China Consumers -CBEC:1-year postponement of positive list and custom clearance form confirmed

　　One-year postponement of positive list and Custom Clearance Form confirmed

　　According to ebrun, local customs offices in CBEC pilot cities were informedon 19 May that the requirement of a Custom Clearance Form (“CCF”) to importproducts via CBEC bonded warehouses will be postponed by one year.According to the internal notice, the new tax system is intact, butimplementation of the positive list and CCF requirements will be postponed bya year as a grace period for CBEC players. To recap, industry players wanted toextend the transition period to the new policy by a year, and made theirdemands one month after the new policy commenced on 8 April, as 95% ofthe products stocked in warehouses are affected by the new regulation. Thenational quality inspection bureau (“AQSIQ”) insisted that the CCF is necessaryfor CBEC imports in an official announcement on 15 May, which disappointedthe whole market.

　　Most of the current CBEC players are not officially authorized by brand owners,as the majority of CBEC products are sourced from overseaswholesalers/retailers, according to ebrun and our industry expert. Thus, it willbe hard for them to obtain certificates of origin and other relevant documents,which are normally issued by brand owners, before obtaining a CCF fromAQSIQ. Besides, first-time imported cosmetics and nutritional products cannotbe sold via CBEC under the new policy, unless the products have beenregistered at CFDA, which could take 6 months to 2 years.

　　The extended transition period will give importers and pilot cities more time toadjust their business and apply for the required importation documents, e.g.CCF. In addition, first-time imported cosmetics and nutritional productswithout CFDA licenses or registrations may possibly resume sales via CBECbonded warehouses for the next one year, based on our understanding andchecks with industry experts.

　　Deutsche Bank’s view

　　Our industry contacts confirmed this news. In spite of the one-yearpostponement, we believe interpretation and execution by different pilot citieswould be discrepant. For instance, the parallel trading of cosmetics could beallowed in some pilot cities but not in others. The one-year postponement ofthe positive list and CCF could benefit in the short term Biostime and Sa Sa,which are involved in nutritional products and cosmetics CBEC, while webelieve the government’s attitude towards CBEC will not change on a longerperspective. Thus, the bonded warehouse model may not be sustainable.Going forward, possibly more importers will choose the direct mailing modelor traditional B2B imports.