1. Cross-border E-commerce
2015年4月

2. 一、Cross-border E-commerce Logistics
二、APPLICATION FOR CROSS-BORDER E-COMMERCE TRADE

3. 一、Cross-border E-commerce Logistics

4. Origin：
Since last half year , we had made an investigation on “Import cross-border E-commerce” and matched SITC container line resource to see if there’s any opportunity.
However, due to national policy of the time, cross-border e-commerce with normalized mode were operating only by direct mailing B2C, where SITC has no relevant qualification or supported resource to serve.
Until the beginning of this year, the national customs made the relevant policy about gradually releasing pilot cities and crystallizing operation on cross-border electronic commerce. Normally ,except the direct mail B2C, bonded (Free-trade) B2B2C is also popular along with it. 4

5. Potential Cross-border E-commerce Bonded Mode (B2B2C)
Bonded Mode: also known as “Free-trade Mode”, oversea goods are stored in bonded areas after entry; once customer purchases, goods will be cleared as personal items in terms personal postal articles tax; and then will be delivered to customers by means of domestic logistics.
Bringing sunlight to cross-border e-commerce requires platform order, logistics and payment voucher together; the supervision convenience under bonded mode is relatively higher than that of scattered express mail customs clearance. Bonded mode will be the best choice of sun lighted cross-border e-commerce.
A country manufacturer
Air port or sea port
Plane or ship
B country bonded area
B country make order
Personal postal articles tax customs clearance
Goods deliver to customers in B country 5

6. Bonded mode：shipping bonded mode will be the trend
Direct mail mode
Order confirmation
Personal postal articles customs clearance
Vendor warehouse
Express package
Deliver to air port
Trunk airline
Land distribution
Purchaser
Vendor
Logistics time after order：two weeks or a month
Bonded mode
Logistics time after order: 4-7dyas
Deliver to airport
Trunk airline
For LCL,
Sea freight FCL
Express package
Distribution
Vendor warehouse
Bonded warehouse
Sea freight LCL
Personal postal articles customs clearance
Vendor
Purchaser
Sea transport 6

7. Bonded mode：B2B2C in essence
跨境电商物流模式：直邮+保税
Bonded mode：B2B2C in essence
Opportunity for Shanghai and Ningbo company
Oversea companies cooperate by utilizing available resources
B2B
B2C
Vendor1
Warehouse 1
1、Customs declaration
三单合一
2、Payment vorcher
E-commerce plateform as the uniformed consignee
Purchaser 1
Vendor 2
3、Logistics waybill
Warehouse 2
Air line
Deliver to airport
Purchaser 2
Vendor 3
Warehouse 3
Ocean freight FCL
Purchaser 3
Ocean line
Vendor 4
Warehouse 4
Express package
Personal postal articles customs clearance
Purchaser 4
Distribution
Ocean freight LCL
Purchaser n
Vendor n
Warehouse n … …
The bonded warehouse at port of entry owned by e-commerce or its outsourced logistics carrier:1) have the function of goods labeling, postal parcels, flow distribution and so on; 2) distribution of sea transportation LCL has to be completed by a qualified company in principle; 3) electricity commerce tends to select ports with convenient customs clearance and logistic settings to set up the central bonded warehouse; 4) the customs sets 1210 code for regulation. 7

8. SITC SEA FREIGHT SERVICE ADVANTAGE FOR CROSS-BORDER E-COMMERCE
SITC Container Lines covers：
Japan, Korea, Taiwan, Hongkong, Southeast Asia and so on；
Take advantage of SITC high frequency and high density liner service, Shanghai and Ningbo will be the main ports of import cross-border e-commerce.
0versea warehousing and matched logistics service in Asia:
Supply the service of overseas goods collection, selection, packing and others for cross-border e-commerce.

