Opportunity and Challenges at China Cross Border e ... and Challenges at China Cross Border...

Opportunity and Challenges at China Cross Border e-Commerce after the

April 8th!

Shenzhen 13rd October, 2016

We are a professional supply chain consultancy that combines the maturity and experience of more than 15 years operational experience in retail supply chains and e-Commerce operation in the APAC region. Operating out of Shanghai and Hong Kong, our specialties lies in the knowledge, the experience, and the passion to help your footprints in China via efficient and cost effective supply chain

People. Process. Solution

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Kara Cheung

An experienced logistics professional having spent the past 15 years operating on the front line of retail supply chains in the Asia Pacific region, in particular an expert on Operational Management of Logistics and Distribution operations. Helping retail brands to improve their suppliers On-Time-In-Full shipping performance, Cross Border e-Commerce, Free Trade Zone Policies, Food and Beverage Import to China. Successful management of programmes and projects. Experience in development of Logistics and Distribution vision and strategy. Experience in delivering cost reduction project; Delivery of commercial outsourcing engagements; Experience in Network optimisation (inventory, warehousing and distribution); Delivery of process and operating model transformations; Execution of technology improvement projects, 3PL and 4PL freight optimisation programmes

Education and Qualification:

• Post Graduate in Logistics Management and Supply Chain Management University of Sydney

• Certified Professional Logistician • Chartered Member-CILTA

Previous Employment:

• Cargo Services Group 2011 to 2015 • Toll Global Forwarding 2007 to 2010 • Intergroup Australia 2005 to 2007


Based in Shanghai and Hong Kong Focus Globally!


Highlight of the China CBEC

Newly released CBEC policy and the positive list tax comparison

Case study on a newly established CBEC DC at Zhengzhou and Foshan

How to catch the best outcome with the new policy for e-Commerce trader

Content


郑州(Zhengzhou)--E贸易(eMaoe)

www.emaoe.net

Started Operation from July 15,

2013

Model: The only pilot area visited

by President Xi with his expectation

of “Purchase from Globe, Sell to

the Globe”

上海(Shanghai)--跨境通

www.kjt.com

Started operating from Dec 18,

2013

Model: Direct purchase import,

bonded import, general export

Nov 16, 2015 SH gov’t announced

re-establishing a new cross border

ecommerce platform open to

register user. 重庆(Chongqing)--跨境购物e点即成(Cross border)

www.cqkjs.com

Started operation from Jan 28,

2014

Model: First multi-model pilot

area in China

杭州(Hangzhou)--跨境一步达

www.kjeport.com

Started operation from

May 20, 2014

Model: bonded import,

direct purchase import

宁波(Ningbo)--跨境购

www.kjb2c.com

Started operation from Mar 26, 2014

Model: Import B2C pilot model, General

import, personal effect import, postal

tax consolidation payment.

广州(Guangzhou)—跨境易(KuaJing YI)

www.kjy.cn

Project planed since Oct 15, 2013

Started operation from Jan 14, 2014

Model: Retail Export, Bonded import,

direct mail B2C

深圳(Shenzhen)--前海(Qianhai)

www.szceb.com

Started operation from Sep 9, 2014

Model: bonded import, pre-

registration, customs supervise

WHS, category verification, list

verification, foreign exchange final

settlement

福州(Fuzhou)，平潭(Pingtan)--跨境购

Website is under construction

Announced on Aug 7, 2015

Model: direct purchase import,

bonded import, general export

天津(Tianjing)--跨境一步达

http://www.tjeport.gov.cn

Started operation from

Nov 11, 2005

Model: bonded import

10 Pilot Area for Cross Border e-Commerce

http://www.emaoe.net/

http://www.cqkjs.com/

http://www.kjeport.com/

http://www.kjy.cn/

http://www.szceb.com/

http://www.tjeport.gov.cn/


WFTZ

WBLP

PVG IFTZ

Yangshan FTP (IFTZ) Remarks

VAT Refund for domestic good inbound

-

Bonded Import from Overseas

-

Inter-port -

Bonded Manufacturing

-

Simple Value Added

Kitting, Labeling, No change of HS code

Linked with Seaport or Airport

Special Channel connecting Zone and Port, but may be under different customs

International Trade

-

Domestic Sale 可否內銷

-

Free Trade Zone Capabilities (Shanghai Pilot FTZ)

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National Cross Border e-Commerce Current Condition

