Hong Kong Fulfillment when Selling Cross-Border to China: by ZhenHub

Hong Kong fulfillment is one of the most popular options when overseas companies sell products cross-border into mainland China.

Not only can fulfillment centers help you reduce shipping lead times, but they’re also often efficient and offer competitive shipping rates.

In this article, Vince Poon from ZhenHub explains how it works when shipping cross-border from Hong Kong to China. It’s an established fulfillment center with warehouses in almost a dozen countries.

Vincent, please introduce yourself and your work at ZhenHub in Hong Kong.

I’m the CEO of ZhenHub, a single dashboard terminal that helps you fulfill and ship your goods globally.

Here, you can get quotes, execute your shipments, communicate with your shipper, and manage your inventory all in a single location.

Our terminal allows easy communication and our customers to automate their fulfillment and shipping. We also provide business intelligence and analytics around costs, delivery times, and easy view of all documentation required for each shipment.

Before ZhenHub, my background was in the legal field and consulting. I saw a lot of issues within the supply chain, for example:

• No visibility of pricing
• No visibility over where shipments are located
• Slow communication

After working with eCommerce companies, dropshippers, and different brands for the last 8 years, I realized these problems meant the survival or growth of a successful eCommerce business.

This all flows down to how well your business is serving its customers.

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What are common issues when companies start selling in China?

Across the board, the obstacles that these companies experience are often similar:

• Branding and Marketing
• Production and Cashflow
• Operations and Logistics

The issues generally fall into one of these three categories.

From the successful companies to the ones that have failed, we have seen them all. We have seen companies with amazing sales growth doing over USD 10 million per year fail and one-man eCommerce companies succeed.

It is all about who you enlist to help you, are you picking the right people, the right partners to complement your strengths.

If you are a designer, then find companies and people to help you with operations and sales. If you are a marketer, do the same to scale your operations and to get help with logistics and production.

One thing we found across all the clients we served was that selling and marketing was the simplest part to scale and figure out. Because this is the only part that you can just put money in, to scale your business (provided you have the right partner and you know your CAC).

The hardest parts were operations and logistics. Picking your markets and getting the right product-market fit.

Hence, at the end of the day, the clients that came to us with an operational and logistics issue, but already had the know-how to scale. We were the last piece of the puzzle and helped them to grow their business 10 fold, quickly and efficiently.

With all our clients, we hope to pass on our knowledge and deep insight into eCommerce across the globe, refer the right partners, lower their costs, and of course help with their global supply chain in the process.

How does it work with fulfillment and shipping when selling on Tmall and JD?

Yes, for Tmall we work with Cainiao their official logistics provider. ZhenHub also has many cross-border bonded warehouses in China (Dongguan, Hangzhou, and Shanghai), which we can help clear and deliver products to Mainland China consumers.

At the moment, a lot of sellers will use Hong Kong as a fulfillment hub and ship to the mainland via cross-border channels.

“On Tmall Global, most eCommerce businesses work with Cainiao”

If you sell on Tmall Global, most eCommerce businesses work with Cainiao, the logistics arm of Alibaba. You can look at Cainiao like SF Express or DHL Express.

They will help you ship your goods from Hong Kong to China, but using couriers they already have agreements with such as YTO, STO, and more. ZhenHub would help you do the pick and pack, fulfillment, and deliver the goods to Cainiao or a separate Cainiao partner.

But if customers import the goods into China already, then they can use our fulfillment facilities within China and Cainiao would not be mandatory for local Tmall stores (Tmall.com).

At the moment there are no mandatory logistics solutions for JD, Kaola and so most look for alternatives in bonded zones and warehouses in Hong Kong.

What are the benefits of using Hong Kong fulfillment?

Hong Kong provides a lot of flexibility for businesses. I would say, use Hong Kong as an Asia Pacific distribution hub.

This means that you can serve not just Chinese customers, but also the growing markets in Southeast Asia, Singapore, Japan, and Korea.

Because Hong Kong is a free port, this flexibility means you can easily do consolidation and move your goods around and your lead times are generally more stable and faster than if you shipped directly from the US or Europe.

To summarize:

• it’s flexible, your goods can come in and out of Hong Kong easily
• Not required to put down a customs bond
• Different options for customs clearance
• Not susceptible to changes in China customs laws

What are the disadvantages of using Hong Kong fulfillment?

• Generally more expensive labor and storage costs
• Slower delivery lead times
• Goods can be held up in customs
• May not be sure what channel of clearance your service provider is using (not transparent)
• Generally requires a copy of actual China ID front and back

What are the benefits of using China bonded warehouses?

