China's New Import Regulations
These are not laws but rather new regulations
When the Chinese go e-commerce shopping, they look for safe and cheap products worldwide. With the Internet, it makes it pretty easy to do as such. But as anything that is too good to be true—free, innovative and resilient—an end usually comes into sight. The Chinese government, in this instance, wants to limit the cross-border flow of goods by raising customs fees and import taxes. It will not only hurt Chinese shoppers, but it also goes against China’s pledge it made when it joined the World Trade Organization (WTO) to reduce its high tariffs so that Chinese people could afford more imported goods. Here’s what China's new import regulations mean for the Chinese and for exporters worldwide.
According to data from Mintel Group Ltd., “online sales of imported goods have grown at a compounded rate of 63 percent in the five years to 2015, reaching 638 billion yuan ($98 billion) and accounting for 17 percent of China’s total online retail sales.” (Source: “China Changes Online Import Tax Rules, a Move to Help Cosmetics;” http://www.bloomberg.com/news/articles/2016-03-25/china-changes-online-import-tax-rules-a-move-to-help-cosmetics.)
And to be perfectly clear, The Conversation says, “the description of the new rules as ‘e-commerce’ laws is not quite right. Firstly, they are not laws; they are regulations. Secondly, the new regulations are actually the application of duties that were previously waived or reduced for goods that went through China’s free-trade areas.” (Source: “China’s e-commerce laws not a ‘crackdown’ but closing a loophole;” http://theconversation.com/chinas-e-commerce-laws-not-a-crackdown-but-closing-a-loophole-57742.)
New Tariff Policy
The Chinese government enacted a new tariff policy that went into effect April 8, 2016, which would apply to products imported through e-commerce and also goods physically brought across the border. According to Epoch Times, imports of duty-free goods purchased at overseas ports of entry has been increased from 5,000 to 8,000 yuan, but anything over that amount will be hit with an additional tax rate that varies depending on the type of product. It will make it more expensive for Chinese citizens to buy foreign goods such as food, childcare, and maternity products. Companies such as Alibaba’s Tmall International will be negatively impacted.
Duty-Free News International says, “the new rules subject mainland Chinese Internet shoppers to 70% of a range of taxes which previously applied only to wholesalers. Before this, domestic shoppers were levied with a personal effects tax of 10%.” (Source: “China’s new tax puts pressure on online duty-free purchases;” http://www.dfnionline.com/latest-news/retail/chinas-new-tax-threatens-online-duty-free-purchases-19-04-2016/).
For example, the following items increased from a 10 percent to 15 percent tax rate:
- Food and beverages
- Certain electronic products
- Gold and silver
These items increased from a 20 percent to 30 percent tax rates:
- Clothing and accessories
These items went from a 50 percent to 60 percent tax rate:
- Some alcohol, tobacco, and cosmetics
What Happens When Chinese Citizens Can’t Get Their Deals?
While it appears Western countries have opened their borders to cross-trade, China continues to raise tariff barriers to block foreign goods from getting into the country. But don’t underestimate Chinese consumers. They are smart, so they end up purchasing foreign goods through extensive overseas travel. This workaround goes against WTO’s new policy and undermines China’s credibility and reputation.
What Happens to Exporters From Other Parts of the World When Tariffs Are Slapped on Their Products?
Take Australia, for example. “China remains Australia's largest trading partner, despite a slowdown in demand for some exports such as iron ore, and the two nations recently inked a free trade agreement (FTA). However, new rules around imports raise questions about how open the mainland is to foreign companies selling food and health products,” claims Reuters. (Source: “Australia food, health shares tumble on new China import rules;” Interestingly enough, the most imported products to China are clothes, bags, and shoes, which mainly come from countries other than Australia.
The bigger the tariff put on a product, the less likely it will remain competitive in China. It is something all companies have to face and decide if it is worth continuing to do business in a sizable market that can also be so cutthroat.
Have the Chinese become distrustful of their products, high prices, and Chinese authorities? That is the question I leave you with. But one thing we know for sure: The Chinese government needs to prioritize helping Chinese consumers afford high-quality products, giving them as many product options as possible from which to choose from—no matter where they originate in our world.
For Chinese speaking readers, the Ministry of Finance’s notice of the new cross-border retail import tax policy.