Nov 22, 2017
It has been well documented that American e-commerce platforms such as Amazon and eBay have become cesspools of counterfeits and other illegal and potentially dangerous goods that are mostly coming in from China, but, impervious to the apparent irony, Beijing is upping the regulations on foreign e-commerce merchants selling goods the other way.
A global marketplace
As we’ve previously covered:
In a world that is fast becoming borderless for goods, borders remain one of the biggest legal loopholes of our time. By selling internationally, IP laws, health and safety standards, and labor regulations become moot. The counterfeiters who sell their goods on Amazon and eBay can hide behind their national fortifications, fully immune to legal prosecution, as they freely sell illegal and potentially dangerous items to unsuspecting consumers around the world -- such as this lady who had her eyes "glued together" by what she thought was designer eye shadow that she bought on eBay or this family from Tennessee who had their million-dollar house burned down and cats killed when a counterfeit hoverboard they bought on Amazon exploded.
If a product is coming into the USA via B2C or F2C e-commerce it is virtually immune to government regulations, and products that would be otherwise deemed illegal if produced or sold domestically flow seamless across borders. While there are, of course, stacks of laws against counterfeit items and loads of consumer safety regulations, these legal safeguards are rendered impotent when dealing with foreign sellers, primarily because there are no legally liable parties within the jurisdiction of U.S. law to prosecute. Legal precedent has already been established that clears e-commerce sites like Amazon and eBay from responsibility for the products sold on their platforms, so criminals from abroad are pocketing billions selling illegal goods to Americans with complete impunity.
One-way system
This is not an exaggeration; this is the reality of cross-border e-commerce in the early 21st century. Globalization, technology, and consumer buying habits have gotten far ahead of lawmakers, which has ushered in a ‘Wild West’ atmosphere for those unscrupulous enough to take advantage of it.
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However, some countries have started to catch up. Even though the bulk of counterfeits, illegal, and fake goods being sold to U.S. consumers are coming from China, Beijing has taken assertive measures to ensure that merchants in other countries do not attempt to do the same thing to them.
US President Donald Trump (L) shakes hands with China's President Xi Jinping at the end of a press conference at the Great Hall of the People in Beijing on November 9, 2017. (NICOLAS ASFOURI/AFP/Getty Images)
More on Forbes: Amazon And Ebay Opened Pandora's Box Of Chinese Counterfeits And Now Don't Know What To Do
Last week, in the wake of Trump’s visit to China where he aimed to reestablish more equitable trade relations, Beijing issued a second draft of its new e-commerce law, which comes as a major blow to foreign companies looking to get direct access to the world’s most vibrant online consumer base, which just a couple of weeks ago spent $25.3 billion during the Singles Day online shopping event.
China in control
To put it simply, the draft of the new law firmly states that Chinese e-commerce is off limits to foreign retailers without going through a licensed Chinese middleman, that only sales that comply with Chinese law will be allowed into the country (i.e. no beauty products that are not tested on animals), that proper taxes and duties will be collected, that the foreign company must comply with China's cybersecurity laws (such as storing data on local servers), and, via the China Law Blog, “Foreign-owned operators of e-commerce platforms will also be excluded from operating in the Chinese market,” which means that Amazon’s Chinese dreams may have hit yet another big snag.
As Mark Tanner outlines in a recent ChinaSkinny newsletter:
Foreign retailers will be unable to sell online in China without going through a platform controlled by a Chinese-owned entity with the relevant licenses. Whereas the vast majority of online sales currently go through these channels anyway - Taobao, Tmall, JD, etc - it doesn't look positive for Amazon's ecommerce business in China, who this month sold their China-based cloud computing hardware due to the new cyber security laws. It also provides little hope for foreign brand.com stores.
To ensure that China has the logistical capabilities to enforce these regulations, more than 13 specialized cross-border e-commerce zones are being built across the country to curb the possibility that infringing products from abroad make it to their destinations.
More on Forbes: China Is Facing An Epidemic Of Counterfeit And Contraband Wine
Meanwhile, Chinese merchants can sell their products directly to consumers in the U.S. regulation and tax free and U.S.-based customers can freely shop on Chinese e-commerce venues.
The equivalent of what China is doing would be if the U.S. government forced Chinese e-commerce platforms like Aliexpress to open an eBay or Amazon store in order to sell to Americans, made these platforms liable for the sale of illegal goods, prohibited Americans from buying directly from all foreign websites, and provisioned U.S. customs with the capabilities to properly inspect e-commerce purchases coming into the country -- all of which probably isn't going to happen anytime soon.
While Xi Jinping goes around the world saying things like “Pursuing protectionism is just like locking oneself in a dark room. Wind and rain might be kept outside but so are light and air,” Beijing continues issuing protectionist policies that would even make Steve Bannon blush.
