Shanghai FTZ Launches Cross-Border E-Commerce Platform

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Oct. 11 – As one of the first waves of projects initiated in the Shanghai Free Trade Zone (“Shanghai FTZ”), Shanghai will be launching a pilot cross-border E-commerce platform called (“跨境通”, pronounced as “kua jing tong”). A trial run of the platform was completed in the past few days, and it will officially commence operation once approval from the China’s General Administration of Customs (GAC) is issued.

Since prices for products such as luxury handbags, milk powder, and cosmetics can be quite high in Mainland China compared to other locations, more and more people in China have turned to online shopping to acquire these types of goods. Many vendors on Taobao, the largest online trading platform in China, are selling these products or acting as purchasing agents for their customers in China. Due to a lack of legitimate online channels, a lot of these products are imported to China through express delivery – therefore evading customs duties – or sometimes smuggling is involved. Further, vendors will often claim to offer imported products that are actually shoddy knock-offs.

To meet the needs of domestic customers for these products and to clean up the currently chaotic scene of the cross-border E-commerce market, China’s National Development and Reform Commission (NDRC) has delegated the GAC to initiate a pilot cross-border E-commerce service in five cities, including Shanghai.

The project of the Shanghai FTZ was constructed by Orient Electronic Payment Co., Ltd, a Shanghai-based company that owns the Easipay electronic payment platform and previously helped construct China’s electronic customs declaration system.

“ looks just like any E-commerce website, displaying all kinds of commodities by category,” according to the General Manager of Easipay, Wang Peng. “Six categories of popular commodities will soon be presented on the website, including clothing, accessories, baby products, 3C electronic products, cosmetics, luggage and handbags. The website is positioned to provide mid to high-end products.”

Shanghai Customs will be in charge of the customs declaration system connected to the website. All vendors on this platform have conducted record-filing with the customs authorities; therefore customers can avoid the risk of buying fake products. Because the commodities offered on are imported through bonded warehouses, which significantly decrease logistic costs, the prices are often much lower (30 percent to 40 percent discount) than the prices of the same products selling in other places within Mainland China. Currently, products of several luxury brands, such as Calvin Klein, Coach, and Burberry, have been presented on the test platform.

However, according to existing customs regulations, there are still restrictions imposed on the total amount that a consumer can spend and the quantity of the products that a single consumer can purchase. “But the customs will adjust the restrictions based on the performance of,” said a source from Easipay.

Although introducing is great news for customers in China, it could strike hard against current vendors engaged in the cross-border purchasing agent business on other electronic platforms. It may also have a negative impact on the sales of luxury stores in China.

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