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General trade in China: what it is and how it is different from cross-border e-commerce - BRANDHOUSE

General trade refers to the import or export of goods by enterprises in China with import-export rights. When a foreign company/manufacturer wants to import its goods in China and doesn’t have a business license, they need to find an intermediary that on their behalf will import the goods from abroad. This legal entity in China clears customs and legally imports goods into China market. This entity also needs to pay duties and taxes on CIF price (cost, insurance, freight) before the product has been actually sold. After the customs have been cleared, the products are sold in brick-and-mortar stores in the majority of the cases. The risk of paying for imported products beforehand and storing them in a warehouse is too high and Chinese legal entities are hesitant to do so, since this risk would be entirely on them. This is why they would usually charge high commission fees on the imported goods. Besides that, the foreign company will have little to no control over the marketing communication and sales on the B2C side once the goods have crossed the border. The distributors and sales agents will have all control over the actual selling and brand awareness.

 

Cross-border, on the other hand, is defined as the direct import of goods from outside China through special cross-border e-commerce platforms and the preferential policies of special economic zones or warehouses (free trade zones). In this case an overseas legal entity imports the goods directly into China. The legal entity clears customs only after an actual order has been placed online by an end customer. The consumer pays duties and taxes on the retail price at the moment when the product is sold. Different taxes and duties apply to cross-border e-commerce depending on product categories and products have to comply with a different set of regulations than via normal trade. Products that enter China under this model can only be sold on e-commerce platforms.

 

In other words, with cross-border e-commerce the supply is driven by actual sales, the value chain is shorter, and customs clearance processes are easier. The combination of these factors makes the risk for the foreign company smaller. BrandHouse is a cross-border parcel delivery business facilitating cross-border sales to China on behalf of FMCG brand owners that are already selling in China or want to enter the Chinese market for the first time. BrandHouse buys from a brand owner and then sells directly on various online B2B & B2C sales platforms and service brands and platforms with enriched content, logistics, product clearance and activation marketing.

 

BrandHouse offers brand owners two cross-border models to enter the Chinese market: