General

According to Huacheng Import and Export Data Observation, recently, the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation jointly issued a document to lower the threshold of exemption from import tariffs after cross-border e-commerce returns, which will help reduce the cost of export return of cross-border e-commerce enterprises. The reporter of the Securities Times learned that the policy was widely affirmed and welcomed. The interviewees believed that this would help cross-border businesses to solve the "return problem" and ease their worries about overseas stock of high-value goods. However, some respondents pointed out that the announcement should further clarify the key definitions related to the return of goods, so that enterprises can handle the return of goods in a timely manner and reduce losses.

Comprehensive return rate is about 10%

According to the Announcement on the Tax Policy for Export Returned Goods of Cross-border E-Commerce, within one year from the date of the publication of the Announcement on January 30, the goods (excluding food) returned to the country in their original state within six months from the date of export due to unsalable and return goods can be returned to the country in "zero tariff", according to the observation report of Huacheng Import and Export Data.

"The document is the implementation of the previous requirement of 'accelerating the issuance of tax policies to facilitate the export return and exchange of cross-border e-commerce', which accurately responds to the demand of cross-border e-commerce for the export return tax policy." Shen Yinghua, the partner of Ernst&Young Tax, told the Securities Times that, according to the provisions of the Regulations of the People's Republic of China on Import and Export Tariffs, because of quality or specifications, the export goods were transported into the country in their original state within one year from the date of export, No import tariff will be levied. In practice, there are various reasons for cross-border e-commerce to return goods. For example, in order to improve the user experience, cross-border e-commerce often provides unreasonable returns within a certain period of time, goods that do not match the page description, and even returns due to price changes. The documents issued this time no longer restrict the specific reasons for return, but are generally applicable to cross-border e-commerce commodities (excluding food) that are declared for export within one year from the date of publication of the announcement and returned to China due to unsalable and return reasons. This is in line with international practice and the principle of VAT neutrality, and also protects the competitiveness of China's cross-border e-commerce in international trade.

Shen Yinghua further pointed out that the announcement stipulates that the minimum form of export goods returned into the country should be basically the same as that of the original export goods. No accessories or parts should be added, and no processing or modification should be carried out. However, after unpacking, inspection (chemical), installation and commissioning, it can still be regarded as "original". This regulation clarifies the requirements for returning goods as is, fits the fierce competition of international e-commerce platforms, and is conducive to China's cross-border e-commerce enterprises going out.

According to the observation report of Huacheng Import and Export Data, in the past five years, the registration of cross-border e-commerce related enterprises in China has shown an overall upward trend. According to the data of the General Administration of Customs by the end of 2021, more than 90% of cross-border e-commerce goods are consumer goods. Among them, exports accounted for 91.8%, mainly including clothing, shoes and bags, home textiles and electronic products. E-commerce platforms are mainly concentrated in the Pearl River Delta, Yangtze River Delta and Beijing-Tianjin region. The export goods mainly come from Guangdong, Zhejiang, Fujian and Jiangsu, accounting for nearly 80% in total. In addition, according to customs statistics, China's cross-border e-commerce imports and exports in 2022 will be 2.11 trillion yuan, including 1.55 trillion yuan of exports.

Shen Yinghua pointed out that the return rate of e-commerce is generally higher than that of physical stores, and it is understood that the comprehensive return rate is about 10%. From this calculation, the amount of cross-border e-commerce export rebates last year should not be underestimated. After the launch of the new policy, China's cross-border e-commerce export tax burden is expected to be significantly reduced. More analysts believe that the policy is conducive to stabilizing the export expectations of enterprises.

There are many considerations about whether to return the goods

When commenting on this policy, Alibaba's Global Express said that the new policy will help cross-border businesses solve the "return problem" and ease the worries of overseas stock of high-value goods. Wang Shan, executive director of Yibang think tank, said that the demand for returning goods with high unit price, technology and intelligence is increasing due to the high storage and management costs of unsalable, rejected and returned goods in overseas warehouses.

"The new tax policy for export return of cross-border e-commerce can indeed bring a return 'profit' to enterprises, but whether enterprises will return unsalable and returned goods to China is also affected by many factors." Zhang Ting (pseudonym), an e-commerce platform practitioner, told reporters that the return of goods is a significant operating cost. In addition to transportation costs, some goods need to be transported in a single way, and may also incur additional storage costs. Enterprises will take into account the unit price of customers, quantity of goods, tax rate and other factors. When the tax saved by the return is higher than the return cost, enterprises will have the power to return the goods into the country. Even so, enterprises still have to face the loss of goods during the return and the new sales problems after the return. "For the goods that need after-sales service or unsalable, enterprises often take the methods of price reduction, sales promotion, overseas warehouse maintenance and destruction," said Zhang Ting.

On February 9, the A-share listed company Huakai Yibai said in response to the relevant questions of investors that the products currently sold by the company on the overseas e-commerce platform are commodities of high price, and will not be returned to China in case of unsalable sales or return.

It should be further defined to improve efficiency

However, some industry insiders believe that some definitions of the announcement are still unclear, which will affect the efficiency of policy implementation. Lu Yujun, a team partner of Beijing Deheng (Shenzhen) Law Firm, told the reporter that the terms of the announcement were too few to make a detailed explanation of all aspects of the return tax exemption. If the application of "unsalable" was not clear, Huacheng's import and export data observation report.

"Slow sales refers to the fact that the product is not popular with consumers and the sales speed is extremely slow, but how long it takes to complete the sales can constitute 'slow sales'. This definition is not clear, which leads to operational difficulties in determining whether it can be returned and tax-free." Lu Yujun said that it is suggested that after the foreign hot sales period, it should be recognized as slow sales, so that enterprises can return to domestic sales in time and reduce losses.

Shen Yinghua said that according to the requirements of the announcement, the returned goods should meet the time limit requirements of "returning the goods to the country in their original state within 6 months from the date of export" or "returning the goods to the outside of the country within 6 months from the date of departure from the customs special supervision area or bonded logistics center (type B)". At the same time, the enterprise should present the Certificate of Tax Paid/Refunded for Export Goods issued by the competent tax authority, the declaration list of export goods or the export declaration form The reasons for the return and other supporting materials shall be applied for handling the tax exemption formalities for the return. We look forward to seeing closer cooperation between the tax authorities and the customs to strengthen the sharing of tax-related information and data exchange. It is believed that with the efficient coordination and tariff linkage between the tax authorities and the customs, the tax refund process can be further optimized, and the efficiency of enterprise capital turnover will also be further improved.