Cross border e-commerce payment: dual wheel drive of foreign exchange and RMB

LABEL： Telecommunications, media, entertainmentand high technology , Compliance business , Digital economy ,

According to the latest calculation data from the General Administration of Customs, in the first three quarters of 2024, China's cross-border e-commerce imports and exports amounted to 1.88 trillion yuan, a year-on-year increase of 11.5%, which is 6.2 percentage points higher than the overall growth rate of China's foreign trade during the same period. Among them, exports amounted to 1.48 trillion yuan, a year-on-year increase of 15.2%, and cross-border e-commerce exports have become a key focus for foreign trade enterprises. During the 136th Canton Fair, the cross-border e-commerce exhibition area introduced 7 top cross-border e-commerce channels and 34 supporting service providers, fully demonstrating the complete layout of China's cross-border e-commerce industry chain and attracting a large number of overseas buyers. The industry symposium was held concurrently with the Canton Fair, discussing cutting-edge topics such as payment innovation and compliance challenges, highlighting the strategic position of cross-border e-commerce in the global supply chain.

With the deepening of globalization, the complexity of capital flows has become a key challenge for enterprises to expand into overseas markets. Is there a difference in cross-border e-commerce payment under different export modes? What are the main legal risks in foreign exchange compliance? How does cross-border RMB bring new possibilities to the payment model of cross-border e-commerce? In this context, enterprises not only need to operate in compliance with foreign exchange regulations, but also actively seize the new opportunities provided by cross-border RMB and enhance their competitive advantage through dual wheel drive.
1、 The choice of cross-border e-commerce export mode and foreign exchange path

Under the item of goods trade, banks confirm whether the cross-border transfer of funds has a genuine and legal basis for goods trade based on customs supervision and statistics. Therefore, export e-commerce should reflect the true trade relationship in the customs declaration mode in order to comply with the principle of "whoever exports receives foreign exchange". We analyze the main customs declaration modes currently adopted by export e-commerce as follows:
（1） 9610 Export (Cross border E-commerce Retail Direct Mail Export)

In the 9610 export scenario, domestic cross-border e-commerce sellers obtain orders through domestic and foreign cross-border e-commerce platforms and send goods to overseas consumers through cross-border direct mail.

Case: A Chinese domestic seller opens a store on a cross-border e-commerce platform overseas, selling electronic products such as USB extension cords and card readers, and providing computer repair and consulting services. The goods are shipped overseas through cross-border direct mail, and overseas consumers transfer the payment for the goods and shipping fees to a third-party electronic payment platform under the e-commerce platform. After overseas consumers receive the goods and check that there are no quality issues, this information will be fed back to the third-party electronic payment platform, which will then transfer the payment to the domestic seller.

At the level of foreign exchange regulation, if a domestic seller chooses a domestic payment institution to handle cross-border e-commerce remittance for them, the payment institution needs to make a declaration in accordance with relevant regulations. The relevant payment should be declared under the "122030- Online Shopping" item, and the transaction remarks should indicate not only the nature of the transaction, but also the words "cross-border e-commerce overseas platform+platform name" and so on.
（2） 1210 Export (Special Area Retail Export)

1210 exports are divided into two modes: traditional mode and overseas warehouse mode. The traditional model refers to domestic enterprises exporting goods in bulk to regions (centers), with customs implementing accounting management. Overseas consumers purchase goods through e-commerce platforms and receive them through logistics express delivery. Overseas warehouses refer to domestic enterprises exporting goods in bulk to regions (centers), and customs also implement accounting management for them. After completing tallying and LCL in the region, enterprises export in bulk to overseas warehouses, complete retail through e-commerce platforms, and then deliver goods from overseas warehouses to overseas consumers.

