Cross-border e-commerce trading has been possible so far thanks to the CBEC pilot zones, special areas where companies exporting to China through Chinese cross-border operators have the possibility to enjoy different taxation procedures compared to general trade ports and hubs. Since 2015, when the first of these special areas was established in Hangzhou, China has put a lot of efforts in replicating the formula and granting the title of pilot zone or pilot city to different destinations. Now more than ever, with e-commerce leading the rebound of the Chinese market from Covid-19, the Chinese government is doubling down on the incentives for online retail and digitalization.
There are two kinds of pilot zones that for the sake of simplification we can label “export pilot zones” and “import pilot zones”. The first are areas designed for Chinese companies, helping them to better coordinate export procedures in order to make smaller players more competitive; these are the most numerous, with a total number of 105. The latter are special areas dedicated to the import of foreign goods through cross-border e-commerce; there are 86 zones of this kind in China.
According to a recent article appeared on Caixin (in Chinese), the variety of digital services implemented in the Beijing area is forecasted to contribute to its GDP in 2022 for up to 55%. “E-commerce is just one of the many facets of a digital economy” said Chinese Ministry of Commerce Deputy Secretary Wang Bingnan, meaning that digitalization in China has a much wider scope than elsewhere, such as research & development, design, production and payment services, but also digital entertainment and digital learning. The CBEC pilot zone is a model that has proved to be worth investing in and has been reiterated many times across the whole country, leading to a total of 86 zones for cross-border e-commerce imports, together with the island of Hainan.
What makes these digital oriented areas different? Apart from less fiscal pressure on goods, import procedures can be handled through online platforms, making everything more time-efficient: taxation, customs procedures, foreign exchange and logistics can all be managed through software. Another aspect worth mentioning is the presence of bonded warehouses in these areas; digitally connected with the customs, bonded warehouses allow goods to be cleared from customs only when Chinese consumers place online orders, making delaying and differing taxation. However, operating in these environments can be tricky for non-Chinese companies, that’s why it’s important to work shoulder to shoulder with an importer that knows how to navigate the whole process. Goods have to be included in the most recent “CBEC positive list” and have to be sold to Chinese consumers through third-party platforms (like a marketplace) registered within the Customs Network. Moreover, products must comply with the tax policy related to imported goods to be eligible for import through the cross-border e-commerce method.
If these criteria are met, exporters will have to register the products deemed to be exported just the first time. The Chinese Customs impose different filing procedures according to the categories of the goods imported, so exporters will have to be prepared for longer registrations for specific products, such as cosmetics for example. Once the registration is complete, the goods can be shipped to their destination, where they will be stored inside the importer’s bonded warehouse.
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