New cross-border e-commerce regulations

Several Chinese authorities, including the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance, the General Administration of Customs (GAC), the State Administration of Taxation and the State Administration for Market Supervision, jointly issued a Circular on Improving Supervision of Cross-Border E-Commerce Retail Imports, which took effect on 1 January 2019. The GAC subsequently issued a Circular [2018] No. 194 to implement the aforementioned regulation, also effective on 1 January 2019 (both circulars are collectively referred to as the New CBE Regulations).

The New CBE Regulations reflect the longstanding policy objective of the Chinese government to divert cross-border e-commerce sales from the less regulated, shady channels, such as the commonly-known “daigou”, to the closely supervised CBE channel. The policy tools for achieving this objective include the increased incentives for the relevant parties to transact through the CBE channel. Meanwhile, to clamp down on the possible abuse of these incentives, the New CBE Regulations show clear commitment to strengthening enforcement against illicit operations, in particular those aimed at exploiting the tax reduction benefit of the CBE programme. In addition, in order to provide greater protection to Chinese consumers in terms of product quality and safety, the New CBE Regulations explicitly hold the overseas sellers and their designated Chinese “responsible parties” jointly and severally liable.

Having regard to these changes, all participants in the CBE supply chain, including the overseas sellers, will now need to take prudent and compliant measures, such as due diligence on designated Chinese parties, to avoid being subject to enforcement against illicit business activities and eliminate potential legal liabilities under the New CBE Regulations.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com