Dr. Hong Xue

Laws and Practices of Cross-Border E-Commerce in China

Monograph

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Информация о книге

УДК 341:339(510)

ББК 67.412:65.428(5Кит)

H77

Author:

Dr. Hong Xue, Law Professor of Beijing Normal University, National E-Commerce Expert appointed by China Ministry of Commerce, Member of State Expert Committee on Trade Digitization, and Vice Chair of World Internet Conference Expert Committee on Cross-Border E-Commerce.

The book is a monograph to comprehensively research all the critical legal issues involved in cross-border e-commerce in China. It provides an in-depth study regarding the unique Chinese legal system in the field of e-commerce, and reflects the world-leading Chinese e-commerce practices. The book places the refined and summarized Chinese e-commerce legal paradigm in the context of the relevant international legal system, highlighting the forward-looking, open and globalized characteristics of China’s legal thinking.

The book is not limited to research digital trade law, but extends to the other key legal issues related to paperless trade facilitation, consumer protection, personal information protection, intellectual property protection, cybersecurity and data security, trade in data, dispute resolution and international cooperation, so as to present a holistic legal view regarding the cross-border e-commerce laws in China.

Legislation updated as of June 27, 2024.

The book that decomposes each important legal system, provides the insightful research and analyzes the relevant practical cases will be a useful handbook for researchers, practitioners and other audience.

УДК 341:339(510)

ББК 67.412:65.428(5Кит)

© Hong Xue, 2024

I. INTRODUCTION

China has the world’s largest Internet user community and still has a great potential for e-commerce development. According to the latest official statistics released in August 2023, there are 1.08 billion Internet users in China, which means that 76.4% of 1.4 billion population are online. Internet retail sales, mobile electronic payments and live stream streaming services keep growing steadily.1

According to the Statistics released by the China General Administration of Customs, 2023 total volume of cross-border e-commerce imports and exports reached RMB 2.38 trillion Yuan (roughly US$ 0.34 trillion) and the annual growth rate was more than 15.6%, in which export grew more than 19.6%. TEMU, Tiktok Shop, Shein, AliExpress and Shopee have become front runners in global e-commerce market.

China recognizes creation of internationally-competitive digital industrial clusters the key area of national development and long-term economic strategy.2 The government policies stimulate digitization of all industrial sectors and trade areas in which data becomes the core element of social productivity.3 Under the National Plan implemented from the beginning of 2022, enable digital economy has become the power engine of the new-round of technological and industrial revolution and a secured, open, cooperative, and orderly network community with shared future should ensure network and data sovereignty.4 With a number of world-class digital platforms being developed, digital economy is expected to take more than 10% of the Chinese GDP in 2025.5

1. E-commerce Innovations Powered by New Technologies

New technology has always been an important driver of trade. The prosperity and development of e-commerce cannot be separated from the popularization and application of network information technology. The application of pioneering new technologies such as artificial intelligence, blockchain, 3D printing, and the Internet of Things to e-commerce has spawned new business models (such as data transactions of IoT devices) and new service formats (such as data authentication), and triggered changes in transaction behaviors, transaction rules, and transaction systems. The application of new technology makes the transaction process clear and transparent, greatly enhances the traceability, guarantees the authenticity and integrity of transaction data, reduces the cost of contract management and performance, and significantly improves the efficiency of e-commerce. The smart contract system built on blockchain technology ensures that the transaction data and the performance process are consistent and cannot be tempered, which enhances the risk management ability of the parties to the transaction and ensures the security of the transaction.

