China Passes E-commerce Law: Implications for CBEC

In recent years, complaints and negative reports related to the safety, quality and authenticity of goods traded through cross-border ecommerce (CBEC) have increased. The top 5 product categories ranked by total complaints are: milk powder, food, diapers, health foods, and cosmetics, according to statistics collected by State Administration for Market Regulation (SAMR).

The rise of CBEC has occasioned a concomitant rise in the number of food safety problems and has made it impossible for China’s government to overlook this booming industry when drafting new food safety requirements. As such the release of tailored legislation and accompanying subordinate rules have been expected. In the fourth draft (which has passed now) of China’s Ecommerce Law, a provision (Provision 26) citing “CBEC businesses shall observe national laws and regulations on import and export of goods” was added. If passed unchanged this would have meant that in future CBEC goods would be subject to the majority of general trade market access and compliance requirements. In other words health foods with functional claims would require registration, all infant formula would require registration and finished products would all require compliance with China’s national standards.

China’s Finalizes E-commerce Law: Vague CBEC Requirements

On Aug. 31, the 13th NPC Standing Committee finalized China’s e-commerce Law which is to take effect on Jan. 1, 2019. Specifics about CBEC are:

Provision 71: The country shall promote the development of cross-border ecommerce by developing an efficient management system governing declaration, taxation, inspection and quarantine of imports and exports, and payment etc. in accordance with features of cross-border ecommerce. The country shall also provide cross-border ecommerce operators with services such as storage, logistics, customs declaration and declaration for inspection and quarantine.

The country shall support small and micro companies to do cross-border ecommerce business.

Provision 72: The agencies in charge of imports and exports should carry forward the comprehensive service and supervision of customs declaration, taxation, inspection and quarantine etc. and optimize the supervision procedure, accreditation sharing and enforcement cooperation.
 

Provision 73: The country shall promote exchanges and cooperation in cross-border ecommerce across different countries/regions, join in the formulation of international CBEC rules, and accelerate the development and implementation of a worldwide accreditation system, electronic signature and ID to facilitate traceability and authentication.

Insight from the Editor:

At present, it is impossible to accurately foresee if goods traded on China’s crossborder ecommerce platforms will be required to follow the stipulations set for general trade in terms of overarching laws, administrative rules, normative guidance, national standards etc. We do know that China’s government is already developing a CBEC administrative rule to flesh out the basic legislative skeleton laid down by the overarching e-commerce law. Based on current trends it is unlikely that CBEC will be regulated in any way that would stifle growth of the sector or channel growth towards black and grey market channels.

We postulate that for certain high risk food categories best exemplified by infant formula, China will likely impose general trade requirements for all products sold on crossborder ecommerce. For lower risk finished product food categories e.g. sports nutrition, characterized by low market value, relatively small domestic production and minimal social importance we do not expect pending CBEC administrative rules to significantly impact market access requirements. However we must be clear that this assertion is at best an educated guess and only time will tell which direction China will go with regards to regulating CBEC.