Cross-border E-Commerce Platforms -- Chongqing's Igetmall
11 September 2015
Chongqing is one of China's pilot cities for cross-border e-commerce. Having officially commenced operations in June 2014, Igetmall is a cross-border e-commerce pilot platform approved by the Chongqing municipal government. Built with investment from the Lianglu-Cuntan Bonded Port Area of Chongqing, it is not only a B2C website for imported goods but also has bonded commodity sales exhibition pilot platforms at the Cuntan Bonded Port Area's Bonded Commodity Exhibition and Trading Centre and the World Financial Centre located at Jiefangbei CBD (Jiefangbei WFC) to foster the O2O model of "offline experience, online purchase". Mainland consumers have shown a keen demand for imported goods with original packaging. Since Hong Kong companies have good existing channels for and rich experience in the procurement of foreign goods, they are likely to be able to use these cross-border e-commerce platforms to open up the mainland market.
Igetmall's special characteristics
Igetmall is a pilot cross-border e-commerce website approved by the Chongqing municipal government. Relying on the existing warehousing and logistics resources, as well as the bonded policy, of the Cuntan Bonded Port Area, it provides customs clearance, warehousing, sorting, packaging and other whole industry-chain services. It has its own bonded warehouse for the storage of bonded imports, a registered warehousing and logistics company in the Cuntan Bonded Port Area, and maintains special customs-approved cross-border electronic accounts. Government departments across customs, foreign exchange administration, industry and commerce administration and taxation all work together in a "one stop" Chongqing Bonded Port Area Management Committee to provide fast and efficient service for member stores of Igetmall.
Taxes payable on goods purchased via cross-border e-commerce platforms
Mainland consumers buying foreign products through cross-border e-commerce platforms are required to pay import tax, which is calculated based on the actual retail price, in accordance with the Classification Table of Import Goods of the People’s Republic of China (GAC Announcement No.15 ). Meanwhile, personal postal articles entering the country are, under the Adjustment of Management Measures for Inward and Outward Personal Postal Articles (GAC Announcement No.43 ), subject to import tax in the form of personal postal articles tax.
Consumers who purchase foreign goods via Igetmall are required to pay import duties calculated on the basis of products' actual retail price, in accordance with the Classification Table of Import Goods of the People’s Republic of China (GAC Announcement No.15 ). Meanwhile, personal postal articles entering the country are, under the Adjustment of Management Measures for Inward and Outward Personal Postal Articles (GAC Announcement No.43 ), subject to import tax in the form of personal postal articles tax. GAC requires consumers to provide personal identification information for verification when they place orders via cross-border e-commerce platforms. GAC will apply the “reasonable quantity for personal use” principle in calculating tax on goods purchased. For the purchase of a number of products in a single order, if the order value is under Rmb1,000, the products can go through customs clearance according to personal postal articles tax regulations. If the order amount exceeds the maximum value of Rmb1,000, the products must go through customs clearance according to regulations governing import under general trade – in other words, duty and VAT are levied. Where the value of a single integral item, such as a handbag or a pram, exceeds the Rmb1,000 limit, if Customs determines that it is for personal use, the product can go through customs clearance procedures in accordance with personal postal articles tax regulations.
Personal postal articles tax rates are lower than the rates of duty and VAT (17%) levied on imports under general trade. For articles with an import duty payable amount of Rmb50 or less, tax will be waived by Customs. Currently, four tax rates apply to personal postal articles: 10%, 20%, 30% and 50%. For example, if a consumer buys one pack of disposable diapers with a sale price of Rmb130 via a cross-border e-commerce platform, the personal postal articles tax rate of 10% applies and the tax payable is Rmb13, which is less than Rmb50 and therefore waived. If the consumer buys four packs of disposable diapers in one order, however, the personal postal articles tax of Rmb52 must be paid.
Import models for foreign goods
Igetmall is linked with the Chongqing Cross-Border Trade E-Commerce Service Platform (www.cqkjs.com) and goods are imported through proper channels. Foreign goods may be imported in the three ways. For "direct imports" and "bonded imports", GAC shall levy personal postal articles tax if examination determines that they are for personal use. "Duty-paid imports" are general trade imports, for which payment of import duties and VAT is required.
Direct imports: After receiving orders, Igetmall stores will pack foreign merchandise ordered for shipment to the bonded warehouses in Chongqing by means of international logistics services. At the same time, Igetmall will send information in real time about the orders, payment and logistics to www.cqkjs.com and will then dispatch the goods following inspection, quarantine and customs clearance procedures. In general, the goods will reach consumers in 7-15 days. Since direct imports are dispatched directly from abroad and each order is sent in a parcel on its own, logistics costs are higher and delivery times longer, in relative terms.
Bonded imports: Consumers also place orders with Igetmall, but in this case the foreign goods are already stored in batches in Igetmall's bonded warehouse and the company packs the goods itself. Igetmall will send information in real time about the orders, payment and logistics to www.cqkjs.com and process customs clearance for each item ordered. After customs inspection, the packed goods are sent to consumers directly from the bonded warehouse by courier service. Since the goods are already stored in the bonded warehouse in the Cuntan Bonded Port Area, consumers generally receive their goods in 3-4 days. Logistics times are greatly shortened.