The foreign exchange supervision logic for export 1210 is consistent with that for export 9610. When domestic sellers sell through overseas e-commerce platforms and receive payments directly from overseas payment companies to their domestic bank accounts or payment institution accounts, the payment is specifically under the "122030 Online Shopping" foreign-related income and expenditure transaction code, and the platform information is specified in the transaction remarks.
（3） 9710 export (B2B direct export)

Under the 9710 export model, domestic enterprises reach transactions with overseas enterprises through cross-border e-commerce platforms, directly export goods to overseas enterprises through cross-border logistics, and entrust banks or third-party payment institutions connected to the cross-border e-commerce platform to collect and settle payments.

Case: A domestic enterprise sells large machinery and equipment such as bearings through B2B direct export on a cross-border e-commerce platform in China. The goods are shipped to overseas purchasing enterprises through the global logistics platform, and are cleared and filed with customs. After receiving the goods and confirming that there are no quality issues, the overseas enterprise will transfer the bearing payment to the third-party electronic payment platform under the platform. A company withdraws the payment from the cross-border e-commerce overseas platform's independent export account to the bank's foreign currency settlement account through the "withdrawal" method.

As the cross-border e-commerce overseas platform and its third-party guaranteed electronic payment platform are domestic enterprises, the withdrawal of funds by domestic enterprise A from the third-party payment platform is a domestic fund transfer between residents and does not require declaration. The payment for this cross-border e-commerce B2B direct export method should be indirectly reported by the third-party payment platform that actually receives foreign-related income in China according to the requirements of centralized payment and collection business restoration declaration. In the cross-border transaction process (i.e. when actual foreign-related payment and collection items are made), two types of data should be reported: one is the actual foreign-related payment and collection data of the centralized payment and collection institution after centralized payment and collection or net deduction settlement, and the other is the original payment and collection data of domestic enterprise A restored one by one. If domestic enterprise A conducts fund collection and payment through a bank that has the qualifications to carry out payment business, the bank should be regarded as a third-party payment institution and still need to declare in accordance with the requirements of centralized collection and payment business of third-party payment institutions.
（4） 9810 Export (Overseas Warehouse for Cross border E-commerce Export)

In this mode, domestic enterprises deliver their exported goods to overseas warehouses through cross-border logistics, and after the transaction is completed through cross-border e-commerce platforms, the goods are delivered from overseas warehouses to buyers. This is commonly seen in enterprises that use FBA mode or export from overseas warehouses. Simply put, the 9810 export model adopts the principle of "order before delivery, goods first", which can shorten logistics time, improve the efficiency of cross-border e-commerce goods delivery, and reduce the rate of damage and packet loss. However, this also means that cross-border e-commerce goods are transmitted to customs as "overseas warehouse booking information" rather than "transaction orders" during export declaration. As a result, the collection process of 9810 will face the situation of "relying on subsequent overseas sales, uncertain collection amount and time". To address this issue, under the 9810 mode, foreign exchange management departments can determine trade data based on customs declaration data and cross-border e-commerce platform sales data, allowing enterprises to conduct fast and transparent foreign exchange settlement. In addition, according to the "Notice of the State Administration of Foreign Exchange on Supporting the New Development of Trade Forms" (Hui Fa [2020] No. 11) issued by the State Administration of Foreign Exchange, enterprises engaged in cross-border e-commerce can settle the difference between the storage, logistics, tax and other expenses incurred overseas for exported goods and the export payment, and handle the actual receipt and payment data and restore data declaration according to regulations. The actual sales revenue returned by cross-border e-commerce enterprises exporting goods to overseas warehouses for sale may not be consistent with the corresponding export declaration amount of the goods.
2、 Foreign Exchange Compliance: A Key Guarantee for Promoting Cross border E-commerce Going Global

Some cross-border e-commerce companies going abroad, in the process of collecting and settling foreign exchange, choose to use illegal means such as underground bank settlement or "buying and exporting" in order to avoid supervision or accelerate capital flow, which violates foreign exchange supervision regulations. Serious cases may result in criminal liability. To promote the smooth export of cross-border e-commerce, enterprises should strengthen their understanding and implementation of foreign exchange compliance policies, actively seek legal export declarations and capital return channels, and effectively ensure the safety of their funds and compliant operations.
（1） Using underground banks for foreign exchange settlement

