China and the RCEP: Guangzhou Becomes First City to Issue Special Cross-Border E-Commerce Measures

Guangzhou’s measures to promote cross-border e-commerce is the first such move in China where special policies have been rolled out to help the local business community benefit from the Regional Comprehensive Economic Partnership, when it comes into effect.

On March 30, the Guangzhou Municipal Bureau of Commerce published Several Measures for Guangzhou to Grasp the Opportunity of Regional Comprehensive Economic Partnership (RCEP) to Promote the Innovative Development of Cross-Border E-Commerce (CBEC) (the Several Measures). This makes Guangzhou the first city in China to issue special policies to help the local business community benefit from the RCEP – when it enters into force.

RCEP is the largest free trade agreement in history, which consists of 15 countries – 10 member states of the Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia, and New Zealand.

By far, Thailand, China, and Singapore have ratified the RCEP agreement. Once ratified by three-fifths of the 15 signatories – namely six ASEAN countries and three non-ASEAN countries, the RCEP agreement will enter into force in 60 days.

According to China’s commerce ministry, all signatories to the RCEP have made clear that they will strive to complete ratification within the year to expedite its enactment by January 1, 2022.

What do the new measures say?

To seize the opportunity of the RCEP, accelerate the innovative development of cross-border e-commerce, and foster new drivers of foreign trade, Guangzhou has proposed to address the following five aspects:

• Optimize the business environment for CBEC
• Foster the main market players
• Strengthen innovation capacity
• Expand international marketing network
• Enhance the training of professionals

To optimize the business environment for CBEC, the Several Measures propose the below policies, among others:

(1) To promote cross-border B2B exports, Guangzhou will further optimize the export customs clearance: The inspection of cross-border e-commerce B2B export goods will be prioritized, qualified cross-border e-commerce B2B export goods will go through customs clearance procedures through declaration lists, and the export return policies will be optimized.

(2) To accelerate cross-border customs clearance of goods from RCEP countries, Guangzhou will further simplify customs clearance process and reduce customs clearance time: For goods from RCEP countries that have arrived at the customs supervision with all the enterprise information needed for custom clearance being submitted and in line with the normal release conditions, the goods will be released within 24 hours. For perishable goods, the turnaround time could be further reduced to six hours.

(3) To improve tax services: The processing time for export tax rebates will be further shortened to five working days for normal cases, and the average processing time for normal export tax rebates will be reduced to five working days. Besides, Guangzhou will pilot the “duty-free without ticket” policy and the verified tax collection policy for corporate income tax for CBEC retail exports.

(4) Settlement of payment difference: Enterprises engaged in CBEC can settle the difference between the cost of warehousing, logistics, taxation, and other expenses incurred in overseas export of goods and the payment for export of goods and report the actual data of foreign exchange receipt and payment to the authority in charge. For the goods exported to overseas warehouses by CBEC enterprises, the actual sales revenue remitted back is allowed to be inconsistent with the export declaration amount of the corresponding goods.

(5) To Increase financing support: Based on the credit risk compensation fund pool for technology-based small and medium-sized enterprises in Guangzhou, financial institutions are encouraged to provide appropriate financial products and services for CBEC enterprises.

(6) Dispute resolution: Guangzhou will establish an online dispute resolution (ODR) platform for CBEC related disputes. The ODR platform will follow the rules set out in the Cooperation Framework for APEC Enterprises for Online Settlement of Cross-border Commercial Disputes and provide rapid electronic solutions and enforcement mechanisms for disputes across borders, languages, and different legal jurisdictions.

(7) Support the agglomeration and development of CBEC enterprises: Guangzhou encourages social capital (private capital/funds) to build CBEC industrial parks (cluster areas) by using existing industrial carriers, old industrial zones, old factories, etc., to attract domestic and foreign high-quality CBEC enterprises and their upstream and downstream supply chain enterprises to settle in the park for cluster development.

(8) To foster market players:  Guangzhou will bring in global high-quality capital to facilitate the development of the local CBEC industry. Guangzhou CBEC enterprises will be encouraged to list in domestic and overseas capital markets, and the successfully listed CBEC enterprises will be rewarded and subsidized in accordance with relevant policies if their domestic operation headquarters are set in Guangzhou.

(9) To strengthen innovation: CBEC enterprises are encouraged to apply to be hi-tech enterprises, which are subject to preferential CIT rates. Besides, CBEC enterprises are encouraged to build their own brand overseas and lead the formulation of relevant standards. For those who successfully develop international, national, and industrial standards for CBEC sectors, financial support will be awarded in accordance with current policies.

(10) To expand international marketing capacity: Guangzhou will support CBEC enterprises to build overseas warehouses for exporting to RCEP countries. The airlines that open international or regional cargo routes in Guangzhou Baiyun Airport shall obtain airline subsidy funds, according to the current subsidy standards and requirements. Besides, livestreaming marketing are specially encouraged to promote Guangzhou’s export to RCEP countries and introduce RCEP goods to Guangzhou citizens.

