Frequent readers of our posts may have already learned how to set up your e-commerce presence in China and generate traffic to their WeChat store.
We’ll now deep-dive into a common problem of vendors selling to China: logistics and shipping to China.
Can my product be shipped to China?
The first question you might have is: is it legal to ship my product directly from oversea to China, via cross-border e-commerce?
Thankfully, the EU SME Center has put together a helpful list of products that are legal to export from EU to China. You can find the list here.
The list is very long, and includes, among other products:
- Fashion & Fashion accessories (footwear, watches, jewelry etc.)
- Furniture and kitchenware
- Coffee & various spices
- Various kinds of seafood
- Milk products and milk powder
Cross-border trade and FOREX
Another common question is: who handles currency conversion when conducting cross-border trade with China?
With the rise of Alipay and WeChat Payment, there are now two clear alternatives: Alipay cross-border and WeChat Payment cross-border.
With both of these services, upon transaction:
- Chinese user will pay in RMB
- Alibaba or Tencent will handle currency conversion with their partner bank (usually they will apply a charge around 2.5%)
- Payment amount will be sent to an oversea account
- A transfer will be made to the merchant’s account once the settlement amount is reached
The custom clearance can be a complex process in China.
It involves the following steps:
- During the customs clearance procedure, the importer will have to complete the following formalities
- Customs registration
- Commodity inspection (inclusive of animal and plant inspection and quarantine)
- Customs declaration
- Documents submission
- Payment of taxes and other fees
- Foreign exchange control
In order for the customs to be cleared, the vendor also have to provide the personal information of the buyers:
- Legal name
- Chinese ID number
Most companies will leverage the help of third party logistic providers in order to ship their products to China. The logistic provider will handle the custom clearance process and help to pay the appropriate taxes when shipping your products to China.
Here are a few examples of logistic providers:
Another alternative is direct shipping from oversea to China. This is usually a slow and expensive option. Shipping a small box (weighing up to about 2 kilos) from the U.S to China will cost you around $32 with USPS. And the shipment are often neither trackable nor guaranteed.
USPS offers transparent pricing for shipping to China https://postcalc.usps.com/
In that case, there is also a higher probability that the items might get help up by the customs (around 5% probability). If that were to happen, your customer in China will have to go claim the item, and possibly pay some custom taxes to have it enter the country.
Most countries have manageable when shipping from their local post office to China, especially countries with large trade volumes with China such as New Zealand or Australia.
Overall, direct shipping is not a scalable option for companies wanting to do significant business with China. It is however a good option if you are conducting a small test and are looking for a simple way to ship a handful of items sold after your first promotion.
New cross-border e-commerce regulation (published November 2018 – apply from January 2019)
The Chinese Ministry of Finance announced in November a new set of regulation affecting cross-border purchases. The new rules will take effect on the 1st of January 2019.
What are these new regulations, and how will they affect you?
An increase of maximum amounts for cross-border transactions.
The main change of the new regulation is the increase of the cut-off amount for tax-free cross-border purchases:
- Single-transaction amount increased from 2,000 RMB ($291 USD) to 5,000 RMB ($727 USD)
- Yearly amount of cross-border purchases increased from 20,000 RMB ($2,909 USD) to 26,000 RMB ($3,782 USD)
Within these limits, customers won’t pay any import tariffs, and will have their import VAT and consumer tax collected at 70% of the statutory taxable amount.
In practice, this reform opens up the cross-border market for a lot of luxury retailers with products in the 2,000 to 5,000 RMB range. For industries such as high-end fashion and cosmetics which strongly appeal to Chinese cross-border buyers, this is a game-changing move.
New items added to the positive list
63 new items categories were added to the positive list for cross-border purchases. The new allowed categories notably include sparkling wine, beer, health care products, and fitness equipment.
The full list of allowed items (in Chinese) can be found here.
Additional geographical coverage
The cities included in this cross-border tax-rebate were expanded from 15 to 37 cities.
The full list of cities covered by the cross-border policy is: Beijing, Tianjin, Shanghai, Tangshan, Hohhot, Shenyang, Dalian, Changchun, Harbin, Nanjing, Suzhou, Wuxi, Hangzhou, Ningbo, Yiwu, Hefei, Fuzhou, Xiamen, Nanchang, Qingdao, Weihai, Zhengzhou, Wuhan, Changsha, Guangzhou, Shenzhen, Zhuhai, Dongguan, Nanning, Haikou, Chongqing, Chengdu, Guiyang, Kunming, Xi’an, Lanzhou, Pingtan
No country for Daigou
The reform also stresses out the fight against “Daigou”: people buying a product tax-free oversea and then re-selling it online or offline on the local market.
The new regulation insists strongly on the fact that cross-border purchases are final, and that then re-selling these products in China would be illegal.
The positive trend to expand imports
This new regulation is a part of the collective effort China is making to expand its import market and drive internal consumption.
Early in July, China identified 22 cities as the cross-border e-commerce pilot zones. In September China started to cut admin charges and expedite cargo clearance to incentives global trade. In November 1st, China implements a tariff cut on 1,585 imported goods.
In November, China also held the first China International Import Expo that attracts 2,800 brands from 130 counties to participate. President Xi Jinping called it “demonstration of China’s embracing of greater openness”.
Take-away from new cross-border e-commerce regulation
With an increase in tariff-free purchases cap, the number of categories in the positive list and a wider city coverage, this new regulation update is great news for all companies shipping to China.
The news is especially good for high-end fashion companies, or cruelty-free cosmetic companies wanting to sell to China cross-border, which will most benefit from the ability of customers to make larger orders.
If your products are legal to export in China, shipping can be a hassle but which is easy to overcome. Working with logistic partners operating from Hong Kong or free trade zones is the easiest way to handle your start in China in a transparent and efficient way. For a first test, direct shipping might be an option. But be ready to switch to a more scalable shipping strategy after things gain momentum.