(Source: https://pltfrm.com.cn)
Introduction
Understanding the legal aspects of e-commerce is essential for success in the Chinese market. This article explores how businesses can build a robust legal framework to operate effectively within China’s e-commerce landscape.
1. Setting Up a Legal Entity
1.1 Business Structure Options
Foreign brands must establish a legal presence in China. The most common structures include Wholly Foreign-Owned Enterprises (WFOE), Joint Ventures (JV), and Representative Offices. Each has its own advantages depending on business goals, product types, and operational scope.
1.2 Registration and Permits
Once a legal entity is established, brands must obtain various local permits and licenses to operate in China. This includes the required e-commerce business licenses, as well as any specific permits related to the industry, such as food safety or pharmaceutical licenses.
2. Understanding Product Regulations
2.1 Product Compliance and Testing
Foreign products sold online in China must comply with Chinese safety and quality standards. Some products, such as electronics or cosmetics, require mandatory safety certifications. Failure to comply could result in removal from e-commerce platforms or legal action.
2.2 Labeling and Packaging Requirements
Chinese law mandates that products be labeled in Mandarin, with specific details such as ingredients, usage instructions, and expiry dates. Non-compliant labeling can lead to fines or the suspension of sales.
3. Navigating the Tax System
3.1 Value Added Tax (VAT)
All e-commerce businesses in China must comply with the VAT system, which is set at a standard rate of 13%. Brands must ensure that they collect and remit VAT on sales in a timely manner to avoid penalties.
3.2 Import Taxes and Tariffs
Products imported into China for online sale are subject to import duties, which vary based on product type. Companies should be aware of these tariffs to ensure competitive pricing in the market.
4. Labor Laws and Employee Regulations
4.1 Employee Contracts and Benefits
When setting up a local team, foreign brands must adhere to Chinese labor laws, which require contracts that specify wages, working hours, and benefits.
4.2 Social Insurance Contributions
Companies are obligated to make social insurance contributions for their employees, which include pension, medical, and unemployment insurance.
Case Study: A Fashion Brand’s Legal Framework
A European fashion brand entering China established a WFOE and worked with local legal experts to ensure compliance with product safety regulations. They also worked with a tax consultant to navigate VAT and import tariffs, which helped them streamline their cost structure. As a result, the brand entered China’s market without major legal hurdles and quickly gained a foothold on Tmall.
PLTFRM is an international brand consulting agency that works with companies such as Red, TikTok, Tmall, Baidu, and other well-known Chinese internet e-commerce platforms. We have been working with Chile Cherries for many years, reaching Chinese consumers in depth through different platforms and realizing that Chile Cherries’ exports in China account for 97% of the total exports in Asia. Contact us, and we will help you find the best China e-commerce platform for you. Search PLTFRM for a free consultation!
