Good news for Icelandic and Danish brands that want to enter the Chinese market
Chinese consumers have become increasingly drawn to foreign brands via e-commerce platforms. Statistics showed that the retail imports of cross-border e-commerce are up almost 54 percent year-on-year so far this year.
According to the Chinese Ministry of Finance, new and improved rules affecting cross-border trade will take effect on the 1st of January 2019. New E-commerce laws will also take effect extending much needed legal protection for consumers and brands alike. These measures are a great step forward in the fight against fake merchandise.
The Cross border model
The cross border model allows the Chinese consumer to experience the brand and it’s products in a local digital setting, but buy from abroad with lower or no tariffs and a reduced VAT. The brand faces lower Chinese regulatory, testing, and approval hurdles and the time to launch is vastly shorter than doing the full local launch. It is the best (and cheapest) way for brands to test and understand the market.
New cross border rules create new opportunities
From the 1. of January the limit on cross border purchases will be raised. An individual buyer will then be able to purchase for 26.000 RMB (around 470.000 ISK or 25.000 DKK) instead of 20.000 RMB before. The limit on a single purchase will be raised from 2000 RMB to 5000 RMB (around 90.000 ISK or 4.800 DKK). A meaningful change because it allows for bigger single purchases and more expensive items to be sold through this system.
More products added to the duty free list
Another meaningful change is the expansion of product categories included in the duty free list. The list has been extended with 63 categories including healthcare products, beer, sparkling wine and electronics.
Customs clearance made easier The Chinese customs has implemented new measures to expedite cargo clearance and cut administrative charges to facilitate foreign trade. To that effect the authorities have designated 22 cities as pilot zones in an effort to boost cross border e-commerce. This as well as cutting tariffs on 1585 imported goods is great news for small and medium sized Icelandic and Danish companies.
Daigou reselling is now illegal The new reform fights the "Daigou" process of people buying large amounts of tax-free products overseas only to resell them in the local market. With the new regulation, cross border purchases are final and reselling the products in China will be illegal.
E-commerce is exploding E-commerce sales accounted for 23.8 percent of all retail sales in China in 2017. That number is expected to be 33.6 percent by 2019. This unbelievable growth calls for stricter oversight and better market regulation.
The new law clarifies the types of businesses under its jurisdiction. Now Platform operators, vendors on platforms and general online sellers (selling through their own websites and social media apps like Wechat) will be responsible for protecting IP rights. That means that they can expect heavy fines if they are caught selling fake goods
China is slowly but surely combatting the fake goods industry.