Consumption Patterns Industry Monthly Average

2012 2013 2014 2015 2016 (Jan to Apr)

Product Consumption Garments, Textiles Category 70%-100% 40%-70% 40%-70% 10%-40% 10%-40%

Oil, Food, Beverages, Tobacco and Alcohol 40%-70% 70%-100% 40%-70% 40%-70% 10%-40%

Daily Supplies 40%-70% 70%-100% 40%-70% 10%-40% 40%-70%

Household Appliances and Audio Equipment

40%-70% 40%-70% 40%-70% 10%-40% 10%-40%

Furniture 70%-100% Over 100% 70%-100% 40%-70% 70%-100%

Construction and Decoration Materials 70%-100% Over 100% 40%-70% 40%-70% 40%-70%

Books and Magazines 40%-70% 40%-70% 40%-70% 40%-70% 40%-70%

Gold and Silver Jewelry 40%-70% 70%-100% 40%-70% 10%-40%

Cosmetics 40%-70% 40%-70% 10%-40% 10%-40% 10%-40%

Automotive 40%-70% 70%-100% 70%-100% 40%-70% 40%-70%

Sports and Recreational Goods 40%-70% 40%-70% 10%-40% 10%-40% 10%-40%

Communications Equipment 70%-100% 70%-100% 70%-100% 10%-40% 10%-40%

Cultural and Workplace Category 40%-70% 40%-70% 10%-40% 10%-40% 10%-40%

Chinese and Western Medicine Category Over 100% Over 100% 70%-100% 40%-70% 10%-40%

Consumer Service Food and Beverage Services Over 100% Over 100% Over 100%

Travel Services Over 100% Over 100% Over 100% Over 100% 40%-70%

Education Services Over 100% Over 100% 70%-100% 70%-100%

Domestic Services Over 100% Over 100% Over 100% 40%-70% 70%-100%

Cultural and Recreational Services 40%-70% Over 100% Over 100% 70%-100% 70%-100%

Healthcare Services 40%-70% 40%-70% 40%-70% 10%-40% 10%-40%

Product and Service Sector Consumption Growth

General Trade B2B: Through general import platform various manufacturers and suppliers

provide their product details and trade related services to their business customers. This is a

way of traditional trade display, negotiation and conclude a transaction. This creates a

sizable, cost effective and efficient supply chain to the overseas business.

B2C Cross Border eCommerce Services: Business and traders to supply directly to the end

consumers via various market place and trading platform. Delivery directly from business to

the end user via express courier and postal parcel services. i.e. Ali Express, Tmall Global

etc.

B2C Cross Boarder eCommerce inbound into China currently has three model: Direct Mail;

Bulk Orders Import and Bonded Import Orders.

Overseas Purchase

Bonded WHS

Place Order

Provide ID Info

Delivery to end

Customer

Dispatch from

Bonded WHS

Customs Control

Payment and

Postal Tax


Cross Border e-Commerce Flow (Inbound)

Business

Export WHS

Sea Freight

Container

Sea Freight Consolidation

Sea Port

Import Clearance

Bonded Clearance

& CIQ Buyer WHS

LCL Delivery

Customer

Inland Delivery

Business

Export WHS

Courier Packaging

Airport

Airline

Courier Parcel Clearance

Last Mile Delivery Customer

B2C Cross Border：Frequency Dispatch、Breakdown Order，Multi-items，Complexity and High Cost

General Trade：Bulk Dispatch、Bulk Order，Multi-items，Simple and Lower Cost

The Main Cross-border Logistics Model Comparison

Overseas Supplier

International Logistics

Domestic Bonded Warehouse

Bulk Purchases

Ship

Overseas Warehouse

Small-volume Purchases

Japan Warehouse

Korea Warehouse US Warehouse

Australian Warehouse

Others

Direct Mail

Ship

Bonded

International Express

Customs Clearance

Domestic Express Delivery

Chinese Consumers


Logistics Model Comparison of Major Cross-border e-Commerce Model




Case study on a newly established cosmetic CBEC DC at Zhengzhou and Foshan


Content

April 8, 2016

Integrated cross-border e-commerce

tax

Replace postal tax

Postal Tax adjusted to three tier: 15%,

30%, 60%

What’s New? Only products listed on positive list could be

import via Cross Border Channel Major impact to infant formula, skin care and

cosmetics, medical devices etc. CIQ clearance slip require for inbound into BLP

for BBC model Personal Effects import restricted to

RMB5,000. Duty Free of charge for purchase amount

under RMB50 canceled…….. Maximum daily order RMB2,000 with annual

limit RMB20K per Chinese ID holder……


Adjustment for Cross-border e-Commerce Import Tax Policy and Postal Tax Policy

Previous Policy New Policy

Nature of Goods Personal Commercial

Import Tax Personal Article Tax ”Cross Border e-Commerce Consolidated Tax” (Please refer to the next slide)

