Whenever retailers look to China to sell their goods the initial part of planning is essentially to limit as much risk and uncertainty as possible. They look to experts, fellow retailers and solution providers to help navigate the waters but, in countries like China, the government can change the rules of the game while you’re on the field.
We caught up with a few of our China experts who have been “on the field” for a long time to take a look at China’s first comprehensive eCommerce (draft) regulations. This is hot off the press and China is currently receiving feedback from industry and foreign governments before finalizing the details.
“China is introducing rule changes at a rapid pace.” says Paul Stepanek who is the President of Shanghai-based CompleteMAD, a company that helps retailers develop their business in China, “They want to make sure that stakeholders throughout the value chain are in compliance with a standard set of rules. When you have over 8,000 express carriers throughout the nation and hundreds of payment providers you can understand their desire to develop a rule-set that everyone will follow. The rules are good for the consumer but vague for the solution providers and retailers and since China is a penal society they often throw in a fine if a company isn’t complying, which can be challenging with new rule changes.”
China usually announces new rule changes and then puts a buffer as to when they will be acted upon so that they can gauge feedback from the market. So it is key to know where rule change recommendations are in the process so that you can monitor their potential affect on your business.
A report from one of our China “experts”, James Eron, Partner at KungFuData.
As with all things retail in China, despite these new regulations having just come out, James had already put together a draft report. He’s been kind enough to share it with the Getting to Global community. So here it is:
China Releases 1stComprehensive eCommerce (Draft) Regulations
On December 19, 2016 China’s Twelfth session of the National People’s Congress (NPC) Standing Committee assembled in Beijing. In the 25th meeting of the session, the NPC’s Financial and Economic Committee met to discuss China’s eCommerce laws and released China’s first comprehensive draft of eCommerce regulations.
For perspective, in China the average citizen does not involve him/herself directly in government meetings or affairs. China’s news media may provide a short synopsis of the meeting, but only someone specifically related to or affected by the law will take note. And laws are generally handed down without discussion or objection.
This comprehensive draft legislation provides guiding ideology and principles. It is worded somewhat vaguely allowing for later refinement and interpretation.
Firstly, it is established to promote the “healthy and sustainable” eCommerce development.
Secondly, it addresses common issues in eCommerce to promote orderly market operations, standardization, and trading policies. Finally, it addresses the management and governance, and addresses transaction security issues.
The full (Chinese) text can be found at http://b2b.toocle.com/detail–6377723.html?from=groupmessage Here is the main outline and summary:
Chapter I General Provisions
Chapter II The Main Business of eCommerce
- General Provisions
- eCommerce third-party platforms
Chapter III eCommerce Transactions and Services
- Electronic Contracts
- Electronic Payments
- Express Logistics and Delivery
Chapter IV eCommerce Transaction Security
- eCcommerce Data Information
- Market Order and Fair Competition
- Protection of Consumers’ Rights and Interests
- Dispute Resolution
Chapter V Cross – border eCommerce
Chapter VI Supervision and Management
Chapter VII Legal Liability
Chapter VIII Supplementary Provisions
The 13 page (in Chinese) document covers key issues including eCommerce transactions and services, e-commerce transaction security, cross-border e-commerce, supervision and management, legal responsibility, and the Supplementary Provisions. Here are a few highlights.
(1) Modification of eCommerce Practices and Relationships
The draft law seeks to adjust the practices and relationships in the China eCommerce ecosystem to create a framework for promoting development and standardization, and in order to protect rights. It also defines eCommerce as “trading of commodities or transaction of services or business activities via the internet or information networks.” This can include both internet and mobile internet, and tangible and intangible products. The law does not apply to media broadcasting or online content services or financial services, or products transacted or consumed online.
(2) Defining the main business of e-commerce
The draft law distinguishes between 3rd party trading platforms such as Tmall which facilitate trading vs. those of general or direct e-commerce operators/sites which act as (B2C) sellers. It is noted that 3rd party trading platforms have a leading market role in China’s e-commerce market and constitute an important part of eCommerce development, and as such are required to have certain operating standards related to policies, information disclosure, and transaction record retention. It requires reviews of those operating procedures to certify stable operations, security reviews, and transparent trading rules. The proposed laws allow exemptions for smaller operators who do not need to obtain permission to provide personal services, sell household handicrafts, or for agricultural production.
(3) eCommerce transactions and services
The draft law includes wording regarding electronic contracts, automated trading information systems, handling electronic errors, etc. With respect to online payments, the draft provides for statutory rights and obligations of providers and recipients of electronic payment services, including payment confirmations, mis-payments, unauthorized payments, and other provisions. For express logistics providers, the draft seeks to standardize the e-commerce delivery process, security, and service issues in accordance with eCommerce laws.
(4) eCommerce Transaction Protection
The main provisions of the draft have four aspects: First, it includes e-commerce data development, utilization and protection. It stipulates and encourages the exchange and sharing of data and information to ensure the orderly information flow and reasonable use. It also emphasizes that eCommerce operators should take appropriate safeguards to protect users’ personal information.
Secondly, to promote market order and fair competition, the provisions bolster intellectual property rights, platform responsibility, credit evaluation rules, and prohibits unfair competition.
Thirdly, it bolsters protection of consumer rights, including goods or services, information, goods or service quality assurance, trading rules and terms. The draft law provides for the establishment of consumer rights and obliges 3rd party platforms to support consumers rights. Lastly, it promotes the active building of dispute resolution mechanisms.
(5) Cross-border eCommerce
Cross-border eCommerce is growing quickly and is seen as conducive to supporting China’s opening up strategy and increasing foreign trade and as supporting China’s “free trade zone” strategy. The draft legislation makes specific provisions to encourage cross-border e-commerce through government support, promotion, and safeguards. It also promotes the establishment of regulatory and management systems to meet the needs of cross-border e-commerce activities including improving customs clearance efficiency, taxation, ensuring trade security, and facilitating trade.
(6) Oversight and Social Co-governance
The draft provides authorizes the State Council and the government to handle regulations at all levels, but also promotes self-regulation of industry participants in what is referred to as “social co-governance”. The industry is encouraged to innovate and improve industry norms including operations and fair competition, and also encourages consumers to participate within the boundaries of the proposed regulations.
Additional clarifications and regulations are expected to follow in the coming year. If you have comments or questions, feel free to leave them below.
For more on China:
U.S. Commercial Service’s China eCommerce Market Brief.