The delay applies to all foreign products sold online through bonded warehouses in free trade zones run by China’s vast e-commerce platforms such as Tmall and JD.
They are now not-quite-so-free trade zones. The 11.9 per cent duty levied since April 8, intended to help even-up the competition with China’s struggling traditional retailers, will remain in place.
But other elements of the new rules — product compliance measures, such as labelling — that had most concerned Australian exporters have been delayed.
Formerly, products arriving in China for e-commerce distribution did not have to comply with Chinese standards as long as they were legally sold in their place of origin, except for a few categories, chiefly fresh foods, that were simply not permitted to be imported at all.
The policy proved to be a boon for manufacturers of products which typically face lengthy or costly approval processes. Under China’s current requirements, approving a novel health supplement for offline retail distribution could take up to two years.
Australian dairy companies including Murray Goulburn and Bega were sold off heavily by investors in April after China effectively changed the tax groupings, under its postal tax regime, for products sold through the e-commerce platform.
Under the initial rule changes, from April 8, all goods arriving in bonded warehouses had to match the standards that applied to traditional retail, including goods made in China. But now they have until next May to adjust.
For traditional retail distribution, the factories that are the source of some products — especially infant formula — must be registered with the China Food and Drug Administration, which announced over the weekend that from October 1 it would ensure all domestic and foreign formula producers had done so.
In its new Baby Formula Registration Regulation, it also requires retailers to specify the place the powder comes from, not merely “from foreign pastures”.
It also forbids packaging that makes claims such as “good for the brain” or “improves immunity”. The main impact of such rules will fall on fringe domestic operations.
This level of compliance, however, is unlikely to affect products coming out of Australia, which has eight infant milk powder manufacturers certified, among 169 approved dairy operations. Some 47 meat processors are also approved.
On January 7, Chinese trade officials informed the World Trade Organisation of a plan to require that each infant formula brand should be associated with a specific milk formula.
This included discussions about introducing a new rule that a single factory that produces formula can only sell three different brands. Such a rule would substantially reduce the formula brands in China.
About 2000 brands are available to consumers. Of these, about 10 per cent are licensed imported brands, and the rest are owned by domestic licensed producers, which typically sell about 18 brands each.
So the chief effect, if implemented, would be to drive a significant reduction in the brands owned by each domestic producer — presenting opportunities for other companies to increase their market share.
With major suppliers expressing concern about how these new measures would be implemented these have also been put on hold until 2018.
Austrade Trade Commissioner in Shanghai Brent Moore said that “there remains a lot of time to go before that is introduced, if that does go ahead.”
In the consumer-to-consumer online trade between Australia and China, substantially through the Taobao platform owned by Alibaba, there is discussion about more traceability of the source of products, including especially formula, over which the e-commerce traders themselves have been taking the initiative.
Personal shoppers who on-sell formula and other items, will often already include a photo of the receipt showing where and when the item was purchased.
Mr Moore said that all the major digital retailers in China were looking at the role of technology and regulation in ensuring the provenance of products.
“While some Australian exporters do voice concerns about the potential cost of meeting higher standards,” he said, “the upside is it can play to Australia’s competitive strengths as an exporter of high-quality products with strong traceability systems”.
He said that Australian supply was relatively stable, and Chinese demand continued to increase steadily. So the recent changes in how part of the Chinese market is accessed have not been a factor in the price shift within Australia.
The price paid to Australian farmers for milk — most of which is now exported — is a function of the world price, which has in recent times been driven down by the European Union’s push into new markets to replace its former dairy sales to Russia, after sanctions were put in place following the Ukraine crisis.
Most of the sales of Australian milk products to China comprise business-to-business sales, including cheese for food manufacturing and powders for ice cream.
“Our companies — some of which have been doing very well — now have until May to prepare themselves for any changes that may be required by new regulations,” Austrade’s Mr Moore said.
Source: The Australian