Tax Exemption CNY50 None

Dutiable Price Selling Price Selling Price + Courier + Insurance

Limit on Import Volume CNY1,000 per order (Excluding inseparable products with value over CNY1,000 per piece)

CNY2,000 per order CNY20,000 per ID per year (Order Value > CNY2,000; Inseparable product with value over CNY2,000 per piece; annual consumption above CNY20,000 per ID, subject to full amount of VAT, import duty and consumption tax)

Commodity Management Negative List Positive List (Please refer to the next slide)


Policies Highlights

Infant Milk Powder (Effective from 1st Jan 2018)

•Still under development process.

•No need to obtain a certificate of registration formula related products temporarily.

Cosmetics (Effective from 8th April 2016, Cross Border e-commerce Pilot cities exempt and postpone to May 2017)

•First time import must obtain cosmetic permit issued by China Food and Drug Administration (in which non-special use cosmetics for the record certificate).

•In the future, should obtain permit in accordance with the relevant provisions of the product. •Tax reduction on the cosmetics products and skin care products effective from 1st Oct 2016 for general trade and cross border eCommerce

Medical Devices Related Products

•For those Chinese name cannot correspond with medical products tariff code, they shall declare the registration or filing.

•Approved for registration or filing products legally can be imported in accordance with the relevant provisions of laws and regulations.


Adjustment for Cross Border e-Commerce Import Tax Policy and Parcel Tax Policy


February 2014

General Administration of Customs Announcement No.

12

Addition “9610” Code of Customs Supervisory

Method

Called “Cross-border e-Commerce Business”

March 2014

Notice from General Administration of Customs

on cross-border e-Commerce online shopping service pilot

The limitation of purchase price and quantity

Tax: Dutiable value based on actual selling price and

Parcel Tax Rate

July 2014


56

Inbound and outbound good of cross-border e-Commerce

services

Clear regulatory on General Trade and Parcel

August 2014


57

Addition “1210” Code of Customs Supervisory

Method

Stands for “Bonded Cross-border e-Commerce”

June 2015

General Administration of Customs Announcement No. 21

Reduce consumer goods import tariffs more than 50% in average for clothing, footwear,

skin care products, diapers, etc.

Apr 2016

Ministry of Finance, General Administration of Customs,

State Administration of Taxation jointly issued

Implementation of cross-border e-Commerce retail

import tax policy

Adjust and synchronize Parcel tax policy

• Favorable policies to cross-border have been introduced to create favorable conditions for the development of Chinese cross-border e-Commerce

• China government released two batches of commodity lists of Import Cross-border e-retailing (positive lists) since Apr 7th, 2016 with 1,293 HS code in total, including food and beverages, apparel & footwear, hats, household appliances, cosmetics, toiletries , mum and baby products, toys, etc.

• Products within the list will be exempt from submitting any permit to the Customs, and all inspection by CIQ will follow relevant laws and regulations.

- For B2C model, it will be exempt from CIQ certificate - For B2B2C model, it requires CIQ certificate during bulk inbound shipment coming into the

bonded warehouse (* please refer to May.25th new Customs policy slide)

• CIQ certificate – The documentation required for import cargo and special products is issued by CIQ to prove the import cargo consignee or his agent has followed the CIQ declaration.

• CFDA Permit (CFDA) – In accordance with the supervision and management of pharmaceuticals, medical devices, cosmetics, health food and food safety, related product need to apply for the CFDA permit for domestic circulation and sales.

• CCC (CNCA) – The Compulsory product certification system required for the products which are related to the safety of human health, animal and plant life, and environmental protection, involving 132 products in 19 categories.

• Wildlife import and export certificates – The import and export of wild animals, plants and related products via freight, mail, express or carried by passengers requires law wildlife import and export certificates.

