Chinese government has embarked on issuing a series of policies in favour of this industry. China’s National People’s Congress is currently reviewing the draft E-commerce Law, which includes a special chapter on cross-border e-commerce. The text explicitly requires government agencies to take measures to, among other things, facilitate the processing of cross-border e-commerce transactions, and ensure their legal compliance by means of, for example, building pertinent regimes, sharing information, and using paperless systems.

But encouragement policies date way back. In August 2013, the Chinese government promulgated a notice requiring relevant government agencies to put in place measures that support cross-border e-commerce, in response to the new trends in foreign trade and the emerging needs of traders and consumers. Later on, in June 2015, it published the ‘Guiding Opinions on Promoting the Healthy and Rapid Development of Cross-border E-commerce.’ In this document, the Chinese government rolled out its strategy to foster cross-border e-commerce, which encompassed a number of measures:

  • encouraging enterprises to engage in international trade through e-commerce;
  • strengthening major e-platforms;
  • enhancing Customs and quarantine procedures;
  • improving cross-border payment services;
  • providing financial support to e-commerce companies;
  • promoting the functions of trade associations.

At the local level, municipal governments in some cities are encouraged to explore ways in which they can integrate different administrative resources and provide comprehensive services in order to hatch cross-border e-commerce. For example, in Shenzhen, China’s fourth biggest city, 99% of cross-border e-commerce operations are processed within Qianhai, which is part of the Guangdong Pilot Free Trade Zone (FTZ).

The Authority of Qianhai has created a special division to attract and serve e-commerce industries by regularly holding meetings with cross-border e-commerce players within the FTZ, clarifying FTZ policies, and gathering questions to be addressed by other government agencies. Moreover, as Qianhai is located within a FTZ, goods exported from Qianhai can be imported into a foreign FTZ and stored under bonded conditions; if purchased, the goods can be conveyed from the FTZ to a foreign market upon Customs clearance; in other cases, the goods can be shipped to a third country or returned to Qianhai without any duty payment.

In addition, the Chinese government has also approved a dozen cities to found cross-border e-commerce comprehensive pilot areas, with a view to hatching this emerging industry. Hangzhou, which is also known as China’s e-commerce capital, was the first to be approved, on the back of its achievements in mobilizing different administrative resources.

To hatch SMEs and new entrants in this industry, the municipal government of Hangzhou has established systems that enable e-platforms, banks, logistics operators and government agencies to share data and information for the purposes of identifying non-compliance risks, protecting intellectual property rights (IPR), facilitating financial flows, monitoring the behaviour of enterprises, compiling statistics, implementing sanitary and phytosanitary regulations, etc. Moreover, the municipal government, in partnership with some e-platforms (e.g. Alibaba and Amazon), delivers capacity building and training to SMEs and new entrants.

Customs regulations on cross-border e-commerce

Announcement No. 26 on Matters concerning the Supervision of Retail Imports and Exports in Cross-Border E-commerce, issued by the General Administration of China Customs (GACC) in April 2016, among other things, is the principal Customs regulation on cross-border e-commerce. The Announcement applies to all individuals and companies that engage in retail imports and exports via e-platforms, including e-vendors, e-payment operators, e-platform providers (either self-run or a third-party), and logistics operators.

All cross-border e-commerce players are obliged to register with their local Customs house and on the Cross-Border E-commerce Clearance Service Platform, which is part of the Chinese E-port Portal maintained by the GACC.

Before any import or export transaction, all cross-border e-commerce players are required to input information about the transaction (e.g. purchase order) and payment/logistics (e.g. waybills) to the Clearance Service Platform. Thus, Customs officials are able to compare information on the same transaction coming from different sources and identify any risks contained therein.

The e-vendors or e-platforms have to also declare the import or export electronically to Customs. The declaration can be conducted through the Manifest for Cross-Border E-Commerce Retail Consignments. If a consignment is identified as not being legally compliant, it will be investigated.

As e-commerce highly depends on ‘just-in-time’ delivery, the GACC, since May 2015, has required its Customs offices to provide all-year-round services to cross-border e-commerce and to ensure that Customs clearances, under normal circumstances, are processed within 24 hours upon arrival of consignments.

China Customs levy tariffs, value-added taxes (VAT) and excises on retail imports of cross-border e-commerce. The dutiable value is the actual transaction price, including cost, insurance and freight (CIF). Purchasers should pay the duties and taxes, but e-platforms or e-vendors, if they have deposited sufficient guarantees, may pay the duties and taxes and then claim reimbursements from the purchasers. Some authorized companies may pay the duties and taxes to Customs periodically, rather than on a consignment by consignment basis.

For the sake of consumer welfare, the GACC, together with other government agencies, has published a list of commodities. When a consumer purchases a listed commodity, he/she is exempt from tariff collection and needs only to pay 70% of the applicable VAT and excise, on condition that a single import does not exceed 2,000 Chinese yuan and that the accumulated value of imports for the same individual within one year does not exceed 20,000 yuan. In other words, each purchaser is vested with a quota on certain goods within which he/she may enjoy a zero tariff and a 30% discount on VAT and excise.

According to the GACC, this policy not only spurs consumers’ purchases, but also encourages imports, and results in increased revenue collections. Moreover, as cross-border e-commerce transactions are supervised through the Clearance Service Platform, the evasion of duty and tax is minimized.

The road ahead for cross-border e-commerce

Cross-border e-commerce is still in the course of fast growth. Unprecedented trading techniques and modes, stemming from this industry, also continue to balloon. While the contributions of cross-border e-commerce to a country’s economy are apparent (e.g. acting as a positive catalyst for economic competitiveness), there are safety and security issues that must be borne in mind (e.g. the impact on the environment, counterfeit goods and cyber-enabled smuggling), which lead to a number of challenges on the road ahead.

Several best practices can be drawn from the Chinese experience in governing cross-border e-commerce. In particular, (i) the central government develops its strategies and roadmaps for boosting cross-border e-commerce at the national level, (ii) all relevant government agencies issue specific, but aligned policies and regulations on cross-border e-commerce within their remits, and (iii) the municipal governments are allowed to experiment with measures they deem most suitable for local conditions.


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