9. Current progress of SITC cross-border e-commerce ocean transportation service
Build the logistic ability of cross-border e-commerce；
Prepare the training both for domestic and abroad companies
Carry out marketing with domestic and abroad companies
Target customer：
Overseas direct customer（manufacturer, brand owner, e-commerce, agents);
Domestic customers who set up shops on cross-border platform;
Direct cross-border ecommerce client, for instance, TIANMAO, JINGDONG, NO.1 SHOPPING MALL；

10. 二、APPLICATION FOR CROSS-BORDER E-COMMERCE TRADE

11. The reason for the rise of B2C cross-border e-commerce: trade-price difference
Personal postal articles tax：The Customs shall impose import duty on personal articles mailed from other areas and exempt duties for articles with import duties not more than RMB 50.
Main commodity tariff：General trading tariff VS personal postal articles tax
Commodity classification
General trading
Personal goods
Customs duty （most-favored-nation）
Value-added tax
Consumption tax
Personal postal articles tax
Cosmetics
10%
17%
30%
50%
High-end watches and accessories
11%
20%
Luggage -
Shoes and hats
15%
clothing
14-17%
Electronic products
Milk powder
Accessories
Personal sports equipment
12-14%
Overseas specialty 11

12. The reason for the rise of B2C cross-border e-commerce: trade-price difference
Price difference between domestic and overseas products(yuan)
SPEEDY 25
LV vanity
Domestic higher 64%
Swarovski LOVELY CRYSTALS watch
Domestic higher 71%
Domestic higher 19%
IPHONE6
16G
Lancôme black bottle 30ml
Domestic higher 26%
Enfamil 2
Domestic higher 64% 12 1

13. The reason for the rise of B2C cross-border e-commerce: trade-price difference
Tariff for goods under supervision
CASE-make-up products：tax-paid cost 4559 Yuan, of which taxes total are 2079 Yuan, accounting for 47%
STEP1:
FOB COST=$380；
Freight=$10, insurance=$10；
Exchange rate=1:6.2；
CIF COST=（ ）*6.2=2480 Yuan
CIF COST
CIF
2480元
FOB cost + insurance + freight cost
A tariff or tax imposed on goods when transported across international borders. Different tax rates are applicable.
STEP2：
Import customs duty rate=10%（most favored nation）；
Customs duty=2480*10%=248 Yuan
Customs duty
CD 248 Yuan
STEP3：
Consumption tax rate=30%；
Consumption tax=（CIF cost + customs duty）/（1-consumption tax rate）*consumption tax rate=（ ）/（1-30%）*30%=1169元
Consumption tax
A tax on spending on goods and services.
CT 1169 Yuan
Value added tax
VAT
662 Yuan
Applies to the market value added to a product or material at each stage of its manufacture or distribution
STEP4：
VAT RATE=17%；
VAT=（CIF+CUSTOMS DUTY+CONSUMPTION TAX) *17%=（ ）*17%=662元 13

14. Cross-border e-commerce trade：the blue ocean of e-commerce14

15. Import cross-border e-commerce port：Shanghai
Platform mode：direct mode& portal settlement；
Potential tenants：The merchant must be the entity registered overseas, and must provide one domestic company to be under government regulation and undertake post-sales service.
Presence requirements：
（1）the merchant provides the brand authorizing documents from overseas manufacturer or retailer, so as to prove the genuine source;
（2）needs to offer one domestic entity as the entrusted which could operates the store and provide post-sales service( if FTZ model, the entrusted must be registered in Shanghai free trade zone). At present, the approved imported goods category of cross-border e-commerce by CHINA government include: costume, baby products, foods, health care products, digital products, and luggage items ,etc. ( Alcohol, tobacco and drugs is beyond the scope of the license.)

