China Officially Extends Grace Period for CBEC Transition Policy (Video）

During the State Council executive meeting held on Nov. 21, 2018, China determined to further extend the transitional policies of CBEC retails beyond the originally stipulated January 1st, 2019 deadline.
(CCTV News: China announced in the State Council executive meeting to extend CBEC grace period)

Key provisions

1. The current CBEC regulatory policy will continue to beyond January 1st, 2019 January 1, 2019. Commodities imported via CBEC channel will be continuously regulated as personal articles exempt from mandatory administration license, registration or filing requirements of first-imported cosmetics, infant formula powder, medical device and special food (such as health food and food for special medical purposes).

2. The application scope of the delayed policies will be expanded from the previously-approved 15 pilot cities to Beijing, Shenyang, Changchun, Harbin, Nanjing, Wuhan Xiamen, Tangshan, Wuxi and other 22 cities with newly-established comprehensive CBEC pilot zones on July 13^th, 2018. CBEC direct mail business in non-pilot cities can refer to relevant regulatory policies.

» ChemLinked Interpretation:

A total of 37 pilot cities will be subject to the CBEC transitional policy. We expect the current lack of regulation to continue in the short to medium term. For CBEC direct mail model, the existing regulatory scheme still applies.

3. The positive lists of CBEC products will be appended with 63 product categories in great demand. CBEC-traded products listed in the existing two positive lists are still subject to the taxation policy—zero tariff within the prescribed limit, 70% of import value-added tax and consumption tax. Furthermore, the single transaction limit (consumers' duty-free consumption limit) will be raised from current 2000 RMB to 5000 RMB, and the annual transaction limit will be raised from current 20,000 RMB to 26,000 RMB. The cap is subject to a dynamic increase in tandem with the increase of people’s income.

4. Support CBEC exports in accordance with international practices, research and improve relevant export tax rebates policies.

5. Strengthen implementation of different entities’ responsibilities including CBEC enterprises, platforms and payment and logistics service providers according to law, strengthen commodity quality and safety monitoring coupled with risk prevention and control, maintain the order of a fair competition in the market, and protect consumers’ rights.

A Chronology of CBEC Policy Flip-flopping

The previous reform of China CBEC policy was designed to address 3 key issues:

• Taxation

• Positive list

• Customs clearance sheet

However, the reform sparked controversy among public and two-year buffer period was granted for stakeholders to prepare for the new regulatory scheme.

Tax policy

On March 24th 2016, MOF, GAC and SAT jointly issued Notice on New Tax Policy for CBEC Retail Imports ending the preferential treatment of CBEC packages as personal parcels and changing parcels rate from four levels (10%, 20%, 30% and 50%) to three levels (15%, 30% and 60%). The new tax policy took effect on April 8th, 2016.

Positive lists

Right after the Notice came out, 2 positive lists of Imported Commodities in CBEC Retail were successively issued on April 6 and April 15, 2016 restricting the scope of goods permitted to be traded via CBEC and stipulating the necessary customs clearance, quarantine, license, registration/filing and certification requirements of cosmetics, infant formula powders, medical devices and special food.

Customs clearance

On May 15, 2016, AQSIQ stressed that products imported through CBEC in bonded warehouse model belong to “goods”, hence customs clearance is required. Only merchandise imported in direct mail model can be free of customs clearance.

Delays, extensions and greenlights: 3 extensions of the grace period

1. The release of transitional policy: On May 25, 2016, China Officially Grants One-year Grace Period for CBEC to May 11th 2017 in ten pilot cities. As a transitional policy, cosmetics, infant formula, medical device, special foods (such as health food and food for special medical purposes) via CBEC are permitted to exempt pre-market approval with the previous CFDA.

2. The first delay: On November 15, 2016, the grace period was extended to the end of 2017.

3. The second delay: On September 20, 2017, the grace period was further postponed to the end of 2018.

4. The third delay: The transitional policy will undergo the third delay from Jan.1, 2019 according to the announcement released on Nov. 21.P

Pending work

With the unveiling of preliminary policies for CBEC retails, more relevant developments are expected, including:

• The release of a specific list of 63 tax items.

• The follow-up measures from relevant departments such as China Ministry of Commerce and GAC.

• The potential subsequent adjustments or supplement of the provisions.

• The aftermath of the favorable CBEC policies to domestic industries.

ChemLinked will follow the updates as always, please stay tuned for further development.