China is the frontrunner for creation and application of technical innovations in e-commerce. For example, SHOPLINE, a company building independent websites SaaS system for cross-border e-commerce brands, provides end-to-end solutions for merchants all over the world, from product selection, website construction, traffic attraction, conversion to fulfillment to meet the needs of sellers of overseas brands. Relying on technological innovations, SHOPLINE has launched self-developed functional plug-ins, and tried to build Al-empowered website creation features to help brands achieve deeper operations. At the same time, based on the open ecosystem capability, SHOPLINE has started cooperation with ecosystem partners at home and abroad to rapidly expand the number and categories of apps in app stores, to empower more diversified e-commerce scenarios of independent websites, and help overseas enterprises achieve cost reduction and efficiency improvement. In addition, with the help of SHOPLINE’s integration system, merchants can effectively manage inventory, optimize operations and diversify sales channels, while maintaining brand consistency. SHOPLINE has provided services to more than 600,000 sellers around the world, including world-renowned brands such as Linsy, FMS and Samebike.

In another case, Hangzhou Shulex Technology Co., Ltd combines the services with Al innovation, realizes the intelligence and automation customer service, intelligently analyzes the relationship between the market and consumers, and uses the custom Al tag feature to identify new groups, new demands and new usage scenarios. In 2022, its business covers more than 100 countries and regions and has more than 100 million users around the world.

Meanwhile, new technologies have its limitations. Different systems such as blockchains, digital identities, or the Internet of Things are operating according to their own rules and are not connected to each other, potentially resulting in silos of data and over-centralization of data infrastructure. For the healthy and sustainable development of e-commerce, the development and application of global technical standards should be promoted, and the compatibility and interoperability between technologies, systems and applications should be enhanced, so that transactions and data systems can be interconnected.

E-commerce characteristic of algorithm, smart contracts, high-frequency and large volume requires the corresponding progress of the relevant trade rules and legal supervision. In e-commerce activities involving multiple actors in the supply and value chain, any small technical error or defect in the operation of AI systems can cause catastrophes and distort the entire contractual relationships interconnected with each other. But flows in system design, errors of human-computer interaction, and even failures in the execution of computer code are difficult to trace. Artificial intelligence (AI) models with deep learning ability operate in a technical black box and show some kind of autonomous will, in the absence of a clear legal basis, it is extremely difficult to attribute the responsibility of the AI outputs and make the affected parties obtain relief and compensation. In order to ensure the mutual trust and predictability of transactions under AI conditions, the human-centered principles proposed by the Digital Economy Partnership Agreement (DEPA) deserve consideration in international coordinated governance, namely: the algorithm shall be explainable, the information shall be transparent, and the system setting shall be relatively fair.

The application of new technologies in e-commerce must adapt to the relevant legal and policy environment. Technologies such as 5G communication, 3D printing equipment, drone delivery, and self-driving cars have raised public safety concerns. The network security of networked products, devices and facilities is the major concern. Countries have launched the relevant cybersecurity certification, assessment and other mandatory regulation, but the different scope of application and standards of national regulations may become a barrier to cross-border trade, and increase the compliance cost of e-commerce enterprises.

The application of new technologies shall not harm the legitimate rights and interests of citizens, legal persons and other parties concerned. China’s Regulations on the Protection of Minors Online clearly prohibit providers of online products and services from conducting commercial marketing to minors through automated decision-making, strengthening the legal obligation of e-commerce operators to protect minors’ personal information. The application of AI and big data analysis in e-commerce on consumer data profiling and targeting advertisement shall not damage the legitimate rights and interests of consumers, such as consumers’ right to know and right to choose. With respect to those software-driven connected products, quality warranty, after-sales services and product liability need to be defined by new legal norms.

New technologies evolve and advance very quickly, and their potential and value in e-commerce should be tested in market competition. The regulation of policies and laws should strictly adhere to the principle of technology neutrality, giving different technological solutions and implementation plans equal opportunities for competition, as well as avoiding abuse of market dominance by super-large platforms or enterprises, unreasonable monopoly of data and transactions, and damage to normal market competition.

In e-commerce, maintenance of a delicate balance between technological innovation and legal regulation to ensure development of new technologies in line with the efficient and sustainable development goals will be a difficult task for regulators in a long run. For the sake of common development goals, it is necessary for all countries to strengthen international information communication and cooperation, jointly promote the development and implementation of common technical standards, coordinate and harmonize new technology regulatory laws and policies, avoid conflicts and frictions between rules, and reduce the risk of fragmentation of the trade rule system.

