E-Commerce EU SME Topics

In China, there are two main ways to sell products: (i) general trade, namely the traditional way; and (ii) Cross-Border E-Commerce (CBEC). CBEC involves the online sale of certain products across borders and through dedicated platforms. It differs from general trade in that it enables EU SMEs to sell directly to Chinese consumers without the need of establishing a company in China: sellers can place their products in an online shop on one of the dedicated CBEC platforms, and the Chinese customer can order directly through the platform. This can be done through two main ways: (i) direct shipment from the exporting country once the order is made; (ii) direct shipment from a warehouse in a bonded zone in mainland China, where CBEC imported goods may be temporarily hosted even before online orders are made.

Through CBEC, imported goods are cleared by customs without the need for pre-market access product filing, registration or certification – which are instead mandatory through general trade for most product categories. This allows imported products to be sold faster and cheaper, and potentially to sell products otherwise not allowed to be imported via general trade, such as certain F&B categories that require government protocols. Furthermore, goods imported into China via CBEC also enjoy preferential tax rates (see FAQ “Are there preferential tax rates for goods imported into China via CBEC?“).

However, not any product can be sold via CBEC: only those included in a specific Positive List, officially called Catalogue of Products Authorised for Retail Import via Cross-Border E-Commerce, can be sold in this way. There are currently 1,476 items on the list, covering most categories of consumer goods, including OTC drugs or other categories subject to strict market access requirements. An unofficial translation of the Positive List is available in dedicated resources produced by the EU SME Centre, together with more details on CBEC as well as dedicated CBEC platforms, their costs and strengths.

Goods sold in China via CBEC are considered personal goods. Therefore, CBEC imported goods are cleared by customs without the need for premarket access product filing, registration or certification – which are instead mandatory through general trade for most product categories. Products can also be sold in their original packaging and label (Chinese label is not needed). For instance:

• Health food and food supplements can be exported to China through CBEC, without going to pre-market entry registration with SAMR (which may take two years) and GACC/CIFER registration (which may take several months).
• Animal cruel-free cosmetic products can be exported to China through CBEC without going through a lengthy and strict exemption process.

Still, certain categories of goods – including infant formula– may still be subject to pre-registration, record filing, licensing or registration for first-time imports; others, such as cosmetics or products which can fall under the definition of medical devices, will still need to fully abide by Chinese laws and regulations in terms of efficiency claims. It must be noted that local customs authorities in different cities may have different interpretations and apply different requirements and procedures for clearance.

At the same time, although GACC/CIFER registration is not needed, it is recommended that the exporters still begin the registration process.

Selling goods through China’s e-commerce is simple:

• For traditional e-commerce, payments are managed by the platform and directly accessible from the seller’s account on the e-commerce platform (seller’s direct access, or its importer/distributor/agent). The payment does not involve foreign currency, therefore everything is handled in RMB.
• For CBEC, cross-border payments are managed by the CBEC platform on which the transaction is made, through the local clearing system. No additional bank accounts must be opened, only a transaction and currency conversion fee are charged by the host platforms. Therefore, companies operating in CBEC can initiate transactions in the currency of sale (e.g. EUR), while Chinese customers pay directly in RMB.

One exception could be if goods are sold via the exporter’s own website. In this case, it is strongly recommended to work with a third-party provider to enable your platform popular payment methods such as WeChat and Alipay. International credit card payment methods, or other platforms such as PayPal, are not common in China. In general, selling via your own website is much more difficult (and costly) compared to opening official stores on Chinese popular e-commerce platforms.

CBEC products are considered personal goods and thus are subject to preferential import tax rates. The taxes levied and the rate depends on whether the value of the purchase is within the RMB 5,000 limit for a single transaction, and within the RMB 26,000 maximum annual quota for each person:

• Scenario 1: Within the RMB 5,000 limit for single transactions, and within the RMB 26,000 maximum annual quota for each person. Imported CBEC products are exempted from customs duties, while VAT and consumption tax (if applicable) are charged on 70% of the value.
• Scenario 2: Exceeding the RMB 5,000 limit for single transactions, but within the RMB 26,000 maximum annual quota for each person. CBEC import is still allowed, however customs duties, VAT and consumption tax (if applicable) will be charged in full, and the value will be added into individual annual quota (RMB 26,000). In this case, therefore, the only benefit of the CBEC model relates to easier customs clearance.
• Scenario 3: Exceeding the RMB 26,000 maximum annual quota for each person. Regardless of the value of the single transaction (within our exceeding 5,000 RMB), if the maximum annual quota is exceeded, CBEC import is not allowed at all. Goods must be bought via the general trade channel (i.e. physical stores, traditional e-commerce, etc.). However, in practice, Chinese consumers who have exceeded the quota can still use the ID of friends/family members to buy CBEC goods.

More details on the preferential tax policy for CBEC imported goods, with concrete examples, are available on dedicated resources produced by the EU SME Centre.

Note: This FAQ was provided by the China IP SME Helpdesk, an EU-funded project which provides free technical assistance to EU SMEs on IPR-related issues in China: https://intellectual-property-helpdesk.ec.europa.eu/regional-helpdesks/china-ipr-sme-helpdesk/china-frequently-asked-questions_en

The specific regulations related to the internet stipulate that if the IP-protected material is uploaded without the right holder’s consent, he/she may request in writing that the internet service provider (ISP) removes the infringing work, or removes the relevant website from the ISP’s network and disables access to the copyrighted material. This kind of written warning is known as a ‘take-down notice’. The general rule is that if the ISP removes the infringing content following a ‘take-down notice’ it will not be held liable for any further compensation. If however, the ISP knew or should have known about the infringement, the ISP will be held liable jointly with the person who uploaded the infringing content. In order to avoid liability, Chinese ISPs have developed systems to aid take-down notices. For a successful take down action, you will have to provide the ISP with the registration documents of your Chinese trade mark, patents or copyright.

E-commerce websites usually have dedicated systems for dealing with product infringing IPR. You can upload your IP certificates in their system even before you need to take action against the infringers. This step is recommended as it allows you to take swift action against the infringers as the IP certificates have already been verified by the platform.

For further information on notice and take-down procedures, consult the website and relevant resources of the China IP SME Helpdesk.