CCM: Online Shopping Overseas: Bye-bye to Tax Exemption 07-20-2016

From 8 April, the personal postal articles tax is no longer applicable to cross-border E-commerce business. If a domestic consumer intends to purchase goods within a value limit (=USD3,097 or RMB20,000 personally and annually), he / she should pay tax based on 70% * (tariff rate + VAT + consumer tax).

In addition, there was an exemption that, if the tax was <=RMB50, consumers did not need pay it - this has now been abolished. Previously, tariffs were set at 0% for purchases of up to RMB20,000, after which normal tariffs kick in. All of this will have significant impact on the purchase costs for food, healthcare products, maternal and child products and daily products.

Specifically regarding dairy products (incl. infant formula), consumers will need to pay a tax rate of 11.9% [= [tariff rate (0% at present) + VAT (17%) + consumer tax (0%)] * 70%].  

The Ministry of Finance (MOF) originally released the statement China to Implement Cross-border E-commerce Retail Import Taxation Policy and Adjust Personal Postal Articles Tax from 8 April on 24 March. On 7 April, it officially unveiled the List of Cross-border E-commerce Retail Imported Commodities.

This is a "list of positives" - products on this list are exempt from having to submit licences to customs, related quality supervision, inspection and quarantine procedures to be carried out in line with laws and regulations. In particular:

Commodities purchased directly are exempted from checking the Customs Clearance of Entry Commodities

Bonded commodities purchased online are required to check the Customs Clearance of Entry Commodities when they first enter the Chinese territory, and are exempt from checking the Customs Clearance of Entry Commodities when they exit the bonded zones

Commodities that are not listed will not enjoy preferential tax regimes, but will be imported based on common tax principles (tariff rate and consumer tax not 0%, no 30% discount; specific taxation based on different product categories). This greatly increases the costs.  

There are 1,142 commodities (8-digit HS Codes), mainly consumer goods that are in certain demand and can be imported by express delivery, express mail service, etc. Some dairy products are also listed.

Dairy Products Listed in the List of Cross-border E-commerce Retail Imported Commodities, April 2016

Tariff No.



Milk & cream (concentrated, unsweetened)


Milk & cream (concentrated, sweetened)




Butter milk & other fermented/ acidised milk and butter


Whey & modified whey


Products consisting of natural milk constituents




Milk sauce


Fresh cheese, incl. whey cheese, curd


Processed cheese, not grated or powdered




Infant formula


Infant food in retail packaging


Milk & cream, fat <= 1%, not concentrated or sweetened


Milk & cream, fat > 1% but <= 6%, not concentrated or sweetened


Milk & cream, fat >6% but <= 10%, not concentrated or sweetened


Milk & cream, fat >10%, not concentrated or sweetened


Milk & cream in solid forms, fat <=1.5%


Milk & cream in solid forms, fat >1.5%, unsweetened


Milk & cream in solid forms, fat >1.5%, sweetened

Note: Italic part is the 2nd list released by MOF on 15 April, restricted to only bonded commodities purchased online.
Source: Ministry of Finance

It is anticipated that the new policy will lead to rises in infant formula prices and probably will force some infant formulas to disappear from e-commerce shelves. For example, Murray Goulburn have already removed its products from China's largest e-commerce site.  

Prices of infant formulas purchased on cross-border E-commerce platforms to go up

In particular, the impact on imported infant formulas should be highlighted. For instance, if a consumer wants to purchase RMB1,000 (USD154.8) worth of infant formulae, the impact will be:

Before tax reform: 10% of personal postal articles tax - RMB1,000 * 10% = RMB100 (USD15.5)

After tax reform: 70% * (tariff rate + VAT + consumer tax) - [70% * (0% + 17% + 0%)] * RMB1,000 = RMB119 (USD18.4)

In addition, before the tax reform, the purchase of <=RMB500 (USD77.4) infant formulas is exempted from taxation. However, it is now cancelled. That is to say, a tax rate of 11.9% should be afforded also.

“Now the average price of imported infant formulas sold offline is USD38.7/can (RMB250), whilst that on the cross-border E-commerce platform is USD23.2-38.7/can (RMB150-200),” analysed dairy expert Song Liang, “As the new policy is implemented, the price of infant formulas imported via the cross-border E-commerce platform will rise by USD1.5-3.1/can (RMB10-20), to about USD26.3-34.1/can (RMB170-220). Still, they are cheaper than those sold offline.”

However, “In the future when the cross-border purchased infant food administration measure is issued, the infant formulas imported through any channels should be certified by government departments and should be labelled in Chinese,” continued Song Liang, “This of course will continue pushing up the costs and the prices of infant formulas purchased via cross-border E-commerce platforms.”

Unregistered infant formula brands to be forced to go off shelves

The new policy, in addition to making adjustments in tax for infant formula, also set access thresholds on imports of infant formula: infant formulae that have not yet been registered in accordance with the Food Safety Law of the People’s Republic of China will not be listed.

This indicates that on cross-border E-commerce platforms, consumers cannot buy foreign-made infant formulas that have not been registered in China. This also means that, before the implementation of the infant formula registration regulation, the Chinese government has already effectively implemented it in terms of imported infant formulae.

“If the foreign brands should be registered before being put on cross-border E-commerce platforms, it will certainly affect the dairy industry,” said Song Liang. Dairy expert Wang Dingmian agreed to this, “At least 1,000 imported infant formula brands will be involved. The quantity will decrease greatly.”

By 18 November, 2015, there have been 233 foreign infant formula brands registered in China through the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). These brands now can be bought on cross-border E-commerce platforms in original packing.

If consumers intend to buy infant formulae not registered in China but of a high reputation / word-of-mouth recommendation, they can do so by having somebody overseas to buy the product for them. This is the so-called personal overseas purchase.
However, the personal overseas purchase is not easy.

Though the personal postal articles tax principle is still applicable to this kind of purchase, the rate has been revised, from 4 grades (10%, 20%, 30% and 50%) to 3 grades (15%, 30% and 60%). The exemption (tax at RMB50) has also also removed.

The personal overseas purchase is suspected to be used for tax fraud, and if the value surpasses USD15,483 (RMB100,000), it is seen as smuggling. Since 2015, China has tightened the check on goods carried in personally. This undoubtedly pushes up the costs for personal overseas purchase.

And this is a key point - previously, consumers largely were able to buy goods on cross-border E-commerce platforms easily, but now they have to make more of an effort and look for personal overseas purchase. This also increases the money they have to spend and the difficulty of purchasing these items online from overseas.

It is important to note that, on 13 April, MOF officially stated that the infant formulae now sold on cross-border E-commerce platforms are not required to have registration certificates; however from 1 January, 2018, all infant formulae sold in China, including those imported via cross-border E-commerce platforms, shall have a registration certificates. Industry sources commented that this was a transitional period granted by the government.

This article comes from Dairy Products China News 1604, CCM


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


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Tag: Dairy  infant formula


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