The development of e-commerce in the world’s economies is extremely uneven, and the application of new technologies is exacerbating the existing digital divide. The Internet penetration rate in the least developed countries is still below 20%, technological innovation and application rate is low, and digital divide has become a development gap. E-commerce should be guided by the United Nations Sustainable Development Goals, promote inclusive development and win-win cooperation, and encourage multi-channel and multi-level technical assistance and technology transfer. E-commerce powered by new technologies will take off and creates new opportunities for global economic and trade growth.

2. The Global Development of Cross-Border E-Commerce

Digital technology is assimilating comprehensively across all domains and processes of human economic, political, cultural, social, and ecological civilization in the world. This assimilation is ushering in new concepts, business formats, and modalities, engendering a broad and profound impact on human production and life. Digitalization and the Internet have also profoundly changed the environment, models, and value chain of international trade, enabling the globalized market to become a more effective information system. Consequently, international trade has transcended into a new epoch of deep globalization, reveling in unprecedented development opportunities. Supported by digital network technology, digital trade of goods, services and intellectual property rights has taken a substantive portion of the total volume of international trade, enhanced trade efficiency, created new jobs and promoted economic growth and social progress. Against the background of deceleration of the world economy, e-commerce continues to uphold a robust growth trajectory, and becomes the new engine of global economic development.

Cross-border e-commerce characteristic of conclusion of sales contracts of goods or services via digital networks has become the main part of digital trade. Digital platforms are critical in cross-border e-commerce, which enable micro, small and medium-sized enterprises (MSMEs), and even individuals, to enter the field of international trade and engage in direct trading activities with foreign subjects. The infusion of Generative Artificial Intelligence (AI), Augmented Reality (AR), Virtual Reality (VR), and other avant-garde technologies are being extensively deployed in cross-border e-commerce, reshaping the modes and business formats of international trade. Cross-border e-commerce, that is enabled by modern information networks, promoted by the new cutting-edge technologies, and supported by digital platforms carrying tens of thousands of MSMEs, profoundly changes the pattern of world trade and global trade rules.

Cross-border e-commerce has emerged as a key and focal point in international economic and trade rulemaking. In the international multilateral trade system. Global e-commerce negotiations on electronic contracts, signature and invoices and consumer protection taking place at the World Trade Organization (WTO) and other for a have yielded new consensus, while countries are still at odds on the topics of international taxes, market access, online fraud, and cross-border data flow. Meanwhile, countries are exhibiting more flexibility as they engage in bilateral or regional trade systems tailored to their distinct circumstances. With respect to the international trade rulemaking on cross-border e-commerce, multiple negotiating and evolving processes, paths, platforms, systems, and fora are coexisting and mutually stimulated.

Development of cross-border e-commerce, however, is plagued by the insufficient compatibility of international rules and other issues and challenges. Huge disparities in terms of network penetration, infrastructure, degree of digitization, etc. among different countries and regions have led to highly uneven development of cross-border e-commerce in the world. Today, when cross-border e-commerce is gradually becoming the main form of international trade, countries (especially least developed countries) that lack the capacity to digitally transform their trade system are not only losing valuable development opportunities, but also facing the risk of being marginalized from the international trading system. The digital divide is getting widening in digital economy and digital trade.

The international rules of cross-border e-commerce are in the process of continuous development and evolution, while countries in digital transformation (especially LDCs) lack the ability to grasp and understand the changing international rules, this deficit leaves them in a state of disenfranchisement or semi-disenfranchisement at the pivotal juncture of the evolution of the international system of cross-border e-commerce.

The development of cross-border e-commerce depends on an appropriate policy and legal environment. However, developing countries have insufficient relevant policy and legal framework to effectively protect consumer rights, personal data and privacy and intellectual property rights.

Escalated compliance costs for developing countries and for the large number of MSMEs engaged in cross-border e-commerce increase trade uncertainty and risk. Influenced by the evolving international system, many developed countries and regions have strengthened their policies and legal regulation on cross-border e-commerce and the regulation on cross-border e-commerce is intensifying, with stronger penalties for non-compliance. Meanwhile, international system of cross-border e-commerce is increasingly complex and costly for compliance.

