Chemlinked Cosmetic Portal, which provides insight into regulatory and compliance issues in APAC, announced that Chinese producers will now have until the end of 2017 to obtain a “Customs Clearance of Entry Commodity” (CCEC).
Although the extended grace impact reduces the short-term burden on cosmetics companies and aims to limit risk and maximise quality and safety, we look at the impact that China’s Cross-border E-commerce (CBEC) policies are set to have on the country’s cosmetics trade.
What is the policy?
The Cross-border E-commerce (CBEC) policies, implemented on 8th April 2016, represents a change to the country’s associated tax structure and as such, many goods are subject to an 11.9% tax hike.
Traders must also now receive a Customs Clearance of Entry Commodity (CCEC) as part of the new policies implemented by the country.
The Chinese Business review reported that cross-border e-commerce trade is predicted to go above RMB6.5 tn (€895 bn) in 2016. However, despite these figures, the government released the Cai Guan Shui [2016] No.18 circulator, which stated that goods imported under the direct shipping model and the bonded warehouse model will be required to pay import taxes with tariffs, import value-added tax (VAT) and consumer tax (where necessary).
The outlook
Whereas e-commerce trade previously provided consumers with a cost-effective alternative to traditional methods of purchase, this restructure may force companies to no longer offer reductions online, but instead, potentially increase the price of goods.
“Since the new CBEC policies, 70% of CBEC companies have collapsed. I guess this is why the government delays the implementation date,” added Sun Hanwu, chairman of Sunsult Investment.
In 2016, domestic players and SMEs have struggled to obtain finance due to these changes and therefore, continues to have significant implications for the cosmetics industry going forward.
Despite the unstable marketplace in China, the country’s Ministry of Commerce (MOC) announced it would extend the grace period given to consumers from 11th May 2017 to the end of next year.
Until then, cosmetics can still be improved under editing CBEC provisions without having to gain approval from the China Food and Drug Administration (CFDA).
“In addition to the extension of [the] grace period, I think other favourable policies could be released in the middle of next year,” said Gu Junlin, CEO of 55 HAITAO. “For example, I think we may see an increase in the limit of single orders or personal annual purchasing limits.”
At the end of 2017, once the grace period ends, cross-border e-commerce trade will have to meet the same regulations and product standard requirements as traditional trade.
China's State Council created new cross-border e-commerce zones in 2015 to reduce issues clearing customs, settling exchanges and reimbursing taxes.