Cross-Border E-Commerce Challenges

"Currently, customs oversee more than 7 billion cross-border e-commerce and cross-border mail and express packages annually, averaging around 20 million pieces per day," said Lv Daliang, Director of the Statistical Analysis Department of the General Administration of Customs, at a series of thematic press conferences held by the State Council Information Office on "Promoting High-Quality Development." He added that cross-border e-commerce has become a new driving force for the growth of China's foreign trade.

The latest data released by the General Administration of Customs shows that in the first half of this year, China's cross-border e-commerce import and export volume reached 1.22 trillion yuan, a year-on-year increase of 10.5%, which is 4.4 percentage points higher than the overall growth rate of China's foreign trade during the same period.

However, behind the explosive growth of cross-border e-commerce, the lack of supporting facilities faced by sellers has become a bottleneck constraining its development. Taking logistics overseas warehouses as an example, phenomena such as frequent loss of goods, buck-passing responsibility, and no recourse for losses are increasingly criticized by the industry. Against this backdrop, how to standardize processes and improve regulatory capabilities urgently requires more attention.

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Who is responsible for frequent loss of goods?

"On May 15th and 31st this year, I sent 5 boxes and 7 boxes of goods to the Orange Union overseas warehouse in Houston, USA, through a freight forwarding company in Qingdao. The goods sent on May 15th were shown to be signed for on June 11th, but 4 boxes were lost, and the goods sent on May 31st were shown to be signed for on June 24th, but 1 box was lost," a cross-border e-commerce seller from Shandong said helplessly to the reporter recently, "Even if only calculated based on the purchase cost, the value of the lost goods is tens of thousands of yuan."

In the past two months, the seller has communicated with the freight forwarding company, logistics company, and overseas warehouse on three occasions, but none of them were able to find the lost goods. "The overseas warehouse responded with 'goods not received' and issued a proof of non-receipt of goods. The logistics company showed that the goods had been delivered and had a proof of delivery, while the freight forwarding company in Qingdao said they were powerless," the seller said.

It is understood that the seller transported the goods from Chinese ports to American ports by sea through Qingdao Xingbaisheng International Logistics Co., Ltd. (hereinafter referred to as "Xingbaisheng Company"), and after the goods arrived at American ports, they were delivered to the Orange Union's overseas warehouse by FedEx. Under normal circumstances, the seller can only put the goods on the shelf and sell them online after they arrive at the overseas warehouse.

Tianyancha shows that Xingbaisheng Company was established in 2018, with Shao Feike as the legal representative, a registered capital of 5 million yuan, and an actual payment of 0. The company's social security information shows 4 people, and the registered address is in Chengyang District, Qingdao. It is a company mainly engaged in multimodal transport and transportation agency business.

The official website of FedEx in the United States shows that FedEx Express is one of the world's largest express transportation companies, providing fast and reliable express services to more than 220 countries and regions; the official website of Orange Union shows that Orange Union is a technology company serving global cross-border e-commerce, committed to providing customers with logistics, finance, big data, and other multifaceted service products through market analysis, system development, and resource integration, providing high-quality, comprehensive service solutions for global cross-border e-commerce. Orange Union was jointly established by domestic private equity investment institution CITIC Industrial Fund and American cross-border e-commerce platform eBay, mainly providing logistics services for cross-border e-commerce sellers.

In response to the loss of goods by the cross-border e-commerce seller, the reporter interviewed Xingbaisheng Company, FedEx, and Orange Union respectively.Xing Baisheng Company's person in charge, Shao Feike, stated in an interview with journalists that the FedEx official website shows the goods were normally picked up and have also been normally signed for. "It's hard to say at the moment whether it's an issue with the Orange Union overseas warehouse or FedEx logistics, but under normal circumstances, it's likely to be an issue with the overseas warehouse. Since the company handles a lot of goods daily, if there were a logistics problem, there should be many similar situations. However, only a few orders have similar issues, which might suggest a problem with the overseas warehouse," said Shao Feike.

Is it indeed a problem with the overseas warehouse? In response to this, Orange Union Corporation stated: "The current situation of the seller's lost goods is being actively investigated and handled internally. If it is verified to be the responsibility of Orange Union Corporation, we will handle it according to the agreement signed with the customer."