Developing countries lack the capacity and resources to implement measures to facilitate the import and export of goods in cross-border e-commerce. With the continuous development of the international system of cross-border e-commerce, not only are traditional multilateral systems such as the WTO active, but a large number of regional free trade agreements and digital economy agreements have emerged. However, developing countries that are not able to effectively implement paperless, automated, and digital single window mechanisms for regulatory processes suffer from inefficient trade, higher trade costs, and reduced competitiveness in the international market.

Developing countries have a deficit in understanding and readiness concerning novel legal challenges brought by emerging technologies, and are potentially left behind the evolution of the international rules system.

Given the global essence of cross-border e-commerce, countries in digital transformation need to confront new issues and undergo revisions and enhancements of their legislations and regulations in a timely manner.

3. Chinese Laws and Policies Enabling Cross-Border E-Commerce

A sound legal and regulatory environment is essential for e-commerce to maintain keep sustainable growth and reach its full potential. Although China has already developed a legal framework that broadly acknowledges legitimacy of trade contracts in digital form, many new regulations and policy documents for promotion of e-commerce were enacted. For example, the State Council issued the Guidance on Promoting the Healthy and Rapid Development of Cross-border E-commerce on 16 June 16 2015.

The Chinese National People’s Congress (NPC), the highest legislature in China, on August 31, 2018, officially approved and enacted the Electronic Commerce Law, which entered into force on from 1 January 2019. Unlike any other e-commerce laws in the world, the Chinese E-Commerce Law is not limited to legalizing e electronic transactions, per se, but addresses a variety of legal issues, such as e-payment, logistics and express delivery, e-commerce operators, consumer protection, data protection, intellectual property protection, online dispute resolution, governmental supervision and regulation, market competition and cross-border e-commerce. This comprehensive law lays down the legal foundation of the Chinese digital economy as well as creating es an enabling legal environment for e-commerce.

Apart from the E-Commerce Law, 2016 Chinese Cybersecurity Law, 2021 Data Security Law and Personal Information Protection Law, along with the other regulations and policies set up the regulatory framework to ensure e-commerce and digital trade operating in an orderly and lawful manner.6

Chinese cross-border e-commerce is developing vigorously in the enabling legal and regulatory environment. The Chinese legal systems regarding digital trade, paperless trade facilitation, data and security, consumer trust, intellectual property protection and alternative dispute resolution are particularly playing the essential roles in the development of cross-border e-commerce and deserve in depth research.

II. REGULATORY SYSTEM ON DIGITAL TRADE

By the end of 2018, China had 619 million consumers of Internet retail sales, 73.6% of 829 million Chinese Internet population shopped online, 71.4% of Internet population used mobile phones and 583 million people used mobile electronic payments when shopping; Alibaba Inc’s Alipay and Tencent’s Wechat pay have been operating in more than 40 countries and regions.7 Given that the Internet penetration rate was only 59.6% of China’s 1.4 billion population, China as the world’s largest Internet user community had great potential for e-commerce development. A sound legal and regulatory environment was needed to be crafted for e-commerce to maintain sustainable growth and reach its full potential.

Although many regulations and policy documents for promotion of e-commerce have been promulgated, for example, the Guidance on Promoting the Healthy and Rapid Development of Cross-border E-commerce issued by the State Council on June 16, 2015, they are short of the authority and coverage of laws. The Chinese National People’s Congress (NPC), the highest legislature in China, therefore tasked the Economic and Financial Committee to draft the E-Commerce Law at the end of 2013. The Draft was completed in the middle of 2016 and the Bill for the E-Commerce Law was filed and reviewed by the Standing Committee of the NPC four times from 2016 to 2018. On August 31, 2018, the NPC officially approved and enacted the Electronic Commerce Law of the People’s Republic of China (hereafter E-Commerce Law). The Law entered into force on January 1, 2019.