• Other licenses copyright reserved @ kcw & a

Commodity Positive List

Fashion & Lifestyle

• Garment and Bags

• Textiles

• Footwear Umbrella Hat

• Jewellery

• Lamps

• Bedding

• Rattan crafts

FMCG

• Toiletries

• Household Items (plastic, wood, paper, ceramics, enamel, glass, copper, aluminum)

• Toys and Sporting Goods

• Baby Products (diapers, formula

• Stationery

• Cosmetics (lipsticks, etc.)

• Cigarette Lighter

Electronics & Technology

• Household Appliances

• Optical Products

• Clock

Pharmaceutical & Healthcare

• Medical Supplies

• Medical Devices

Food & Beverage

• Smoked meat/ fish/ vegetables products

• Honey, fruits, nuts, wholegrains, oatmeal

• Pastry dessert, tea and ice cream, liquid dairy products

• Coffee, tea, spices, dried fruit and flower seeds

• Sugar, cocoa and products

• Wine (in small package)

• Health food (fish oil

and vitamins)

Industrial & Material Science

• Gum resin products

• Animal feed

• Salts and products

• Chemical fiber products

• Silica gel and sodium bicarbonate

• Lubricant

• Dyes and inks

• Stone products

Mobility Tool

• Bicycles

• Baby Carriage & Stroller

Others

• Animal glue substance

• Photography class accessories Rubber products

• Musical instruments

• Tools (not cooking)

• Pesticides

• Print Ropes


Commodity Positive List

No. Commodity Remarks

1 Smoked Meat Products Only applicable to e-Commerce bonded warehousing products

2 Fishery Products Only applicable to e-Commerce bonded warehousing products

3 Milk Products Only applicable to e-Commerce bonded warehousing products

4 Vegetables & Fruits Only applicable to e-Commerce bonded warehousing products

5 Grains Products Only applicable to e-Commerce bonded warehousing products (Not exceeding 20 kilos in total for some products)

6 Health Care Product (Fish Oil, Ginseng, Angelica, etc.)

Only applicable to e-Commerce bonded warehousing products, exclusive of Catalogues of import and export of wild fauna and flora

7 Spices Only applicable to e-Commerce bonded warehousing products, exclusive of Catalogues of import and export of wild fauna and flora


CIQ Supervision


• Policy Content: Health care products first imported are required to apply registration in CFDA, while the first import nutrition and health care food for example vitamin supplementation, mineral substance are required to put on record in CFDA.

• Effective Date: 2016.7.1

• Cost & Lead time for registration: - Registration Application: 1 – 2 years, 0.1; 1 million CNY ‐ Putting on Record: 6 – 12 months, within 0.2 million CNY

• Required Certificate (Besides common documents):

1. Registration or Recording in CFDA;

2. Certificates of free sales in country of origin;

3. Ingredient analysis tables;

4. Filling date Proof in country of origin

Health Care Products

• Policy Content: Milk powder for infant & Special medical food are compulsory to obtain CFDA permit for the formula of product.



1. The manufacturer are required to get registration in CFDA;

2. Health Certificate(Milk and milk products);

3. Automatic Import License(Milk powder );

4. The inspection and quarantine certificate for entry

Milk Powder & Special &

Special Medical Food

CIQ Supervision


• Policy Content: Imported cosmetics for the first time must obtain the cosmetics license issued by CFDA


• Special purpose cosmetics: Refer to the cosmetics is used to regenerate hair /dye hair/perm hair/lose hair or feathers/beautify the breast/body-building/deodorization/removing freckle/ sunscreen;

• Non special purpose cosmetics: cosmetics besides the “Special purpose cosmetics”;

• Cost & Lead time for registration: - enrollment management: 1-2 years,10,000-100,000 CNY ; - register management: 6-12 months,70,000-700,000 CNY;


1. Obtain the cosmetics enrollment/register license issued by CFDA;

2. Sanitary license of imported cosmetics;

3. Product ingredient list;

4.Production certificates in country of origin;

5. Certificate of free sales in country of origin & sale;

6. Composition test report in country of origin & sale

Cosmetics

CIQ Supervision


• The Duty Rate for cross border e-Commerce Import orders has been set at 0%. • The Consumption Tax and VAT will be charged at 70% of the tax amount payable. • The Consumption tax amount payable can be calculated as:

𝐷𝑢𝑡𝑖𝑎𝑏𝑙𝑒 𝑃𝑟𝑖𝑐𝑒+𝐷𝑢𝑡𝑦 𝐴𝑚𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒

1 −𝐶𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 x Consumption Tax Rate