The person explained that for similar incidents, the company would take measures such as dedicated after-sales customer service and investigation tracking. If this incident is the responsibility of Orange Union, they will compensate and refund according to the relevant responsibility agreements. "At the same time, we suggest that seller customers can consider purchasing cargo transportation insurance during the initial logistics segment to Orange Union's overseas warehouse to protect their rights and interests in case of loss or damage by the initial logistics carrier."

At the same time, FedEx, responsible for logistics, responded to the journalist, stating that the company's relevant departments are currently assisting in the investigation and handling of the matter and will promptly consult with the relevant consignees to resolve the issue properly.

The person said: "The seller directly shipped through a third-party cargo agency, which then entrusted the delivery to FedEx USA. This means the seller is not a direct customer of FedEx. The seller can contact the cargo agency to confirm the shortage of goods and the reasons, solutions, and claims, as they have a direct contractual relationship."

"We have also received feedback from the seller. Currently, the transportation and receipt show normal, so we cannot determine whether the loss of goods occurred during the sea freight process or if there was a problem elsewhere. From the perspective of claims, the seller needs to confirm with the cargo agency," said the person in charge of FedEx.

In fact, the above situation is not an isolated case.

Regarding the issue of lost goods, other sellers have also expressed to the journalist that their goods sent to the United States were lost during delivery. "I used another logistics company in the United States, and at that time, a box of goods worth 3000 yuan was lost, but the logistics company only compensated 100 US dollars, which is approximately 700 yuan."

"What's strange is that the goods were not all lost, but only a part was lost, and the other part was normally put on the shelf. Moreover, FedEx did issue a receipt for all the goods, and the receipt also had the name of the recipient," said the seller who lost the goods.

Shao Feike stated that in FedEx USA, only truck delivery requires warehouse staff to sign on paper documents, while cases like the seller's belong to normal express delivery, which usually does not require warehouse staff to sign for it. This is a default term, meaning that after delivery, electronic receipt is taken by default.Overseas Loss of Goods is a Common Phenomenon

Why do cross-border e-commerce companies frequently experience the loss of goods in overseas warehouses? How can sellers protect their rights and interests?

On social media platforms, many bloggers have reported such incidents, with some even providing educational videos on how to recover lost goods, whether it's possible to recover them, and how to claim compensation.

A senior figure in the international logistics industry, when interviewed, stated that the loss of goods is very common abroad, "it might seem abnormal if goods are not lost."

He gave an example, saying that when a client has 100 boxes of goods tied together, some couriers might steal from the middle and then disperse the goods. Upon arrival at the destination, they simply drop off the goods and leave, and the warehouse usually does not count the number of goods, typically shelving whatever the logistics company delivers.

"Due to the high number of loss incidents, many sellers use thick, dark-colored cardboard boxes or bags to pack goods, with no markings on the outside. This is mainly to prevent couriers from seeing the products inside, but it inevitably increases the costs for Chinese sellers. However, if this method is not used, and the couriers know what the goods are, especially if they are valuable, they are likely to be stolen," the senior figure said. "We had a client who sent an inflatable tent to the UK, worth one to two thousand US dollars, and after three shipments, the buyer still did not receive it. So, such incidents are hard to avoid."

"Cross-border e-commerce and its logistics have developed rapidly in recent years, but there is also a phenomenon of mixed quality, making it quite chaotic," lamented industry veteran Liu Xiaobin.

In 2006, Liu Xiaobin resigned from public office to become a foreign trade entrepreneur, covering both traditional foreign trade and cross-border e-commerce. In 2018, Liu Xiaobin passed the judicial examination and transitioned into a foreign trade lawyer specializing in international trade and cross-border e-commerce. Today, he is a member of the E-commerce Law Committee of the Shenzhen Bar Association and the Deputy Director of the Cross-border E-commerce and International Trade Legal Affairs Department at Yingke Law Firm (Shenzhen) in Beijing.

In an interview with a journalist, Liu Xiaobin said that contracts between cross-border e-commerce sellers and logistics companies generally fall under multimodal transport contracts. Cross-border e-commerce sellers usually entrust their goods to a freight forwarding company, which typically provides a one-stop service, which can be understood as a "general contractor." This "general contractor" is responsible for shipping the seller's goods overseas by sea or air.