16. 01 02 03 04 Import cross-border e-commerce port ：Shanghai 稳定 快速
Payment：Easipay, Unionpay, Tenpay；
Logistics：main partners include SF-EXPRESS、TNT、DHL、UPS (mainly targets direct mail) and domestic logistics companies.(Shops settled in portal could select from the list of domestic express provided by KJT)
Commodity admittance：easy for admittance, as long as commodity conform to the overseas standard, then could entry (no need for Chinese)
Stationed Process： 01 02 03 04
Enterprise filing
Products filing
Shops settlement
Online sales 自贸 稳定 快速

17. { CPS Charge mode：Sales commission & Deposit 0.5%-5% Capped fee
Different rates for different catalogue
Free registration
Fee wavier for special activity {
0.5%-5%
Capped fee
Free of charge until end of year
Deposit of 1000 Yuan is required before setting up stores

18. { Charge mode：other possible fees Warehousing charges Order sorting
Shanghai {
Free charge for 1-2 week
Free in promotion period
Warehousing charges
Order sorting
Secondary packaging
Customs declaration fee
Charge when actually happened
No charge for details

19. Plan for SITC cross-border e-commerce trade
1) Operation qualification：
“SITCSUPPLY CHAIN MANAGEMENT ( SHANGHAI) COMPANY LIMITED” as the guarantee enterprise within the territory of Shanghai;
“SITC LOGISTICS COMPANY LIMITED” as the foreign operation enterprise (cross-border e-commerce).
Enterprise filing on the portal of KJT of Shanghai
2) Operation procedure：
Enterprise filing in the customs system：domestic (SITC supply chain); overseas (SITC logistics HK)
Commodity filing in the customs system：maternal & child, grocery life , cosmetics, small appliances. For example, milk powder, napkin, toothbrush, vacuum cup, mask, shampoo and so on.
Overseas merchandise purchase: SITC overseas company is in charge of purchase or SITC headquarter purchase from direct channel, and paid by SITC LOGISTICS HK.
Offshore warehouse：after purchase, Japanese company take responsibility for receiving goods, sorting, booking for ocean freight, preparing for export documents, delivering container to terminal and other logistics operations.
Domestics receiving goods：after container arrives at Shanghai port, Shanghai branch company finishes the customs transit to nominated warehouse under customs supervision of KJT (FTZ of Shanghai airport)
Website online sales：Once goods are delivered and stock-taking is done, KJT approves our application, then we could do the online sales.
Products purchase and settlement：purchaser could buy on the website ( or other e-commerce website integrated with that of KJT. After a time, we could apply to KJT for purchase payment to SITC LOGISTICS HK.
Overseas settlement：after SITC LOGISTICS HK receives the payment, we could calculate the earned profit.

20. Plan for SITC cross-border e-commerce trade
3) Risk management and control
Customs Policy Risk：policies might change
At present the nation opens policy, “early entry, early benefit”.
Risk of combination of “Postal articles tax” and “trade tax” : relying on our SITC container liner high density service, the logistics cost of cross-border e-commerce will be more competitive with transparent trade purchase cost .
Exchange Rate Risk：Since the purchase of the good may be paid by local currency, while the sale will be paid by CNY, payment with “KJT” will use the foreign exchange rate quoted by the middle (the foreign currency is confirmed when enterprise filing in customs system, SITC LOGISTICS HK will settle accounts by US dollar).
Change the price of goods sold online in time when the exchange rate fluctuates substantially; or take foreign exchange rate hedging when the purchase is large ( in need of the technical support of financial center).
Relying on SITC container liner service, take the LCL transportation pattern of “small batch high density”, so that the foreign currency funds could be reduced.
Overstock risk：for part of goods with poor sales
In the initial stage, the goods we purchase are the good our staff are most interested in, so there might be no big worries about the expiration date.
Later we could take the pattern of “small batch high density” of LCL, this might be another way to reduce the risk of expiration of goods.
Fake risk：
We only purchase from Japanese local manufacturer or direct retailer in the beginning, rather than overseas personal buyers, that could make our products genuine and traceable. If any problem, we could transfer risk by contract terms and legal means.