Seller Beware! April 8 Means Big Changes to China Duty Policy
There is a rising Chinese middle class with more disposable income. They are eager to buy Western products and services for their accessibility, authenticity, and quality. They travel to USA and Europe to shop, eat and tour. They buy from the best global brands using cross-border ecommerce platforms like Beyond (别样). It is estimated that cross-border e-commerce grew 10 times in 2015 alone and will grow significantly in the next few years.
The Chinese government promotes and encourages cross-border ecommerce, but they also frequently change the regulation policy. This brings a lot of uncertainty and risks to American and European merchants. For example, since early March, 2016, there is a rumor that the duty policy of cross-border e-commerce will change. This week, the formal duty regulation policy documents were finally published. It is a big change. See the original text 财关税〔2016〕18号. Here are the Top 4 changes you should pay attention to:
Duty for every item through customs – Previously, there was no duty charged if the duty amount was less than RMB 50 Yuan, i.e., about $7.7 USD. Now, every item will have to pay.
Duty rate change – The duty rate previously had 4 buckets, 10%, 20%, 30%, and 50%. Now, there are 3 buckets, 15%, 30%, and 60%. When the change takes effect beginning April 08, 2016, there will be a transition period where 70% of the owed duty will be charged. It is not clear when the full amount will be charged.
Free trade zone advantages disappear – In 2014, some free trade zones in cities like Shanghai were set up to promote cross-border ecommerce with some duty advantages. The new policy change negates these advantages. American and European merchants are now encouraged to ship products to Chinese consumers directly without worrying about the free trade zone setup.
Good news for ecommerce with long-tail inventory. The duty rate for hot products like baby milk powder, nutrition, snack, and diapers will increase significantly while the duty of skincare, apparel, watches, and shoes will be reduced. High-end retailers like Neiman Marcus can leverage this opportunity to sell directly to China.
The mission of BorderX Lab is to enlarge global commerce through BigData and AI technology. Currently, we help American and European brands reach emerging Chinese consumers through our mobile marketplace, Beyond (5th Avenue in your Pocket) and data-driven marketing technology.
We offer a turnkey platform (payment, logistics, and marketing) with no setup cost to get merchants started and do initial market test; we also offer an omni-channel co-marketing toolkit to scale cross-border ecommerce quickly. BorderX Lab is co-founded by 3 Google alumni with series entrepreneurship experience and headquartered in Silicon Valley.