Duty-paid imports: Foreign goods are imported through general trade and affixed with Chinese labels in accordance with China's national standards. Duty-paid imports are dispatched from Chongqing's bonded port areas and consumers generally receive their goods in 2-3 days, together with an invoice. Compared with duty-paid imports, direct imports and bonded imports operate according to place of origin rules. They do not require Chinese labels and do not come with invoices. Duty-paid goods sold via cross-border e-commerce platforms are cheaper than similar goods available on the market because no commission has to be paid to distributors and agents and no logistics costs are involved.
"Offline experience, online purchase"
Igetmall has a "Century Show" experience store at the Bonded Commodity Exhibition and Trading Centre in the Cuntan Bonded Port Area and a pilot bonded goods sales exhibition platform at the Jiefangbei WFC, which formally opened for business on 31 July and 18 October 2014 respectively. Over 2,500 imported goods are exhibited at these venues and consumers are able to experience these on the spot and place orders online on-site. In general, the goods will be delivered to consumers within three days. Unlike the physical stores of other e-commerce platforms, the products shown at Igetmall's pilot sales exhibition platforms are for display only. Even if consumers place online orders on the spot, their goods must be sent to them by mail.
Requirements and fees for merchants
Hong Kong companies interested in conducting cross-border B2C business via Igetmall do not need to register as local enterprises in Chongqing but they must directly sign a membership agreement with Igetmall. Igetmall will verify their corporate credentials, including legal persons and registration certificates, as well as the origin of their goods. They are not required to establish cyber links with the local customs, inspection and quarantine authorities.
Igetmall offers a whole industry-chain service, including taking delivery of goods and making customs declarations within the territory of China, online sales, cross-border settlement, warehousing and packing, declaration of orders, inspection of orders, and express delivery of goods. Membership fees are divided into three parts: (1) a deposit of Rmb20,000; (2) a platform usage fee of Rmb6,000 per year; and (3) a referral fee of 5% of the value of the goods for direct imports and 8% of the value of the goods for bonded imports. Igetmall will keep contact with shops after they become members and offer professional advice relating to areas of online business such as creative marketing techniques and sales promotions.
Procedures for enterprises to establish their own cross-border import e-commerce platforms
If a Hong Kong company wishes to build its own cross-border import e-commerce platform in Chongqing, it must establish a registered legal entity in Chongqing and apply to the local telecommunications administration for a licence to operate a network platform under that name. Upon approval, the network platform will be able to obtain an ICP value-added telecoms business licence, after which it can file records of its business and merchandise with www.cqkjs.com and also submit order and payment information on its cross-border e-commerce transactions to the Chongqing customs supervision platform. Customs will examine and release goods on the basis of the data. It is understood, however, that building one's own cross-border e-commerce platform requires considerable investment in terms of human resources and time. In general, if an enterprise intends to engage in B2C sales, it may be more cost effective to cooperate with an existing cross-border e-commerce platform.
Meanwhile, consumers are able to check their "personal spending limit" and "individual consumer e-tax return" on www.cqkjs.com. They may also check the barcodes on parcels to verify that their goods are authentic products imported through proper channels.
Using cross-border e-commerce platforms to open up the mainland market
The Chinese government encourages a "sunshine policy" for overseas online shopping and e-commerce platforms involved in exploring new product suppliers and brands. Since Hong Kong companies have many years of working with foreign businesses, they should be in an advantageous position to bring foreign goods into the mainland market. Moreover, as the inspection and quarantine procedures for imported goods sold via cross-border e-commerce platforms are simpler than those for general trade imports, Hong Kong companies may use them to introduce a greater variety of products and brands to the China market.
At present, goods sold at Igetmall mainly include maternity and baby products, personal care products, healthcare products, daily merchandise, wine and other mass consumer goods. Places of origin include Europe, the US, Australia and New Zealand. Although only some mainland cities are allowed to pilot cross-border B2C sales, consumers in cities across the country can still make purchases via cross-border e-commerce platforms. This points to the fact that the potential reach of these platforms covers the entire mainland market. For example, while Igetmall mainly targets residents of Chongqing, and Sichuan province, it also attracts consumers in Beijing, Jiangsu, Zhejiang and other provinces. It is believed that a wider variety of goods will become available as more and more consumers switch from overseas online shopping and overseas agents to cross-border e-commerce platforms for the purchase of imported goods.
Hong Kong companies unfamiliar with e-commerce or online sales on the mainland may consider cooperating with e-commerce companies such as Deep Blue eCom. Such companies provide either entire online sales systems or individual services, encompassing applications for customs declaration and commodity inspection, market promotion, O2O sales, logistics distribution and commodity tracking. Some can even function as agents to assist Hong Kong companies in managing the operation of their cross-border e-commerce business, allowing them to focus their resources on other priorities.
 China's pilot cities for cross-border e-commerce are Shanghai, Hangzhou, Ningbo, Zhengzhou, Chongqing, Guangzhou and Shenzhen.
 www.cqkjs.com is a dedicated cross-border trade e-commerce service network built by the Chongqing municipal government and managed by the municipal office in charge of port affairs. E-commerce platforms and relevant enterprises entering www.cqkjs.com must file their records with Chongqing customs and build links to www.cqkjs.com.
- Information Technology
- Mainland China
- Mainland China