No More Tax-Free Baby Formula: China Takes Aim at Overseas Shopping Loopholes

No More Tax-Free Baby Formula: China Takes Aim at Overseas Shopping Loopholes

Liao Shumin

Date: Wed, 09/12/2018 - 21:06 / source:Yicai
No More Tax-Free Baby Formula: China Takes Aim at Overseas Shopping Loopholes
No More Tax-Free Baby Formula: China Takes Aim at Overseas Shopping Loopholes

(Yicai Global) Sept. 12 -- China has passed a new online shopping law which primarily targets cross-border shopping agents, known in China as daigous, in an effort put an end to the freewheeling business beset with copyright fraud and tax evasion, as well as suspiciously sourced health products such as baby formula. 

Shopping agents who offer services on online platforms such as Alibaba Group Holding's Taobao and Tmall and JD.Com's site that goes by the same name, as well as social media platforms including Tencent Holdings's WeChat or live webcasts are all considered e-commerce operators and will be subject to a strict regulatory scrutiny. They will face a fine as high as CNY2 million (USD291,000) if they violate the law which will come into effect on Jan. 1 next year.

Last month, China’s police revealed a case where luxury cosmetics counterfeiters spend hundreds of thousands of US dollars producing realistic-looking products that were sold through WeChat or daigous to unsuspecting consumers back home.

According to the new rules, all shopping agents must have business licenses in China as well as in the country of procurement. They also need to pay duties while tax evasion will be treated as a criminal offense. They are not allowed to sell any infant formula or health products without a Chinese label or a certificate issued by China's Certification and Accreditation Administration.

E-commerce platforms will be held liable if they are aware of a violation but fail to report it to the authorities.

Editor: Emmi Laine 

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Keywords: Daigou, 0verseas Shopping, E-Commerce Law, China, Taobao, Tmall, online shopping, Tax-Free