• The VAT amount payable can be calculated as:

𝐷𝑢𝑡𝑖𝑎𝑏𝑙𝑒 𝑃𝑟𝑖𝑐𝑒+𝐷𝑢𝑡𝑦 𝐴𝑚𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒

1 −𝐶𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 x 𝑉𝐴𝑇 𝑅𝑎𝑡𝑒

• Assume the product dutiable price is (Y), consumption tax rate is 30% and VAT rate at

17%. In this case: - The duty amount payable will be (Y) x 0%; - The consumption tax amount payable will be (Y+0)/ (1-30%)x30%; - The VAT amount payable will be (Y+0)/ (1-30%)x17%

Highlights of the New Policy


Commodity Before After

Food, Drink, Books, Periodicals, etc.

10% 11.9%

Cameras, Garment, Bicycle, etc.

20% 11.9%

Golf, Luxury Watches, etc.

30% 32.9%

Wines, Cosmetics, etc.

50% 22.40%

The Basic Tax Rate



Taxes >=CNY 50: 10% Taxes <CNY 50: Tax Free

11.9%



11.9%



32.9%

Wines, Cosmetics, etc. Taxes >=CNY 50: 50% Taxes <CNY 50: Tax Free

22.40%

Single Purchase within CNY 1,000



10% 11.9%


20% 11.9%


30% 32.9%


50% 22.40%

Single Purchase CNY 1,000 to CNY 2,000 Commodity Before After


Tax Free Full Tax


Tax Free Full Tax


Tax Free Full Tax


Tax Free Full Tax

Single Purchase exceed CNY 2,000

Tax Comparison

Postal Tax: China Custom regulated to charge passenger personal effects and postal items import tax, this tax included the import VAT and Consumption Tax , therefore this tax is a generic terms for non trade related personal goods import duty and import commercial tax, postal tax graded in 3 different rates by commodity: 15%, 30% and 60%. *General Cosmetics/ Skin Care= Products CIF price under RMB10.00/ ml or RMB15.00/pieces ** Luxury Cosmetics / Skin Care= Products CIF price RMB 10.00/ ml or RMB15.00/ pieces or above


These duty rate differences are the competitive advantage for CBEC

Commodity Category

B2B (General Trade, Goods) B2C (Cross Border, Articles)

Customs Import Duty

(Most-Favoured-

Nation)

VAT Consumption

Tax Overall Tax

Cross Border e-Commerce Tax Less 2000 RMB per order

Personal Effects Article

Customs Import Duty

VAT Consumption

Tax Overall Tax

Food & Beverage 10% 17% 0% 28.70% 0% 11.90% 0.00% 11.90% 15.00%

Electronic Product 10% 17% 0% 28.70% 0% 11.90% 0.00% 11.90% 15.00%

Toiletries 2% 17% 0% 19.30% 0% 11.90% 0.00% 11.90% 15.00%

Clothes 10% 17% 0% 28.70% 0% 11.90% 0.00% 11.90% 30.00%

Bags 20% 17% 0% 40.40% 0% 11.90% 0.00% 11.90% 30.00%

Shoes and Hats 12% 17% 0% 31.00% 0% 11.90% 0.00% 11.90% 30.00%

Watch (<CNY 10,000) 11% 17% 0% 29.90% 0% 11.90% 0.00% 11.90% 30.00%

Luxury Watch (>=CNY 10,000) 11% 17% 20% 62.30% N/A N/A N/A N/A 60%

General Cosmetics/ Skin Care * 6.50% 17% 0% 24.61% 0% 11.90% 0.00% 11.90% 30.00%

Luxury Cosmetics / Skin Care** 6.50% 17% 15% 46.58% 0% 11.90% 10.50% 26.35% 60.00%


Commodities Personal Article Tax (Previous) Cross Border e-Commerce Consolidated Tax (New)

Luxury Cosmetics and Skin Care Products CIF price RMB10.00 / ml or RMB15.00/ Piece or above

≤ CNY100 per order Personal 0% 26.35%

>CNY100 per order 50%

General Skin Care, Cosmetics Products CIF price under RMB10.00 / ml or RMB15.00/ Piece