Due to considerations such as foreign exchange regulation, there are many cross-border export e-commerce companies that have established subsidiaries in Hong Kong and overseas to conduct business, and illegally enter the country with overseas income through "underground banks" and other means. In a typical "underground bank" model, the party pays foreign currency from their overseas account to the overseas account controlled by the underground bank, and then the RMB account controlled by the underground bank pays RMB to the party's domestic account.

Formally speaking, enterprises do not engage in direct buying and selling between RMB and foreign exchange, but instead use foreign exchange to repay RMB or RMB to repay foreign exchange, and exchange foreign exchange and RMB to achieve currency value conversion. The enterprise completed the foreign exchange settlement through domestic and foreign "tapping", and the funds were circulated in a one-way manner both domestically and internationally without any physical flow. The enterprise achieved "balance between the two places" through reconciliation.

According to relevant regulations such as the Foreign Exchange Administration Regulations of the People's Republic of China, the Management Measures for Foreign Exchange Business of Payment Institutions, and the Pilot Management Measures for Personal Domestic and Foreign Currency Exchange Franchise Business, enterprises and individuals can only purchase and settle foreign exchange through banks and other financial institutions with foreign exchange settlement and sales qualifications, cross-border payment institutions that have obtained the Payment Business License and registered in the Trade Foreign Exchange Income and Expenditure Enterprise List, and exchange franchise business operating institutions that have obtained the Personal Domestic and Foreign Currency Exchange Franchise Business Operation License. Otherwise, it may constitute illegal buying and selling of foreign exchange, with risks such as confiscation of illegal gains and fines. If the fine amount is large (reaching more than 30% of the illegal amount), it will be considered a serious punishment, and if it constitutes a crime, criminal responsibility will also be pursued.

According to the Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Application of Law in Handling Criminal Cases of Illegal Fund Payment and Settlement Business and Illegal Trading of Foreign Exchange, those who violate national regulations by engaging in illegal buying and selling of foreign exchange or disguised buying and selling of foreign exchange, disrupt the order of the financial market, and the circumstances are serious, shall be convicted and punished for the crime of illegal operation in accordance with Article 225 (4) of the Criminal Law.

In addition, those who engage in illegal fund payment and settlement business or illegal buying and selling of foreign exchange, which constitute the crime of illegal business operations, and also constitute the crime of assisting terrorist activities as stipulated in Article 120-1 or the crime of money laundering as stipulated in Article 191 of the Criminal Law, shall be convicted and punished in accordance with the more severe punishment provisions.
（2） Pay for export

Some cross-border e-commerce enterprises may have engaged in the behavior of "paying for exports" in the early stage, that is, enterprises (actual shippers) who do not have import and export operation rights or do not want to handle import and export procedures in their own name use the name of the export enterprise (usually an export trade agency in practice) to declare exports using export declaration forms and other documents provided by the export enterprise. In this situation, the customs declaration subject is not a cross-border e-commerce enterprise, but the actual recipient of foreign exchange is still a cross-border e-commerce enterprise, which does not comply with the principle of "whoever exports receives foreign exchange" stipulated in the "Guidelines for Foreign Exchange Business under Current Account". The foreign exchange income of this part of the goods exported by cross-border e-commerce enterprises does not have corresponding export customs declaration data, and can only be remitted back to China through other means, which poses a foreign exchange compliance risk. In addition, 'paying for exports' may also encourage entrusted customs declaration companies to defraud export tax refunds, government subsidies, illegal foreign exchange trading, smuggling and other illegal and criminal activities.

