Regulatory uncertainty in China has seen a courier company suspend Australian infant formula deliveries from Wednesday in a worrying sign for one of the country's fastest growing exports.
Vanda Express, a courier company specialising in parcels from Australia to China, notified customers of the indefinite suspension via its WeChat account on Monday.
It said parcels could not be delivered until China's Customs Bureau adjusted its systems to accommodate new import taxes, which have been rolling out since April 8.
Cui Yi, who works with Vanda Express in Perth, confirmed the change.
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The tax increase on parcels and cross border e-commerce purchases is being accompanied by tougher inspections and the levying of import taxes at airports across China. Kate Geraghty
"The reason we have suspended deliverers is due to the tax increase," he told The Australian Financial Review via phone.
Mr Cui said it was unclear when shipments would resume, while adding the tax changes would not, at this stage, affect deliveries of vitamins and other health products.
The changes are likely to impact sales for Bellamy's Organic, which is popular in China, and Blackmores, which recently launched its own brand of infant formula in partnership with Bega Cheese.
It is the latest disruption to China's so called "grey market" import channel following the April introduction of new regulations and taxes for e-commerce sites.
It was initially thought the changes would not affect parcels sent to China by personal shoppers, known as daigous, who are based overseas.
But in recent weeks, the customs office has begun collecting import taxes of between 15 per cent and 60 per cent on parcels sent to individuals from offshore.
The imposition of the new tax has caused traffic chaos and long lines to form outside post offices across China, where some are waiting more than two hours to pay duty and collect their packages.
Daigous usually buy infant formula, vitamins, cosmetics and other consumer goods from regular supermarkets and chemists, before couriering them to China.
While their products are often cheaper than in China, due to high taxes on the mainland, the main reason for the popularity of the service is that consumers believe goods bought overseas are less likely to be fake or tampered with.
Bain & Co estimated the parcel market into China was worth $US7.6 billion last year ($10.5 billion).
Under the new rules, infant formula sent to individuals from overseas attracts a flat tax rate of 30 yuan ($6.30) a kilogram, according to a notice displayed at a customs office in Shanghai.
The halting of some infant formula deliveries is due to uncertainty about whether customs will clear the packages while systems are being upgraded.
One Sydney-based daigou told the Financial Review on Monday that another courier company, Shentong, had suspended all deliveries from Australia to China because of the tax changes.
He said the regulatory changes had caused a great deal of "uncertainty".
He said daigous were less worried about the imposition of the new tax, but were concerned foreign goods sent by courier could be blocked from entering China.
Two other popular courier companies used by daigous, BlueSky and EWE, have not suspended deliveries of infant formula or other products.
On top of the tax increase, rumours have been circulating in China for some weeks that new regulations for parcel deliveries of food and other products would be announced on June 1.
The peculiar trust Chinese consumers put in daigous helped generate around $110 million in sales for Blackmores in the first half of the financial year, according to chief executive Christine Holgate.
That was about 32 per cent of all sales by the vitamin maker.
The parcel channel is equally significant for the likes of Swisse and Bellamy's.
Mark Tanner, the managing director of market research firm China Skinny, said the government's strategy was not only to promote domestic retailers but also push people towards cross border e-commerce platforms.
"It's not just a tax grab. The e-commerce sites are easier for the government to regulate and monitor," he said.
On April 8 China levied an 11.9 per cent tax on goods bought via cross border e-commerce sites, although a plan to implement tougher import regulations is likely to be delayed for another 12 months.
The new impost is one part of the government's policy to boost Chinese domestic retailers, which have lost significant sales in recent years to packages sent from overseas and cross border e-commerce sites.
"There are still lots of food scandals in China and people believe they can trust products sent from overseas," said Mr Tanner.
The tax increase on parcels and cross border e-commerce purchases is being accompanied by tougher inspections and the levying of import taxes at airports across China.
This so called "suitcase channel" was worth $1.13 billion to Australia last year, according to figures compiled by federal government agency, Tourism Research Australia.
The agency estimates Chinese tourists holidaying in Australia spend 10 times more than those from Britain, which are the second biggest spending visitors.
It is unclear at this stage what effect the new airport inspections will have on Australian retailers.
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