Unlike any other e-commerce laws in the world, the Chinese E-Commerce Law is not limited to legalizing electronic transactions, per se, but addresses a variety of legal issues, such as e-payment, logistics and express delivery, e-commerce operators, consumer protection, data protection, intellectual property protection, online dispute resolution, governmental supervision and regulation, market competition and cross-border e-commerce. This comprehensive law lays down the legal foundation of the Chinese digital economy as well as creating an enabling legal environment for e-commerce. To understand this unique Law, it is necessary to look into the legal systems and norms.8

The comprehensive E-Commerce Law contains the relevant legal norms from civil, commercial, administrative, financial and other laws and covers a variety of legal subjects and legal issues. The comprehensiveness of the Law aims to meet the needs of the complicated legal demands of e-commerce. Despite its comprehensiveness, the Law does not attempt to be a lengthy collection of a cluster of laws. Instead, the Law effectively coordinates with the existing laws and enables further legal developments in a coherent, robust and vibrant eco-system. The Law creates many innovative legal norms to fill in legal gaps between the existing laws, it updates and modifies certain provisions of the existing laws as well as creating completely new norms for e-commerce. The Law also effectively takes into account international legal developments and the need for cross-border e-commerce. In a nutshell, the E-Commerce Law that is comprehensive, coherent, innovative and internationalized which is a unique existence in the Chinese legal system.

Under the E-Commerce Law, e-commerce means the business activities of selling goods or providing services through the internet or any other information network. Financial products and services (except for electronic payment) are excluded from the scope of the application of E-Commerce Law. Content services provided via information networks, such as news information, audio-video programs, publications, and cultural products, are subject to the other laws on content regulation, but transactions of digital goods (for example, audios, videos, e-books, or visual games, etc.) shall apply the E-Commerce Law.

The E-Commerce Law applies to e-commerce both within the territory of China and in cross-border circumstances,9 particularly the follows:

• Chinese e-commerce operators invested in by foreigners;

• foreign e-commerce operators offering goods or services to consumers in China; or,

• regional or bilateral trade agreements between China and other countries adopting the Chinese laws.10

The E-Commerce Law may also be applied to cross-border e-commerce based on the transaction rules and service agreements of Chinese e-commerce platforms or the choices of the transactional parties.

In addition to the Chinese Civil Code, the E-Commerce Law provides the legal norms salient to digital trade, especially on automated contracting, electronic payment and express delivery, and e-commerce platforms.

1. Automated Contracting

The E-Commerce Law does not affect the other laws applying to the sales or service contracts. Formation and performance of e-commerce contracts shall comply with the Civil Code, the Electronic Signature Law, and the other relevant laws. But e-commerce contracts are typically concluded and frequently performed via automated information systems, which is specifically defined in the E-Commerce Law.

(i) Users of automated information system

The E-Commerce law clarifies that the e-commerce parties that use an automatic information system to enter in or perform a contract shall be responsible for the legal effect of using such a system.

Even if both parties commonly use one automated information system, there may be one party who can control and set up the system, while the other party (such as consumers) has no choice but to accept the setting and arrangement of the system. The party in control, under the E-Commerce Law, shall clearly, fully, and explicitly inform users of the procedures for forming contracts, matters that need attention, and the download methods, etc., to ensure the users’ convenient access to and download of such information in full.

E-commerce operators shall also provide access for users to correct any input error before submitting an order. If the users attempt to correct their input errors after submitting the orders, certain conditions shall be met, as provided in the United Nations Convention on the Use of Electronic Communications in International Contracts. The Convention, Article 14, provides that where a natural person makes an input error in an electronic communication exchanged with the automated message system of another party and the automated message system does not provide the person with an opportunity to correct the error, that person, or the party on whose behalf that person was acting, has the right to withdraw the portion of the electronic communication in which the input error was made if: (a) The person, or the party on whose behalf that person was acting, notifies the other party of the error as soon as possible after having learned of the error and indicates that he or she made an error in the electronic

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