In practice, the actual shipper enterprise can adopt a formal entrusted agency export method, and the recipient of foreign exchange related to the export goods payment should be the exporting enterprise. After receiving the foreign exchange, the exporting enterprise can directly transfer the foreign exchange to the actual shipper, or transfer the RMB to the actual shipper after settlement.

The "Notice of the State Administration of Foreign Exchange on Further Optimizing the Management of Trade Foreign Exchange Business" (Hui Fa [2024] No. 11) implemented in June 2024 (hereinafter referred to as the "Notice") further facilitates the foreign exchange settlement of trade for enterprises within the customs special supervision area. Previously, according to the requirements of trade and foreign exchange management policies, when enterprises in the customs special supervision area handle transactions that are inconsistent with the import and export entities, banks need to review the customs supervision documents and written explanations of the inconsistency between the entities on the basis of authenticity verification. However, in some business models, although the import and export entities of some enterprises in the area are not consistent with the payment and exchange entities, their business models and transaction counterparties are single and frequent. Under the requirements of comprehensive risk management and the demand for enterprise convenience, the "Notice" cancels the mandatory requirement for enterprises in the area to submit customs supervision documents and written explanations when handling transactions where the payment and exchange entities are inconsistent with the import and export entities. Banks can review the authenticity and rationality of transactions and relevant materials where the payment and exchange entities are inconsistent with the import and export entities in accordance with business development principles, and indicate "non customs declarant" in the remarks of foreign-related payment declaration transactions.

In this regard, cross-border e-commerce enterprises can fully utilize the flexibility brought by this policy, especially in cases where the enterprises handle foreign exchange receipts and payments in areas under special customs supervision that are inconsistent with the import and export entities, and accurately declare through compliant channels.
（3） Compliance recommendations

To better assist cross-border e-commerce enterprises in responding to foreign exchange regulatory challenges, maintain the legitimacy and transparency of capital flows in the complex international financial environment, and further enhance the operational efficiency and competitiveness of enterprises, we propose the following compliance recommendations:
1. Construction of compliance system

Based on our practical experience, the construction of a compliance system generally includes six aspects: (1) the attention and commitment of senior management; (2) Improve the company's governance structure and decision-making system; (3) Establish and improve compliance system and formulate supporting compliance regulations; (4) Fix vulnerabilities in the main business and establish compliance review mechanisms; (5) Establish cultural construction and compliance training mechanisms; (6) Establish an internal system for reporting violations and a compliance reward and punishment mechanism.

For enterprises that handle foreign exchange collection and settlement on their own, they should strictly follow the principle of "whoever imports pays foreign exchange, whoever exports receives foreign exchange". Enterprises should plan to strengthen the construction of their internal compliance system. For key positions such as customs affairs and foreign exchange, relevant compliance management systems and guidelines should be gradually established to strengthen compliance review and cross verification before declaration, in order to ensure the authenticity, accuracy, and consistency of customs and foreign exchange declaration information.
2. Regular internal audit and compliance implementation inspection

In addition to the basic construction of the compliance system, enterprises also need to pay attention to regular internal audits and compliance inspections. In this regard, we suggest that enterprises can refer to the requirements of the Customs Advanced Certification Enterprise AEO system, which involves internal compliance inspection standards and promote implementation.

Enterprises should develop a detailed internal audit plan, specifying the frequency, scope, and focus of audits, with particular attention to the compliance of export declarations, fund settlements, and related transaction records. Conduct audits by an independent audit team to ensure objectivity and impartiality, and regularly report audit results to management. According to the audit results, the company needs to adjust its compliance policies in a timely manner to ensure compliance with constantly changing laws and regulations. Through regular internal audits and inspections, enterprises can effectively control foreign exchange compliance risks and lay a solid foundation for sustainable development in the field of cross-border e-commerce.
3. Utilizing innovative models such as cross-border RMB settlement