≤ CNY500 per order Personal 0% 11.90%


Baby Diaper ≤ CNY500 per order Personal 0% 11.90%


Milk Powder ≤ CNY500 per order Personal 0% 11.90%


Health Care Products ≤ CNY500 per order Personal 0% 11.90%


Garments ≤ CNY250 per order Personal 0% 11.90%


3C Digital Products ≤ CNY250 per order Personal 0% 11.90%


Change on Import Tax Arrangement

Emerging and traditional industries coexist

Fairness of foreign and domestic trade Encourage the innovation of business

model The proportion of previous high tax

rate commodities will gradually increase as the tax rate has been reduced from 50% to 11.9% or 26.35%

As Parcel tax system would in fact be kept in direct mail, even if exempt from quota-free 50 yuan, as postal rates are attractive enough so that businesses and consumers.


Business Stagnation:

The new policy is too hasty, there is no grace period given to the market

Positive list does not meet the market demand, large number of products will be off the shelf.

Cross-border retail trade accordance with general trade customs formalities, resulting in business stagnation.

The average tax of cross-border e-commerce retail trade is 11.97%-29.7% higher general trade.







Content


Customer’s

Asia RDC

Airport

Seaport Port

Zhengzhou Airport

Qingdao Port

Air Freight

Ocean Freight Warehouse/Fulfillment

center located in Zhengzhou Bonded Zone

Parcel delivery by Courier Inbound customs

declaration (备案) Trucking to Port

Outbound customs clearance in line with ‘3 Forms in 1’

B2B B2C

B2B2C Bonded Mode (网购保税模式) advantages: Shortened the delivery lead time to 2-4 days vs. regular inbound supply chain model (7-10 days)

Reduced supply chain cost

Streamlined supply chain model with enhanced visibility and control

Managed trade compliance risk related import cross-border ecommerce in China

Tackled parcel volume bottleneck with bonded inventory during peak season

Overseas Suppliers

Trucking to Airport

Bonded Trucking to Zhengzhou

Deconsolidation before deliver to bonded warehouse

Business Model 1 - B2B2C Mode

‘3 Forms in 1’：API interface with government e-port platform for automatic data transmission 1. Order information: from e-retailer 2. Payment information: from cross-border payment company 3. Logistics waybill information : from courier company


Review required business model and product profile to design the storage flan and deploy operation flow

Putaway into shelf storage area with bin location

Packing station

Picking staging area

Inbound staging

Inbound QC and sorting

Inbound putaway

Outbound staging area

Custom inspection and on-hold area

Exte

nsi

on

Are

a

Courier handover area

Inbound receiving by piece level with QC request and need to sort to a single batch at single SKU level per carton

Pick & pack strategy basically follows the logical of single piece per order and multiple piece per order by different waive

Handover small packages to the courier after Custom system release

4

3

2

1

7

10

9

8

6

5

Inbound flow

Outbound flow

Facility Design


Outbound – Pick & Pack

Inbound Staging Inbound QC & Sorting Outbound Picking

Order Scanning

Order Packing

Seal box & shipping label affix Move to outbound

staging for customs releasing

Handover with courier company

Process Flow

Resource planning to adapt client daily order ramp up

Clear the regulatory huddles to access China domestic consumer market

Quick response on solutions and implementation to adapt Custom authority changing policy

Shortened delivery lead time and improved supply chain efficiency for the import cross-border B2C fulfillment

Significant savings on taxation through leveraging cross-border e-Commerce establishment in Zhengzhou Bonded Zone


Solution Benefits

HK-Foshan B2C Mode (粤港货栈直购):

Foshan GTIC bonded warehouse has 2 function areas: Parcel Producing Hub (PP HUB) and Cross Dock BC Hub (CD HUB). The PP HUB can be taken as the extension of Hong Kong Warehouse.

Cargos which are not sorted by order can be gathered together and shipped directly to PP HUB by Customs supervised truck with a smart lock and without custom clearance at border

Single parcel to order is produced in PP HUB instead of in Hong Kong. This can save high warehouse and labor cost in Hong Kong. For traditional BC mode, individual parcels must be already produced before entering the border.

