The Australian export industry has been abuzz with talk of China’s recently released regulations aimed at reconstructing how it taxes goods sold on its highly popular e-commerce platforms.

The non-tariff changes that took effect from 8 April 2016 target goods sold by e-retailers, placing higher import duties on certain categories of goods (Regulations).

In this Alert, Senior Associate Lea Fua and Solicitor Briar Francis provide a brief overview of the changes.

Key Points

  • The Chinese Ministry of Finance released two circulars on 16 March 2016 and 24 March 2016 detailing its regulations to change import duties payable on goods imported through e-commerce retailers such as Alibaba, Tmall and Taobao. The result will be that import duty on certain products will increase the sale price for those products.
  • The Regulations are yet to be fully developed and will likely take form after a significant amount of further consideration in the coming months.
  • The intention of the tax changes is to close loopholes and provide for better regulation of this industry.
  • A “positive list” has been released by the Chinese government listing 1,142 categories of products that users of these e-commerce platforms can bring into China.
  • Any changes to the obligations placed on Australian exporters trading in China via e-commerce platforms will need to be developed such that the provisions of CHAFTA are not breached.
  • Australian exporters who are unsure of the impact of the “positive list’ on their export products should seek advice and HopgoodGanim Lawyers can assist with any such enquiries.

China releases new policies on e-commerce import duties: how will Australian exporters fare?

The Regulations

Under the Regulations, new taxes will be placed on goods imported through e-commerce platforms. 

In general, individual Chinese consumers will be able to purchase up to RMB 2,000 worth of goods in a single transaction from one of these platforms taxed at a lower flat rate, with an annual limit of RMB 20,000 applying across all cross border e-commerce transactions.  Purchases that exceed these limits will be levied at the full tax rate as though trading commercially.  Purchases totalling under RMB 50 will no longer attract a tax exemption.

The tax on the import of beauty products has been reduced, as well as some clothing items, however, food products are set to rise in price by about 12% on average due to the increase in duty.

Particularly relevant, the Regulations seek to even the playing field between foreign online retailers and their domestic counterparts by placing a new tax of 11.9% on goods purchase on foreign websites.

Goods sent to China via post by individuals shopping personally overseas appear to be unaffected by the Regulations.

The “positive list”

Inclusion on the positive list means that retailers can import products into China via its 14 free-trade zones without an import licence, and then on-sell the products on e-commerce platforms.

Being on the list also means that the relevant product will be less likely to require Chinese registration and food labelling, although the list itself does not make clear when and how other existing regulations will apply.  Goods on the list that require additional compliance include cosmetics imported for the first time, medical devices and cryptographic or password encrypted technology.

Products not on the list appear to be prohibited from import via cross-border e-commerce, although the status of the list as law (as opposed to policy) is currently in question.

The list is expansive and covers most products currently sold by foreign companies on e-commerce platforms.  Key products not included on the list, or restricted by the list in some way, are:

  • liquid milk and milk powder;
  • infant formula not registered under the Food Safety Law before entry into China;
  • health food, including certain vitamin supplements;
  • foods consumed for medicinal purposes;
  • fresh foods

While the introduction of the Regulations has brought on some panic from within the Australian export community, the Regulations as publicly released appear to be an attempt by the Chinese authorities to better regulate the taxation of goods sold on China’s cross border e-commerce platforms.  The Regulations are primarily aimed at eliminating tax loopholes and normalising duties, and Chinese lawmakers are optimistic that the Regulations will facilitate further dealings via this channel.

Whilst the general consensus amongst Australian exporters appears to be that the Regulations will cause minimal impact to long term operations in China, it is likely that exporters trading key products absent from the positive list will experience short term hurdles such as additional registration requirements and the need to reassess product pricing. It is clear that the price of some goods (especially those not on the positive list) will increase as a result of these changes.  Australian exporters are being assured by experts in both countries that Chinese consumers are prepared to pay increased prices for quality Australian goods over their Chinese counterparts.