Online retailers ship 100 million orders into China via free trade zones (FTZ)

In late 2013, China began testing new procedures to make it easier for Chinese consumers to order from foreign websites and to receive their goods in due time at lower prices.

“From the time the trial started at the end of 2013 to November 2015, we have inspected and processed 100 million parcels in seven cities in the trial, including Shanghai, Chongqing, Hangzhou, Ningbo, Zhengzhou, Guangzhou and Shenzhen, where the Chinese government is testing a new way of importing goods. The total product value of those parcels has topped CNY 15.5 billion,” a spokesman for Chinese customs authority General Administration of Customs of China said in a recent press meeting, internetretailer.com reports.

The FTZs dedicated to promoting ecommerce and allow companies based outside of China to store goods without having them pass Chinese customs. That includes goods that are not licensed for sale in China, such as cosmetics that have not undergone animal testing, which Chinese law requires. A series of laws China enacted in recent years allows Chinese consumers to buy small quantities of imported goods for personal use, including those not licensed for sale in Chinese stores, and to pay lower duties and taxes than they previously would pay.

A foreign brand or retailer can store merchandise in one of these special zones and then send it through customs only when a Chinese shopper orders it from the company’s website. In many cases the brands and retailers have provided information about these products to Chinese customs officials in advance, which speeds processing when the seller sends a parcel through customs.

Global ecommerce players, including Amazon.com Inc., Alibaba Group Holding Ltd. and Costco Wholesale Corp operated cross-border operations through these duty-free warehouses. Chinese consumers can get imported products stored in these zones usually within three days after they place an order. Foreign companies can also keep merchandise in warehouses in their home countries and send parcels to consumers as they’re ordered, but those orders typically take longer to arrive.

Cross-border ecommerce is booming in China and companies like Amazon and Alibaba have reported growing sales through the relaxed cross-border importing rules. Alibaba’s Tmall Global marketplace, launched in February 2014 to allow foreign companies without a China business license to sell online to Chinese consumers, takes advantage of the relaxed cross-border rules on importing small quantities of goods for personal use. Sales on Tmall Global increased 179% in the Q4 of 2015 than a year ago.

At the end of 2015, the Chinese government added three more cities to the cross-border ecommerce trial—Fuzhou, Pingtan and Tianjin—bringing to 10 the number of Chinese cities with special zones where foreign companies can store goods without sending them through customs first. Besides facilitating imports, those cities have also started to operate online exporting businesses in 2015, according to the Chinese government.