HMRC survey of Chinese cross-border sellers highlights need for quality data

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According to a new report, cross-border e-commerce merchants in China largely depend on marketplaces and third-party agents to manage their compliance. The UK’s HM Revenue & Customs (HMRC) recently commissioned in-depth interviews with 30 Chinese online sellers for a report titled Knowledge and Attitudes of Online Sellers in China to UK Tax Compliance.

The interviews sought to ascertain the views of sellers regarding their customs and tax obligations when selling goods to the UK market.

The key findings from the report included the observation that there were good levels of awareness of recent regulatory changes, including the abolition of the VAT de minimis in the UK, but many lacked a detailed understanding of the changes.

However, Chinese online sellers were “mostly passive in their efforts to understand their UK tax and customs matters” and there was a “common assumption that unless otherwise notified, they (sellers) were acting in compliance with the relevant UK tax and customs obligations”.

Changes to UK tax and customs systems were also commonly viewed by sellers through the lens of Brexit, while there was also a lack of reliable information available from Chinese language sources.

Most sellers interviewed also used tax agents and shipping agents “with little evidence to suggest that sellers undertook rigorous due diligence to check the work of their agent.” Furthermore, the term VAT representative was unfamiliar to most sellers – only a small number were able to distinguish between the role of a VAT representative and a tax agent.

Commenting on the report’s findings, Martin Palmer, chief content and compliance officer at Hurricane Commerce, a cross-border e-commerce technology specialist, said, “Although this report is focused on the changes as a result of the UK removing its VAT exemption on low value items as of January 1, it could just as easily be applied to all countries and other major regulatory changes we are seeing.

“Most recently, this includes the abolition of the VAT de minimis in the EU and the launch of the Import One-Stop Shop (IOSS) intended to simplify the payment and declaration of VAT on items with a value of less than €150 (US$178) which is almost identical to the VAT changes in the UK on January 1, 2021.

“It is positive that the Chinese online sellers interviewed recognize the importance of compliance, but there are significant risks to outsourcing compliance responsibilities to third parties. Online sellers need to have robust systems in place to ensure that they are continually auditing their OMP and other providers such as tax and shipping agents. Assuming everything will be okay is never a good approach and you cannot delegate your legal responsibilities.

“The single biggest requirement for seamless cross-border e-commerce trade today is having the right product and complete and accurate shipment data.

“Complete and accurate product descriptions, HS6 codes and import and export codes are vital in complying with the ever-changing global regulatory environment as are the need to screen for prohibited and restricted goods and denied parties.

“In this area, the online seller has a critical role to play in ensuring its data is of the highest possible quality if it doesn’t want to encounter delays with customs clearance, shipment confiscation and additional costs.

“We have many examples where the quality of data being provided on consignments is incomplete and inaccurate. This is a global problem, but particularly acute in China and wider Asia given the region’s dominant status in the cross-border market.”

The full report can be found here.

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Lawrence has been covering engineering subjects – with a focus on motorsport technology – since 2007 and has edited and contributed to a variety of international titles. Currently, he is responsible for content across UKI Media & Events' portfolio of websites while also writing for the company's print titles.

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