(11) To attract talents: Guangzhou will offer e-commerce related educational specialization in colleges/ universities and provide relevant training to the employees of CBEC enterprises. Guangzhou will also endeavor to attract overseas talents – “high-end talents” and “talents in short supply” introduced by CBEC enterprises shall enjoy relevant talents subsidies, according to the current regulations.

The Several Measures came into force as of the date of issuance and shall be valid for three years.

E-commerce and business opportunities under RCEP

As the largest multilateral FTA in history, RCEP holds great significance for the region, for China, and for foreign investors.

The primary aim of the RCEP is to establish a comprehensive economic partnership – building on existing bilateral ASEAN agreements within the region with its FTA partners. It will be guided by a common set of rules and standards, lowered trade barriers, streamlined processes, and improved market access.

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Once implemented, it will create the largest trade bloc in Asia and is expected to generate US$12.4 trillion in trade.

In the region, the pact is monumental not only because it amasses 15 vastly disparate Asian economies and manages to find a common working ground, but it also offers a way to coherently amalgamate multiple bilateral and trilateral trade agreements already in existence – for example, linking together some of the benefits of RCEP, CPTPP, and the New Zealand-Australia-Japan-India New Supply Chain Pact.

For foreign investors, RCEP will deliver substantial new trade and investment opportunities within the participating countries – covering roughly 30 percent of the global GDP (US$26.2 trillion) and 30 percent of the world’s population to form Asia’s largest trade bloc to date.

The RCEP is also projected to boost CBEC between China, East Asia, and South East Asia. Chapter 12 of the agreement specifically outlines clauses related to e-commerce. The regulations on e-commerce, including the facilitation of paperless trade, e-authentication, e-signatures, and the personal information protection for e-commerce users and online consumers, will provide a more conducive trade environment for CBEC.

The RCEP is expected to have a far-reaching impact on regional trade facilitation and international economic integration over the next decades.

Why Guangzhou?

To help the local business community benefit from RCEP when it enters into force, many cities in China have been working actively with various business associations and chambers to organize outreach sessions and webinars. However, we asked why is Guangzhou the first city to come out with special policies in seizing the e-commerce opportunities under RCEP?

Guangzhou, the capital city of Guangdong province, is an important political, economic, industrial, and cultural center in the South China region. North of Hong Kong, Macau, and the South China Sea, Guangzhou’s location in the Pearl River Delta has long secured the city’s position as the southern gate of mainland China. As the origin of the ancient Chinese Maritime Silk Road, it was the oldest foreign trading port in mainland China and the only one that has never been closed.

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Guangzhou also enjoys Guangdong Province’s industrial cluster advantages — Guangdong has a complete range of industries, including electronic information, electrical machinery, petrochemical, textile and clothing, food and beverage, building materials and other industries with obvious advantages nationwide.

Moreover, since it was approved as a Comprehensive Pilot Area for CBEC in 2016, Guangzhou has led the promotion of CBEC.

Firstly, Guangzhou created the “co-sourcing” mode for CEBC export return. It supports enterprises to move overseas warehouses back to Nansha Bonded Port Area, store the returned goods as bonded goods to solve the problem of “difficulty in returning goods” of CBEC. In 2020, the total value of returned goods through this mode reached RMB 360 million (US$55.1 million), which reduced the operation cost of collection and sorting worth RMB 30 million (US$4.56 million) for enterprises.

Secondly, Guangzhou pioneered the “air-rail link” mode in CBEC export. The export goods are transferred from Guangzhou Baiyun International Airport to Dalang Railway Station and sent to Europe via China-Europe Express, which can shorten the logistics time by seven days (around 30 percent) and reduce the cost of port pick-up and operation fees compared with sea freight.

Third, Guangzhou innovated the “pre-check” function of individual quota of CBEC. Currently, the maximum value of each CBEC transaction is up to RMB 5,000 (US$765.5), and the annual total CBEC purchase for each person is up to RMB 26,000 (US$3980.6). Within the limit, the purchase enjoys preferential tax treatments. Beyond the limits, the purchase might be taxed in full as general imports. The pre-check function helped enterprises avoid goods return due to insufficient quota of the subscriber and reduced the transportation cost of enterprises. This function was highly recognized by Amazon, Tmall International, JD Global, and other e-commerce enterprises.

Fourth, Guangzhou built China’s largest local public service platform specifically for CBEC. This platform includes 26 functional modules covering export return facilitation, “tax-free without tickets” enterprises application, verification collection of corporate income tax, etc. By far, this platform has serviced 2,738 enterprises with daily transactions over 800,000 orders. The total customers it serviced has passed 300 million.

Fifth, Guangzhou keeps promoting “CBEC+ live streaming” to facilitate the high-quality development of the foreign trade.

With the Several Measures designed to further ease cross-border e-commerce operations within the RCEP trading arrangement, Guangzhou can be expected to play a leading role in the sector.

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