11 ministries and Chinese commissions including CFDA, AQSIQ, MOA, GAC, and many others have co-released the “Positive List for Commodities Traded through Cross-Border E-Commerce (CBEC)”, which states that the commodities not included in the aforementioned list are not allowed to be imported to China through CBEC. This policy was formally implemented on April 8, 2016, together with the new import taxation policy on CBEC traded commodities.

The list includes 1,142 types of commodities, which partly or completely prohibits the import of dairy products, infant formula, health food, foods for a special medical purpose (FSMPs), fresh foods, etc… to China through CBEC and it will also influence greatly overseas businesses of different food industries, operating within this space.

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POSITIVE LIST IMPACT ON CERTAIN PRODUCTS

HEALTH FOOD

  • Health foods are excluded, all health foods are excluded from the positive list.
  • In China, health food (dietary supplements) should be registered or filed under CFDA.

COMMON PRE-PACKAGED FOOD (EXCEPT THOSE LISTED BELOW)

  • Most categories of common prepackaged foods are included in the positive list, such as chocolate, candy, pastry and bread, honey, and common beverages.

MILK PRODUCTS

Most milk products have been included in this list but :

  • Fluid milk and cream under HS Codes 04011000, 04012000, 04014000, 04015000, 04021000, 04022100, and 04022900 are included.
  • The formula is allowed, provided that registration formalities as required under the Food Safety Law have been conducted. According to further explanation by PRC Customs last week, the registration of infant formula milk products will be required from 1 January 2018. Until then, formula products can be sold through cross-border eCommerce without registration.

ALCOHOL

Wine grape juices under HS Codes 20096100 and 20096900 and wine in small packages under HS Code 22042100 are included in the Positive List.

CEREAL

The following cereal is allowed to be imported. The cereal under HS Codes 10061099, 11010000, 11031100, 11022000, and 11042300 is allowed to be imported under Model 1 only.

  • Rice under HS Codes 10061099, 10062010, 10063010, 10063090 (subject to an accumulated annual amount of 20 kilograms under these HS Codes)
  • Rice powder under HS Code 11029019 (subject to an annual amount of 20 kilograms under this HS Code);
  • Wheat under HS Codes 11010000, 11031100 (subject to an accumulated annual amount of 20 kilograms under these HS Codes);
  • Corn under HS Codes 11022000, 11042300 (subject to an accumulated annual amount of 20 kilograms under these HS Codes);
  • Other cereal powder under HS Code 11029090.

Note that the cereal is subject to the import quota of the PRC Customs.

Source CIRS

WHAT HAPPENS TO PRODUCTS NOT ON THE POSITIVE LIST?

The answer is unfortunately not clearly specified by the regulations.

Legally the Positive List is an attachment to the E-commerce Tax Circular and therefore the list is not a “Yes-or-No” list of products that can be sold by means of cross-border e-commerce. Rather the Positive List should be interpreted, at least literally, as a list that determines whether or not a product will benefit the preferential tax policies granted to cross-border e-commerce.

This legal view does not conform with the views apparently held by the authorities at this stage. Various government authorities indicate that on the whole, they consider the Positive List, to a great extent, to be something of a Yes-or-No list for products permitted for cross-border e-commerce. Many officials have also suggested they are unsure as to how the new policies are to be implemented and are awaiting further instructions from the central authorities.

In short, it is likely that products not found on the Positive List will be restricted from sale via cross-border e-commerce platforms that are connected with the PRC customs supervision system. In practice, it is much less likely that products posted directly from overseas to individuals will be affected. The Positive List has caused much chaos in a short time, particularly for those products that have already been shipped to PRC bonded warehouses but are not on the list. We have noticed PRC Customs are circulating internal instructions to instruct how these goods will be handled and we anticipate further guidance will be issued to bring greater clarity.

IMPLICATIONS FOR INTERNATIONAL BUSINESSES

The E-commerce Tax Circular, its attached Positive List, and recent actions by the Chinese authorities indicate that the PRC authorities intend to both tax cross-border e-commerce more heavily and to block products that are commonly regulated under PRC law from essentially getting a free ride and avoiding PRC scrutiny merely by being sold via bonded zones.

The likely impact of the E-commerce Tax Circular and the Positive List will be that the prices of some products will likely increase, but this is unlikely to have a major impact upon Chinese consumers as trust and availability tend to be greater motivators, although some products will likely face much greater issues in respect of accessing cross-border e-commerce as a model. It will be important to observe both from a government legislation perspective and also a local practice perspective how the regulations will be enforced.

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