China Watch Blog reports that the new Customs regulations for mailed goods which will become effective from September 1, 2010 will prove beneficial to businesses that have been conforming to rules and regulations on import duties and the new regulations are expected to create a level-playing field for such law-abiding companies, but will cause a headache for those who have been exploiting the grey areas in customs laws.
The Customs had recently said it intends to tighten the free payment norms on import duties for international mails. The new rules stipulate that import duties will be waived for goods with a dutiable value of under 50 yuan compared with 500 yuan earlier.
By increasing the tax ambit, the Customs also plans to regulate the practice of importers buying goods abroad and then mailing it to Chinese buyers without paying import duties.
Apart from tax evasion, the practice was also hurting the fortunes of organized B2C (business-to-consumer) retailers like online luxury goods retailer Wooha.com. These companies purchase luxury goods abroad and then sell them in domestic markets after going through the proper procedures.
“The new rules help us have an advantage in the market now as it reduces the gap with the smaller and unorganized online retailers who often lure consumers with cheap prices,”Â Peng Zelin, marketing director of Wooha said, adding that his company makes it a point to declare all the duties paid for importing the product before it sells the same to customers.
Wooha will start the English-version of its e-commerce website in October, said Peng. At the same time the company is also reducing the list of goods it offers on its website to 100 from 300 and focuses more on premium brands.
The company intends to list its shares in the US or UK capital markets by 2013,Â Lian Tingkai, chief executive officer of Wooha was quoted as saying in a China Daily report.
However, the Customs directive has not found favour with some retailers. Some companies feel that such moves are detrimental to their business.
Wang Tao, the owner of an online luxury goods shop said, “My customers used to enjoy free duty on the goods mailed by friends in Europe. They buy the products and mail it to the customers directly,” he said. “Come September, and it is going to be impossible to attract customers with lower prices.”
Zhang Yun, an online luxury goods retailer says she has decided to give up her business as it would no longer be profitable. According to Zhang, her online shop earns 50,000 to 100,000 yuan every month, while bigger players like Wooha can earn over 1 million yuan.
Peng said Wooha’s revenue has been growing by nearly 300 percent every year. The company expects to have around 10 million new users after the English version is launched. Currently it has 2.3 million users.
The market value of China’s online overseas purchases amounted to 2.895 billion yuan in 2008, said data from research firm Analysys International.
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