Is It The End of Daigou Shopping With China’s New E-Commerce Law

A Daigou is a ‘personal shopper’ who purchases products from businesses overseas and ships them back to customers in mainland China, via courier or post. The term ‘Daigou’ literally translates to “purchase on behalf of” in Chinese. Essentially, it is a channel of commerce between mainland Chinese buyers and overseas professional shoppers, sometimes referred to as the “grey market”. The Chinese customer gives the Daigou agent their shopping list and usually makes a down payment. Once the Daigou agent buys the goods, they ask for a full payment, along with their commission. The goods soon arrive right on the customer’s doorstep. Commentators say daigou shopping trend was born as a result of mistrust in the authenticity of products sold in China.

China’s New E-Commerce Law & The Crackdown on Daigou Shopping

The launch of China’s new e-commerce law, coupled with the Daigou crackdown at the Pudong International Airport in Shanghai, has stirred up uncertainty in the Daigou industry. China’s crackdown on daigou is part of its moves to strengthen e-commerce regulation and better control the rapidly expanding sector.

>> From January 1, 2019, daigou merchants are obligated to register and pay taxes. The new law compels daigou merchants to obtain licenses and formally register as businesses. Otherwise, they will be subject to fines as high as RMB 2 million (US$291,620) for illegal business and tax evasion.

>> The law will also crack down on the sale of fake goods, another factor in the daigou phenomenon of recent years [The Moodie Davitt Report believes that legitimate travel retailers should give greater emphasis to the guaranteed authenticity of goods that they offer.

>> A major provision under the new law is the clarification of the types of businesses that will fall under its jurisdiction. The e-commerce law mainly applies to the following three types of operators- Platform operators, Operators on platform and Online sellers.

Final Thoughts

In recent weeks there have been widespread reports that Chinese border authorities have been instigating more thorough customs checks — and certainly, the long lines to pass through customs at some of the country’s main airports appear to corroborate this.

Share with friends:

All You Need to Know About China’s New E-Commerce Law

Top legislators of China passed an e-commerce law on August 2018. The new law is aimed at regulating the China’s online luxury sales market and will become effective on January 1st 2019. The law differentiates different e-commerce operators. The law, which is set to “protect legal rights and interests of all parties” and “maintain the market order,” requires all e-commerce operators to fulfill their obligations to protect consumers’ rights and interests as well as personal information, intellectual property rights (IPR), cyberspace security and the environment. The new law also contends that platforms should take responsibilities in the customer-seller disputes that take place on the platform, which would lead to more legal risks.

The single purchase limit will increase from $288 (RMB 2,000) to $720 (RMB 5,000), and the yearly purchase amount increases from $2,900 (RMB 20,000) to $3,780 (RMB 26,000). Cross-border purchases under the new limits will be exempt from duties and receive a 30 percent discount on consumption tax and VAT.

Platform Operators– This refers to any legal persons or unincorporated organizations that offer virtual places of business, transaction matching, information release and other services to the parties of an e-commerce transaction to enable them to carry out independent transaction activities. A typical example would be the operator of Taobao.

Operators on Platform– This refers to third party merchants that sell goods or provides services on e-commerce platforms. An example is a vendor operating an online store on Taobao.

Other E-commerce Operators– This might include e-commerce operators that sell their own goods or provide their own services through self-established websites or social network such as Tencent’s WeChat.

For goods or services that are related to the lives and health of consumers, e-commerce platforms will bear corresponding responsibilities if they fail to examine the qualification of vendors on their platform. According to the new law, if a customer suffers any health-related problems by using a product bought online, the e-commerce platform will be responsible. So it makes it really important for the e-commerce platforms to properly verify each and every dealer doing business on their site.

Have a look at some of the most important articles of the new law

Article 15 of the new law appears to require that vendors make their ID data available online.

Article 12 of the law requires vendors to display business registration certificates containing core information on their company.

Article 28 of the law to “remind” – but not require – vendors that are not already incorporated to obtain business licenses, and to work with local MSBs in this regard.

Articles 42, 43 & 45 of the new law contain provisions that, on their face, seem to dilute the protections currently offered in take-down work in China.

The law is wide-ranging and covers the requirement for registration and licensing of e-commerce operators, taxation, electronic payment and e-commerce dispute resolution. It also addresses other important aspects of e-commerce including false advertising, consumer protection, data protection and cybersecurity. One practice that definitely won’t benefit from the law is daigou buying. Daigous are the shoppers who buy luxury products overseas, where those goods cost less and don’t incur China’s high import tariffs, but they’ll now come under scrutiny for their undocumented practices.

There is a provision in the new law that said the State Council, local governments at or above country-level as well as related departments should take measures to support and promote environmentally friendly packaging, storage and transportation in e-commerce.

Share with friends: