China’s Tax On Foreign eCommerce Sites

China has some new taxes on goods imported through eCommerce sites, though it has also removed some duties that had previously been assessed.

Food will now import at a higher duty price; previously the tax was 10 percent. Cosmetics on the other hand are getting cheaper, falling from the 50 percent tariff previously charged.

“I don’t see the new policy as a problem,” Tao Yuan, eCommerce director of Germany-based Metro AG’s China division told Internet Retailer. “Instead, it will wipe out those companies that were only seeking a policy loophole and operating in a gray zone.”

Under the new regulations, consumers will have up to $309 worth of goods from a foreign eCommerce site on which they will simply be charged a flat tax of 12.9 percent, a dip from the 17 percent currently being charged as a value-added tax in Chinese physical stores.

Under the latest set of rules governing imports – in effect since 2013 – import duties varied sharply by product category. Cosmetics and alcohol had high tax rates associated with them, where electronic and apparel were only taxed at 20 percent and food only at 10 percent.

The new rules also close a loophole that waives taxes on purchases of $7.73 or less.

“In the past many e-retailers abused the tax exemption,” says Cao Lei, research director of the China E-Commerce Research Center, a market research firm. “For example, they would often break an order into multiple orders to avoid paying the tax.”

That change will have an effect on customers who will now be paying import duties on small purchases when in the past they would have been paying nothing, or far less.  Goods like diapers, for example, will now have a nearly $2 tax, compared to zero tax in the past.

“Chinese consumers, especially young moms, are focused on quality, not price. We are glad to see the policy finalized, and I think it will help the market grow in a healthier way,” noted Zhang Lei, CEO of Kaola.com, a Chinese site selling imported products.

The new rules also formalize 1,142 categories of overseas products that online shoppers can bring into China under the rules governing cross-border eCommerce.

Consumers in China are now allowed to buy from foreign sites a small number or quantity of goods for personal use that Chinese retailers are not yet able to sell. The new CX rules also allow the importing products that have been approved in their country of origin. This change is important — especially for makeup and hygiene products, as China requires testing on animals before sale to humans. Western countries tend to ban testing on animals.

The list contains nearly every conceivable consumer good, and is not intended to limit what Chinese consumers can buy. Instead, according to reports, it seems the list is a measure to prevent the cross-border commerce rules from being stretched to include items like raw materials.

“The positive listing won’t impact the industry much as it covers almost all consumer goods,” says Alan Gu, CEO of 55haitao, a Chinese affiliate site that advertises overseas products to online Chinese shoppers. “The new policy also creates some opportunities to expand their business for e-retailers. For example, for some beauty products the new total import tax rate is 32.9 percent, whereas before it was 50 percent. Also, the old tax rate for sports shoes was 20% and now it is 11.9 percent.”