While addressing the challenges of foreign exchange compliance, cross-border e-commerce enterprises should also actively explore innovative models such as cross-border RMB settlement. This model can not only reduce the risk of exchange rate fluctuations, but also reduce the complexity of the foreign exchange settlement process for enterprises and minimize regulatory risks caused by improper collection and payment of foreign exchange. Next, we will discuss in detail the practical points of cross-border RMB settlement to help enterprises more effectively respond to foreign exchange regulatory challenges.
3、 Cross border RMB settlement: injecting new momentum into e-commerce going global

In 2021, the Notice on Further Optimizing Cross border RMB Policies to Support Stable Foreign Trade and Investment (Yinfa [2020] No. 330) explicitly supported the cross-border RMB settlement needs of new trade formats such as cross-border e-commerce. The Notice of the People's Bank of China on Supporting Cross border RMB Settlement in New Business Types of Foreign Trade (Yin Fa [2022] No. 139) issued in June 2022 further details the conditions that banks and payment institutions need to meet and the key points of authenticity review. According to this framework, cross-border e-commerce transactions that meet the conditions for foreign exchange settlement can be settled through banks or qualified third-party payment institutions.

In practice, many cross-border e-commerce import and export enterprises have used cross-border RMB settlement to reduce exchange rate risks.

Case: County A is the hometown of Chinese wire mesh and the base of China's wire mesh industry. Its wire mesh production and export volume account for 80% of the national total, making it an important export industry cluster in the province where it is located. The county's export industrial cluster is characterized by "large group and small scale". The main export entities are small and medium-sized enterprises, which export to ASEAN countries such as Indonesia and Taiwan, China through cross-border e-commerce B2B.

Due to the significant increase in the two-way fluctuation elasticity of the RMB exchange rate, the profits of small and medium-sized export enterprises are greatly affected by exchange rate changes. Therefore, many enterprises in the A County wire mesh industry cluster actively seek effective ways to avoid exchange rate risks. Banks take advantage of the significant advantages of cross-border RMB settlement in avoiding exchange rate risks, and in conjunction with relevant departments promoting the overall orientation of cross-border RMB settlement to ASEAN and Taiwan, engage in cross-border RMB policy promotion, product promotion, and other bank enterprise docking activities. Cluster leading enterprises actively play a leading role in demonstration, agree with overseas buyers to use RMB for pricing and settlement, and provide them with information such as domestic RMB payment accounts; When receiving payments, cluster enterprises shall handle cross-border RMB remittance by presenting contracts, invoices, customs declarations, and "Cross border RMB Settlement Collection Instructions". Cluster enterprises did not incur additional burdens due to changing settlement currencies, and the exchange rate fluctuation costs generated by foreign currency settlements were effectively controlled. The demonstration of leading enterprises has driven a large number of small and medium-sized enterprises in the cluster to use RMB for pricing and settlement in export trade.

At the regulatory level, cross-border RMB settlement specifically includes the following two modes:

Mode 1: Banks and non bank payment institutions cooperate to provide cross-border RMB payment and receipt services for market entities related to cross-border e-commerce.

In this mode, after the bank verifies that the payment institution meets the admission conditions, the bank signs a "Cooperation Agreement" with the payment institution, clarifying that the payment institution should fulfill obligations such as merchant admission verification, customer real name authentication, limit management, business compliance and anti money laundering management, and reserve fund management.

When conducting cross-border RMB settlement business, domestic banks and payment institutions shall negotiate and establish a business authenticity verification mechanism to jointly verify the authenticity and legality of the business background. The key points for in-process review and post inspection are as follows:

During the review phase, the first step should be to verify whether the designated merchants involved in the transaction list have completed merchant registration, whether the cross-border transaction type is consistent with the registration, and whether the business background, operating status, and creditworthiness can confirm the authenticity and compliance of the transaction. In terms of transaction content, review the payment instructions and transaction details list, and verify the completeness of transaction details elements. Conduct list screening and retrospective screening of counterparties involved in cross-border transactions after list updates. Timely, accurate, and complete submission of centralized collection and payment or net offset settlement data, and proper preservation of original down payment data for future reference.

