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January 7, 2016

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Vendors tap into demand for foreign goods

ON the last morning of 2015, a crowd of about 300 people had lined up outside the Shanghai Customs’ representative office in downtown Wuding Road to pick up their mail packages.

They were among the few who had to pay import tax and complete the Customs declarations before they could get their hands on the packages.

Most of them were products ordered on overseas websites. Personal imported items are subject to random checks by the Customs, which is almost like a lucky draw. The fortunate ones escape without paying taxes; others are forced to queue up and pay for their goods.

The last couple of months of the year and the start of the New Year are usually a busy period for online shopping with plenty of promotions for the festive season. That may be good news for sellers and buyers but not particularly for the Postal and Customs departments, with their staff putting in extra hours to scan the mountains of mails and packets.       

The Customs office has already announced that it would stay open on Saturdays this month to process all the packages. Usually it is open from Monday to Friday, meaning consumers have to take at least half a day off from their regular routine to get their parcels processed at Customs.

In the queue were two college students, surnamed Li and Xia, who told Shanghai Daily that they had to return their package to, a foreign website known for its luxury and fashion goods. They had ordered three handbags from the site, but Customs refused to process them as personal mail items as the total value of the bags was over the permissible limit of 1,000 yuan.

“We placed a combined order with other schoolmates to get a 25 percent discount that was offered for goods worth over US$1,000. We thought we might just be lucky and escape the import tax,” Li said, but luck was not at their side this time.

For other less valuable items such as food, infant nutritional supplements, one has to submit proof that the imported goods are purely for personal use, but they too had to pay taxes.

Shanghai Customs declined to give a figure of the exact amount of packages that were subjected to tax in the last two months of 2015. However, it is true that Customs cannot possibly check all the packets. There will always be a few unlucky ones who will have to pay the tariffs.

Most consumers are usually unaware until the last minute if they had managed to escape the taxes or had to go to the bureau to collect their items.

By early December, the daily average volume of personal imported mailbags that passed through the Shanghai Customs reached 40,000. On an average, everyday about 2,000 people were required to pay import tax or simply had to return their goods. That figured tripled the normal level. Customs official expect the situation to return to normal in early or mid-February.

In the first nine months of 2015, China Customs handled more than 306 million inbound and outbound personal regular mail packages — 66 percent more than the previous year.

Domestic vendors have started to smell an opportunity here and are working on ways to offer Customs-cleared imported products to Chinese consumers.

In the same queue was a woman in her early 20s, surnamed Wu, who had to pay 200 yuan in tax for cosmetics worth around 400 yuan, which she bought from a website based in Hong Kong.

“Next time I will consider ordering from a domestic website because it’s just not worth the trouble waiting for the delivery, paying taxes, not to mention the extra hours I have to spend at the Customs,” she said. Wu stood in the line for about three hours to get her package.

Most of the shoppers seemed to order personal care items, infant food and nutritional products and luxury items from overseas websites at the end of November, traditionally a peak season for online sales campaign, especially on foreign websites. But the ambiguity over Customs rules and the possibility of paying taxes suggest that bargains are not easy to come by. With hot deals becoming less attractive on overseas websites, consumers are looking at domestic vendors, giving rise to new businesses.

Domestic companies have started to tap into the trend. Consumers are definitely not cutting back on spending on imported goods, but are seeking carefree purchasing channels. Business operators smell possibilities here and are unlikely to miss such a huge opportunity.

It is obvious that consumers’ demand and favorable policies will not only continue to drive the development of cross-border e-commerce trade, but will also bring about changes in domestic companies.

One-stop procedure

Shanghai-headquartered RED, a mobile online shopping community, started selling personal care items and luxury goods to Chinese consumers in December 2014.

In late November, it launched a three-day sales promotion that brought it 2 million newly registered users. Currently, it boasts 18 million users.

RED purchases imported goods and dispatches them from its warehouse in bonded zones in Zhengzhou and Shenzhen. It only needs a one-stop Customs declaration procedure before the merchandise is sent to the buyers, making life much easier for the consumers.

It also sources luxury products directly from overseas stores and ships them from its warehouses in US and Hong Kong, although the majority of the products it sells are shipped from domestic warehouses.

Internet giants such as NetEase and Alibaba are also getting hooked to the trend and certainly do not want to be left behind.

Last month, Hangzhou-based and NASDAQ-listed online news portal and gaming operator NetEase started construction of a 250,000 square meter bonded warehouse in Ningbo in Zhejiang Province. The 500-million-yuan warehouse will be operational in 2017 and will handle 200,000 orders on a daily basis. Besides the one coming up in Ningbo, it already operates three other bonded warehouses in Hangzhou, Zhengzhou and Chongqing.

Alibaba’s small financial services and payment affiliate Alipay has been working with overseas fulfillment companies such as Borderfree and Shoprunner to provide domestic consumers with easier access to dozens of overseas websites such as and children’s cloth merchant

These fulfillment companies will calculate the personal import tax in advance as well as the delivery fees for each order and charge shoppers through Alipay’s payment service.

Some of the websites are already providing Chinese versions and many Chinese shoppers only need to type in their shipping address in Chinese without having to go through the complex shipping terms. During the “Black Friday” promotion in late November and early December, Alipay said the number of shoppers added was seven times more than a year ago, and that 80 percent of these orders came from those who were using the overseas shipping function for the first time.

It is obvious that domestic companies are not only importing goods for consumers but also making a large number of them acquainted with overseas products. That is only likely to push up the overseas online purchasing enthusiasm, eventually benefiting businesses at home and abroad alike.


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