Crossing the Line: Will cross-border regulations trip up China?

Image_acw_0816_coverPowdered milk is a phenomenally popular product in China. Numerous scandals involving contaminated domestic milk, a shortage of dairy cows and a general admiration for imported products have made milk powder a commonly found commodity in the e-shopping carts of Chinese consumers. In fact, for one Australian milk cooperative, China has been seen as the antidote to sagging prices in an oversaturated domestic market. Last year, during China’s free-for-all shopping holiday known as “Singles Day,” which takes place on November 11 of each year, dairy producer Murray Goulburn sold 30 tonnes of its Devondale milk powder in just 36 minutes through web portal

This is just one of thousands of products that make up China’s vast and rapidly growing cross-border e-commerce (CBeC) empire. Between 2014 and 2015, the market nearly doubled, from US$30.07 billion to $57.13 billion, with estimates from eMarketer predicting the market will pass the $85 billion mark in 2016. This has undoubtedly bolstered demand for air cargo services between China and its trading partners.

But what if commodities such as milk powder were suddenly no longer accepted through e-commerce channels, or became dramatically more expensive? Chinese importers almost found out the hard way this spring, when a sudden overhaul of the tax structure on cross-border imports briefly went into effect on April 8, along with a crackdown on the types of goods permitted to move through bonded cross-border warehouses.

For a short time – until a near revolt by the Chinese business community halted the chaos after a few days – sales of Devondale milk products, and many other commodities were no long permitted through online portals such as Alibaba’s T-mall. The government pulled back on these policies, but only temporarily. By next spring – May 11, 2017, to be exact – the restrictions will return, giving the Chinese logistics industry less than a year to prepare.

“Overall, the impact recent customs policy adjustments have, and will continue to have on the cross-border e-commerce market, is tremendous,” China-based freight forwarder Sinoair, a subsidiary of Sinotrans, told Air Cargo World.

Today, the booming CBeC industry in China has been clouded by regulatory uncertainty, which threatens to not only influence the cost of foreign products purchased by Chinese consumers through web portals, but also to potentially alter the supply-chain path by which goods make their way into the country. With the airfreight industry betting heavily on cross-border e-commerce as a significant source of growth, these looming changes have freight forwarders and shippers on edge. Could the Chinese government be taking a step too far?

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