After the goods arrive at foreign ports, they are then entrusted to local customs brokers for import clearance. After clearance, they are generally handed over to local courier companies for delivery to the seller's overseas warehouse in the destination country. The seller's overseas warehouse may be owned by major cross-border e-commerce platforms, rented by the seller, or even self-built by larger sellers.For the frequent loss of goods by sellers, Liu Xiaobin believes there are three main reasons: First, the process chain is very long; second, the long chain involves many entities, with complex relationships among multiple parties; third, although the cross-border e-commerce industry has been developing for many years, explosive growth has only occurred in recent years, and with a relatively low industry barrier, it is inevitable that there will be a mix of good and bad players.

In Liu Xiaobin's view, many cross-border e-commerce logistics companies currently operate in the nature of "husband and wife shops," with registered capital of several million yuan, but actually paid-in capital is 0, and often only a few people in the company participate in social insurance. "Although they are small in scale and limited in capacity, they bear great responsibility. For example, if the lost goods are very valuable and they cannot afford to compensate, they might even abandon the company."

In addition, in practice, small freight forwarding companies usually do not deal directly with shipping companies but are sub-contracted through multiple layers before finally obtaining the shipping company's space. After a long chain, the goods are delivered to the destination, and sometimes they do not know where the goods are lost.

In addition to the issues of small shops and multi-layer sub-contracting, there is often another "pit" waiting for sellers.

Liu Xiaobin said that another way of losing goods is being detained by customs in the destination country or region. Some freight forwarding companies will offer extremely low prices to take orders from sellers, and then bundle the seller's goods with some dangerous goods and contraband into one shipment to "rush through customs." However, when inspected by foreign customs, it is inevitable that penalties will be imposed on this shipment and it will be destroyed uniformly. At this time, the freight forwarding company will often take the penalty notice issued by foreign customs and tell the cross-border e-commerce seller that the goods have been destroyed due to violations, and claim exemption from liability.

Why do freight forwarding companies take the risk of bundling goods with dangerous goods to "pass through customs"? Liu Xiaobin said that in theory, freight forwarding companies should declare the goods of each consignor separately, but in practice, they may bundle many goods and declare them uniformly. The reason why some freight forwarding companies are willing to serve cross-border e-commerce sellers at extremely low prices is that they actually earn money from transporting dangerous goods and contraband, and the ordinary goods of the sellers may only serve as a cover.

Based on the chaos in the cross-border e-commerce freight forwarding industry, how can sellers avoid risks and protect their rights and interests?

"Sellers should try to avoid risks in advance, rather than claim compensation afterwards, because the cost of rights protection afterwards is too high." Liu Xiaobin suggests that sellers should conduct background investigations on freight forwarding companies, not only through business apps such as Tianyancha and Qichacha, but also by checking the China Judgments Online and China Execution Information Public Network for relevant company information. In fact, many companies are already "scarred." "If the value of the goods is high or there is a need for long-term cooperation, it is also necessary to visit the freight forwarding company on site for inspection."

Second, sellers should sign complete and standardized contracts with freight forwarding and overseas warehouse companies. Although in practice, even if both parties do not sign a written contract, it does not affect the claim of rights, because both parties have chat records on WeChat and other platforms to prove the existence of a contractual relationship, a complete and standardized contract will often clearly define the main rights and obligations of both parties. For example, a very key point is the compensation standard for the loss, damage, or delay of goods.

Liu Xiaobin said: "The cross-border e-commerce logistics industry is also very competitive. Most of the time, sellers, as the party A, are in a relatively advantageous position and can negotiate with logistics and overseas warehouse companies. Even if the other party is more powerful and their contract cannot be changed, at least the contract should be reviewed clearly to understand the main risks that will be faced." "By doing the above two points, most risks can be avoided."Liu Xiaobin also specifically warns that when sellers sign contracts with freight forwarding companies and overseas warehouses, they should pay attention to the issue of the contracting party. "It is essential to see who the contracting party of the contract is. Many times, freight forwarding companies or overseas warehouse companies will sign contracts with sellers in the name of an affiliated company, which may be a foreign company. If this point is not paid attention to, even if the Chinese court rules in favor, it is often difficult to enforce the judgment."