In terms of post inspection, for customers with suspicious transactions, payment institutions should be urged to include them in the key attention list for verification. For payment institutions or merchants who are unable to cooperate in submitting spot check materials, or whose submitted materials cannot verify the authenticity of their business background and fail to provide reasonable explanations, they should submit a suspicious transaction report in accordance with regulations, and if necessary, terminate cross-border business cooperation with the payment institution.

Mode 2: Banks directly provide cross-border RMB settlement services under current account to market entities related to cross-border e-commerce.

For Mode 2, in the in-process review process, banks should develop corresponding review priorities for different entities: for cross-border e-commerce platforms, banks focus on reviewing the completeness of transaction details, conducting customer and transaction object list screening, and retrospective screening after list updates; For platform operators, banks pay attention to whether the relevant electronic transaction information matches their business situation, check for obvious characteristics of transaction information forgery, and whether the transaction scale matches the normal business scale.

To ensure the authenticity of cross-border transactions, banks bear a crucial monitoring responsibility in the post inspection process. For cross-border e-commerce platforms, banks need to regularly verify their normal business operations, especially the accuracy of logistics and warehousing information, customs clearance system docking data, and the authenticity of goods flow. If the platform is unable to provide relevant audit materials, or if the provided materials cannot verify the authenticity of the business background without reasonable explanation, the bank should terminate its cross-border payment and receipt services and promptly submit a suspicious transaction report. In addition, for platform operators, banks focus on spot checking the risk of document reuse. By querying external information sources such as warehousing companies, bill of lading query platforms, shipping companies, and combining industry association investigation results or conducting on-site visits, banks can more effectively verify the true situation of transaction backgrounds.

However, it should be noted that cross-border RMB settlement, in addition to meeting the requirements of the People's Bank of China, still needs to meet the requirements of foreign exchange management departments for cross-border import e-commerce. Cross border receipts and payments under trade shall still comply with the principle of "whoever imports shall pay in foreign exchange" in accordance with the requirements of the "Notice of the State Administration of Foreign Exchange on Relevant Issues Concerning the Issuance of Foreign Exchange Management Regulations for Goods Trade". The State Administration of Foreign Exchange will implement off-site total amount verification through the goods trade foreign exchange monitoring system. According to the 2019 Common Foreign Exchange Business Q&A Manual, the total amount verification and dynamic monitoring of foreign exchange management in goods trade cover import and export business related to RMB customs declaration or RMB settlement. For cross-border trade transactions that are declared in foreign currency or settled in RMB, or declared in RMB or settled in foreign currency, enterprises shall report trade credit and other reports to the foreign exchange bureau in accordance with regulations; For cross-border trade transactions that are declared and settled in RMB, enterprises do not need to report on trade credit and other related matters.
epilogue

In the context of global economic uncertainty and increasingly complex external regulatory environment, cross-border e-commerce enterprises must pay more attention to the dual wheel drive of foreign exchange compliance management and financial innovation. Foreign exchange compliance is no longer just a basic task to meet regulatory requirements, but a strategic support for the long-term stable development of enterprises. By optimizing the foreign exchange compliance framework and strengthening the transparency of fund flows, enterprises can more effectively respond to legal risks in cross-border transactions.

Cross border RMB settlement, as a key tool in the process of globalization, provides a new solution to cope with exchange rate fluctuations and foreign exchange supervision, giving enterprises stronger financial flexibility and payment convenience. This not only helps companies improve operational efficiency in the ever-changing international market, but also expands new space for their global layout.

As cross-border e-commerce continues to become a strategic focus for Chinese companies going global, companies must transform the dual driving forces of foreign exchange compliance and cross-border RMB settlement into their core competitiveness in order to maintain a leading position in global competition.