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How Does The New ‘Made in China’ Rule Affect My Dropshipping Store?

Blog, eCommerce Insights | October 28, 2020

In this article, we will look into new dropshipping laws, and more specifically, we will find out how the new ‘Made In China’ rule might affect your business.

 

So before we delve a little deeper, let’s get started with the short answer:

 

How does the new ‘Made In China’ rule affect my dropshipping store? The new ‘Made in China’ came into force on November 9th, 2020 with a 45-day transition period. The rule affects the labeling of goods. The impact of this law is mostly a B2B change and won’t affect dropshippers or their customers, other than possibly in brand perception.

 

Ok so now we’ve got the mini takeaway sorted, let’s delve a little deeper into the new ‘Made In China’ regulation and how it might impact your dropshipping business.

 

Let’s first start off by discovering what this new rule is all about.

 

What’s the new ‘Made In China’ rule all about?

The US government recently released a notice stating that Hong Kong goods for export to the US must be relabeled ‘Made in China’ instead of ‘Made in Hong Kong’.

 

On July 14 2020 the Trump Administration issued an Executive Order requiring that all goods of Hong Kong /China origin must be physically marked as to the country of origin “China”. Products produced in Hong Kong and imported to the United States must be labeled “Made in China” instead of “Made in Hong Kong”.

 

If any cargo isn’t labeled correctly, then anyone failing to comply with the new regulation could be looking at a penalty of an extra 10 percent duty.

 

The new rule came into play on September 25th, 2020, with a 45-day transition period in place. This was to give manufacturers and importers a reasonable time span to comply with the new rules.

 

The new requirements will be in effect for all goods entered or withdrawn into warehouses for consumption in the U.S. after November 9, 2020.

 

According to the U.S Customs and Border Protection Agency, or CBP, The essence of the exporting doesn’t change, the new law is simply a change in the markings required.

 

“If any cargo isn’t labeled correctly, then anyone failing to comply with the

new regulation could be looking at extra 10 percent duty.”

 

So now we’ve found out a little of the background to the new ‘Made in China’ rule, you might be wondering exactly what the law says? Let’s find out below.

 

What does the new ‘Made in China’ law say?

  • According to the CPB, “Every article of foreign origin or its container imported into the Customs territory of the United States shall be marked in a conspicuous place and in such manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article.”

 

  • Any imported goods that are manufactured in Hong Kong that enter or leave from a warehouse to customers into the United States must be marked to indicate that their origin is ‘China’ rather than simply ‘Hong Kong’ as was the case previously with goods manufactured in Hong Kong.

 

  • As the labeling change doesn’t automatically change the product’s tariff destination, those shipping goods are to continue using the Hong Kong country code. According to the CPB, Shippers “should continue to file their entry summaries and duty payments according to current regulation and policy,”

 

  • Any products that are not marked properly could be held in a Foreign Trade Zone to be properly marked under a permit which is issued by the Port Director, where they then will be correctly marked or if necessary have any markings which don’t comply with the new rule to be removed.

 

So what is the background of this new law and why was it necessary?

 

Why the change to ‘Made in Hong Kong’ labeling?

The U.S. ended its special trade relationship with Hong Kong with an Executive Order on Hong Kong Normalization, issued on July 14, in response to the Chinese government’s decision to ‘unilaterally and arbitrarily impose national security legislation’ surrounded by protests of pro-democracy.

 

As a result of this, an executive order was compiled to explain labeling changes for shipments coming in from Hong Kong.

 

The trade between Hong Kong and the US is fairly small at a value of $4.7 million during 2019, as compared with the importing from China, which as of the same period was estimated at around $451 billion.

 

You might be concerned as to the impact of the new ‘Made in China’ rule on your Shopify or another eCommerce store.

 

‘an executive order was compiled to explain labeling

changes for shipments coming in from Hong Kong.’

 

Let’s discover more.

 

What is the impact of the new ‘Made in China’ rule on my eCommerce store?

As a dropshipper, importing goods from China, many of those products will make their way to your customers via Shenzhen-Hong-Kong port to Hong Kong airport or port.

 

Hong Kong is essentially the hub of goods shipped out of China, as a cost-effective option for goods produced in South China region. At that point, they are then loaded up and transported to worldwide destinations including the U.S.

 

The new ‘Made in China’ order changes simply Hong Kong product labels and has no impact on tariffs.

 

The impact of this new ‘Made in China’ law is within the B2B element of dropshipping rather than store owners and customers. So essentially, if you are a store owner you won’t have to do anything about the law as this will be handled by the manufacturers and shippers.

 

For sellers who dropship products directly from China to the US, there’s no impact, and no action required.

 

The impact will more likely be on ‘brand perception’ according to experts such as Tim Yu, a supply chain risk intelligence analyst with Resilience360.

 

He goes on to say that for those importing luxury, technology or cultural products the impact of the new China law may see customers having different perceptions of product representation, but won’t be affected by any financial impacts.

 

“The impact of this new ‘Made in China’ law is within the B2B element of

drop shipping rather than store owners and customers.”

 

And finally…

We hope this article has better helped you to understand the impact of the new Chinese labeling laws and the impact on your dropshipping eCommerce store.

 

It’s safe to assume that the laws refer simply to labeling and there won’t be any direct impact on you as the owner of a store or your customers in terms of prices.

 

The main impact of this new shipping law is in the B2B sector and you won’t have to action any new changes for your dropshipping, eCommerce or Shopify store to comply.