In practice, courts in mainland China generally have jurisdiction over disputes in the cross-border e-commerce logistics field. The main reason why many Chinese sellers choose to give up their rights protection is the high cost of doing so. "In fact, in many similar cases, the value of the goods is not high. Considering the litigation fees, attorney fees, and the litigation period, in general, the loss of goods worth tens of thousands of yuan can only be considered unfortunate." If they sue overseas, the cost of rights protection is even higher. "Lawyers in Europe and America often charge by the hour, and even goods worth one or two million yuan may not be enough to pay the attorney fees," Liu Xiaobin said.

Unregulated industry supervision is difficult

Regarding the problems encountered by cross-border e-commerce sellers, a person in charge of the Qingdao Postal Administration said: "We supervise express delivery companies, and this seller may be shipping abroad through bulk cargo logistics, which we cannot supervise."

"Moreover, if the goods are sent from Qingdao and the goods are undertaken by one company from start to finish, we can also supervise. However, the problem is that the goods of the relevant sellers are transported by multiple companies, and the incident occurred abroad, which is beyond our supervision authority," the person in charge said.

A staff member of the Qingdao Transportation Bureau said that the registration location of Xingbaisheng Company is in Chengyang District, and the jurisdiction of the Municipal Transportation Bureau is the three urban districts, namely Shibei District, Shinan District, and Licang District. Specific issues should still be inquired at the Chengyang District Transportation Bureau.

A staff member of the Chengyang District Transportation Bureau said in response to a journalist's interview: "International logistics is an unregulated industry. The so-called unregulated industry mainly refers to the absence of industry management departments. The operation of the business does not require our permission. Moreover, this is a commercial dispute, and if the two parties cannot negotiate, they should file a lawsuit in court."

Liu Xiaobin believes that it may be difficult for the regulatory level to introduce strict restrictive policies in a short time. The law is often lagging, and during the rapid development stage of the industry, it is better to gradually standardize and improve through industry practice and judicial practice, and then elevate to the legislative level, otherwise, it may have a counter-effect on the development of the industry. "I am inclined to let the regulatory authorities wait a bit longer and let the bullet fly for a while."

However, regarding the supervision of cross-border e-commerce policies, Liu Xiaobin suggests that regulatory authorities can consider formulating a unified logistics contract template for the cross-border e-commerce industry, just as the housing and construction department provides contract templates for homebuyers and renters. At the same time, carry out some basic legal publicity for cross-border e-commerce and cross-border e-commerce logistics industries, which can greatly reduce the risks of all parties.

Du Guochen, the director of the E-commerce Research Institute of the Ministry of Commerce, said in an interview that there are indeed many overseas cargo loss issues, and there are almost no better regulatory methods. Cross-border e-commerce is different from traditional general foreign trade. Traditional foreign trade will purchase cargo insurance, and the practitioners and intermediate service personnel are also very complete and professional. Even if there are problems, the responsibilities will be clearly divided. However, the current sellers engaged in cross-border e-commerce lack the support of intermediate service providers and are directly pushed to the front. Most of them belong to small and medium-sized businesses and do not have professional knowledge of international trade. Once they encounter problems, they are often not good at and dare not to protect their rights in the face of complex and difficult processes.Du Guochen pointed out that the country values the development of the cross-border e-commerce industry. It is not only necessary to promote the development of cross-border e-commerce sellers but also to pay attention to the development of intermediary service providers serving these sellers. It is important to strengthen the construction and development of the cross-border e-commerce ecosystem, which includes various aspects such as law, logistics, overseas warehouses, customs declaration, and taxation. In particular, the construction of China's own overseas warehouses and overseas logistics systems must be emphasized to avoid being at the mercy of others.

If a complete ecosystem is not built now, it will become a "bottleneck" in the future. Most of the current overseas warehouses are still primarily self-built by Amazon and other major platforms, while our own overseas warehouses and supporting facilities are too few. If more are built, it will lead to full competition in the industry. In this way, companies will compete in terms of service, security, and efficiency. Only then can cross-border e-commerce sellers choose and eliminate backward intermediary service enterprises through market behavior.

"China's express logistics industry has also been tested by billions of packages during 'Double 11' and '6.18' events, while the population of the United States is less than that of China. Although the logistics system is also very developed, it is still difficult to cope with the increasing amount of goods from China," said Du Guochen.