Take home
China will assess new supervision models for CBEC but would not forgo registration or filing requirements for products under the pre-market approval system.
Within two months, China has made a series of abrupt changes on importing requirements for CBEC commodities, including bringing them under the tax system for general goods, formulating a “positive list”, requiring products such as cosmetic, infant formula, health food, medical foods, etc. to be registered prior to import and requiring part of products listed in the positive list to have the “Customs Clearance of Entry Commodity” (CCEC). CCEC is a passport for goods entry to China, which constitutes a great regulatory barrier for a number of CBEC dealers as they are unable to provide full documentation for application of a CCEC and meet other requirements, like Chinese labels. These new policies have exerted huge negative impact on CBEC trade demonstrated by the statistics showing that within a week of implementation, the CBEC imports at Zhengzhou, Shenzhen and Ningbo showed a reduction in trade of 70%, 61% and 62% respectively compared with before.
In light of this authorities issued facilitation & transitional measures for CBEC to make provisions for the fact that:
- When the positive list was released, it didn’t include some hot products, like liquid milk, fresh food, health food, etc. One week later, the positive list was appended to include these products;
- For products not listed in the positive list but already in the bonded warehouses or have been shipped to China before 8 Apr, they are allowed to be sold until sold out;
- For infant formula, since CFDA has not finalized the rule for registration of infant formula recipes, unregistered IF products are allowed to be imported via both the traditional channel and CBEC model until 1 Jan 2018.
- The biggest concession was announcement of a one year grace period for CBEC. Two huge regulatory barriers namely requirements of “registration” and “CCEC” are removed until 11 May 2017. Although, one year may not be enough for completing product registration it is still a great relief for many in the industry.
On 25 May 2016, the Ministry of Finance expressed that the purpose of this buffer policy is for the smooth transition of CBCE tax and other new regulations. Meanwhile, MOF indicates the government is to explore a new supervision model for CBEC development. The exact plan the government will use to regulate this huge business channel after the grace period ends are still in mystery. It’s not likely that the authority will completely abandon pre-market requirements for some product categories, such as cosmetic, health food, food for special medical purposes and infant formula. While promoting the growth of CBEC is important the protection of a competitive market is also extremely important.
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