Products manufactured overseas enter China’s retail market through two main routes: general trade and cross-border e-commerce. Depending on how goods move, cross-border e-commerce is further divided into BC, BBC and CC models. China also permits parallel imports, although mainstream e-commerce platforms generally do not allow parallel-imported goods to be sold.
Tax payment: Under general trade, customs duties and VAT are paid at customs before importation is completed; some products are also subject to consumption tax. Under cross-border e-commerce, personal postal articles tax or the integrated cross-border e-commerce tax is paid when goods clear customs after a transaction occurs.
Product circulation: General-trade products can be sold without channel restrictions and receive the same treatment as domestically produced goods, but registration requirements are stringent. Cross-border e-commerce products can only be sold retail through e-commerce channels and cannot be resold.
Tax rates: General-trade products are subject to 13% VAT. Customs duty and consumption tax vary by product, generally bringing the combined rate to 16%–25%. Personal postal articles tax on cross-border products is 15%, 30% or 60%, depending on category, with amounts below RMB 50 exempt. The integrated cross-border e-commerce tax is generally 9.1%.
Supply chain: General-trade goods clear customs and are transported to a domestic Chinese warehouse for onward shipment. Cross-border goods are usually held in an overseas warehouse, including Hong Kong, or in a bonded warehouse. They are shipped only after the consumer pays.
Sales channels: General-trade products can be wholesaled and retailed through online channels such as Tmall, JD and Tmall Supermarket, as well as offline channels. Cross-border products can only be retailed through cross-border platforms such as Tmall Global.
Advantages and disadvantages: General trade supports more sales scenarios and marketing tools, faster delivery, greater flexibility and lower costs. Cross-border e-commerce offers a much shorter registration process and accommodates almost all but exceptional product types. Each route has advantages and suits different products.
Next, we will compare the three cross-border e-commerce models.