Business Model 2 - B2C Mode + Canton/HK Overseas Warehouse

‘3 Forms in 1’：1. Customs Declaration Form: e-retailer declare the merchandize type and price to the customs in advance. 2. Payment slip: generated from ecommerce platform. 3. Logistics Waybill Checklist

Parcel Producing B2C

Overseas

Overseas Suppliers

Hong Kong Foshan

HK port Foshan Port

Feeder

GTIC Bonded Warehouse

Parcel delivery by Courier Trucking

to Port

X-Border Trucking

Bonded Trucking

Courier Parcel Producing HUB

Goods Receive

Sort & Pick

Pack & Labeling

sku3 sku4

sku1 sku2 订单

‘3 Forms in 1’

Cross Dock HUB

X-Ray Inspection

X-Border Trucking

Customer’s Asia RDC

Inspection Area

Expansion Area

Unloading Area Cargo Ready and Waiting Area


Facility Design

Strong support of state inspection, customs and other departments

Geographical advantages and cost advantages

A convenient and efficient cross-border customer experience for the public

Create a good business environment for enterprises


Innovation supervision guarantee consumer safety

Solution Benefits






Content

Positive Factor of

Cross-border Oversea Product

The Rise of Middle Class Families

• National income continue to

improve

Consumption Upgrade

• Tend to buy high-quality

branded products

Oversea Product Safety Issue

• Foreign products more popular

Internet Convenience

• Reduce the threshold of cross-border consumption

and cost saving


Multiple positive factors stimulate domestic consumer demand Promote the rise of China cross-border e-Commerce of overseas products


• Consumers require a high level of safety towards overseas product

• Safety endorsement Brand Trust

• Long delivery time and high cost of cross-border logistics

• Unable to trace the whole package and other issues

Cross-border Logistics

• Overseas supply chain integration is difficult

• Powdered milk, diapers and other standard categories stayed in strong brand name

• More related to consumer confidence

Supply Chain Integration

• Overseas products e-Commerce industry increasingly intensified competition

• Resulting in high data traffic costs to improve customer retention, repeat purchase rate and extend consumer life cycle possibility

Customer Operations

Brand trust, logistics, supply chain operations will continue to be long-term development challenges for Cross Border e-Commerce


Poor Shopping Experience

• Long research time for the consumer before purchase

• Need to understand foreign language

• Need to get used to the appearance of foreign website

Long Logistics Lead Time

• Longer lead time from oversea to China

• Direct mail service does not cover whole China, therefore transshipment is needed

After Sales Service not Guaranteed

• After sales service does not support Chinese customers

Oversea Purchase Weakness

High Retail Price Quality not Guaranteed

Unstable Supply

Legal Issue Higher

Investment Amount

Logistics no Guaranteed

Personal Purchase Weakness

Cross Border e-Commerce Business Development Opportunities


Direct Mail, Bonded Mode and General Trade Tax Policy Comparison

Direct Mail Bonded Mode General Trade

Taxation Party -Baggage -Postal Parcel

Cross Border Retail Product

B2B Product

Customs Clearance Amount Random Inspection All Items All Items

Taxation Rate None or Postal Tax Sales Tax, Customs Tax and Tax for Luxury & Cosmetics Product

Formula Less than CNY 50: Nil High than CNY 50: Duty Value X Commodity Tax Rate

-Import Customs Tax: CIF X Customs Tax Rate -Sales Tax: ((CIF + Customs Tax Rate)/(1 – Sales Tax Rate)) X Sales Tax Rate -VAT: (CIF + Import Tax Rate + Sales Tax Rate) X VAT Tax Rate

Tax Rate Postal Tax Depend on Commodity: 10%, 20%, 30% and 50%

-Customs Tax Different from Commodities -Sales Tax 17% -VAT: 30%

Tax Avoidance -Split Bulk Order -Sell Low-Priced Produce -Direct Mail to avoid part of tax

N/A

Split Single and Low-priced Cargoes to Reduce Taxes


Policy Content

Less taxation advantage on maternal & child, food and low-priced cosmetics

Price less than CNY 50 need to pay for the Sales Tax and VAT

Tax rate increases on maternal & child, food, cosmetics under CNY 100

Policy Analysis

Cost of bonded mode for maternal & child, food and low-priced cosmetics increase

More advantages by direct mail and General Trade

Policy Content

Tighten Inspection

Order, Paid and ID card information are requested

Cargoes by postal would be under e-Commerce to classified purpose on usage

Policy Analysis

Cost of bonded mode for maternal & child, food and low-priced cosmetics increase

More advantages by direct mail and General Trade

Less Advantage on Bonded Tax

Thorough Investigation and Tax Avoidance

Future Opportunities

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Opportunity and Challenges at China Cross Border e ... and Challenges at China Cross Border...

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