• Pre-declared goods, quicker to clear customs
• Different tax structure
• Higher order value accepted
• Lower risk of orders being held
• Lower cost of pick and pack and storage
• Can use local China couriers to deliver

What are the disadvantages of using China bonded warehouses?

• Needs a bonded truck to bring goods into bonded areas (min. 1 truckload)
• Susceptible to changes in China policies regarding customs
• Difficult to get products out of Bonded areas
• Stringent inventory records, any differences may result in charges
• Pre-declaration required and changes in sales price required to be declared to the customs

How long does it take to ship products from Hong Kong to mainland China?

Depending on the service, it generally takes 3 to 7 days.

But this lead time is shortened significantly if you directly fulfill your goods from a bonded warehouse in China.

However, there is less flexibility when using bonded areas if you want to bring your products back out of those areas.

How much does it cost when using Hong Kong fulfillment centers and China bonded warehouses?

Please see the general fees when using bonded warehouses and fulfillment centers in Hong Kong below.

Bonded warehouses in mainland China:

• US$2.5 – Pick pack fulfillment, including customs clearance and declaration

• US$2 – Delivery all over China with YTO (2-4 day lead time)

Fulfillment centers in Hong Kong:

Average US$1.3 Pick pack fulfillment cost (no clearance and declaration)

The shipping costs from Hong Kong as follows:

• ETK – US$8 to US$10 (5 – 9 days)
• SF Express – US$6 to US$8 (requires more documentation)
• STO – US$4.5 to US$6 (requires ID number and name)
• Personal Item – US$2.50 to US$4 + cost for delivery to collection point in Hong Kong (7 to 9 days)

Taxes will be added where applicable.

What are the labeling requirements when selling on Tmall Global and JD Worldwide?

If you sell to JD, then they may purchase goods from you directly. Generally, they will have very specific labeling requirements on your pallets or cartons.

With Tmall it is quite simple. We would generate labels from their system, apply it to the package or carton and they will accept your shipments.

How should I pack the products?

We always tell our customers that there should be a 3-foot test. That is, will your package be okay dropping it from 3 feet. But for China, we would probably extend this to 5 feet.

A lot of the time, couriers in China are very rough with the packages. I’m sure most of you have seen the videos of couriers throwing packages everywhere.

Who pays for VAT and import duties when selling cross-border?

The shipper pays the VAT and import duties as quoted to the seller. Generally, sellers will sell inclusive of all VAT and import duties in the sale price.

There are cases where the consumer will pay for VAT and import duties, but service providers often do not want to offer this because of the time, effort, and coordination taken to collect duties from the end customer.

Why is Hong Kong fulfillment preferred above Chinese marketplaces’ in-house fulfillment solutions?

As you move to work with multiple platforms, it is important to maintain your distribution facility. With an independent fulfillment center, you can fulfill all the orders you have or part of the orders you may have.

You also have a lot more control over your products, how you want them packed, kitted, or other value-added items.

If you are a small seller that is focused on a single platform and can ship goods directly from the factory to the platform’s fulfillment center, then we suggest going with their in-house fulfillment center.

However, if you are growing and need flexibility and a centralized inventory to distribute then an independent fulfillment center is always suggested.

This is what we specialize in and is what we are good at. You gain all the knowledge, know-how, and instant access to a global fulfillment network with ZhenHub.

What are the benefits of using direct shipping?

Good question. When you are starting up, it is very important to understand your shipping process as unforeseen issues can happen. You also need to know how your customer responds to your shipped packages.

When your volume starts to outgrow your apartment or garage, you know you are ready to outsource to a fulfillment center.

The intended goal to work with a fulfillment center is now to scale your business globally and quickly. And not many fulfillment centers can assist with this as we can. ZhenHub has facilities in China, Hong Kong, USA, UK, Germany, France, Italy, Canada, Australia, Korea, and counting.

This means once you set up with one ZhenHub facility you will know that as you scale and your volume grows in different regions, ZhenHub can help copy and paste your process to every part of the world.

Can you help cross-border sellers with customs registrations in China?

Yes, we can help them with customs clearance and registration.

Also, we let them know in advance what duty and VAT they will be subject to. The HS Codes for China are different from the ones in the US and in the rest of the world.

Is it mandatory to register with the China Inspection Quarantine (CIQ) when selling cross-border?

It depends on the method of cross-border shipping you use.

The beauty of cross-border is that there are a lot of products that can be shipped cross-border that would normally require certification or a long time to be allowed via normal importation methods.

If you shipped via a personal parcel method such as EMS, Hong Kong Post, basically any postal office, then CIQ would not be required. If you ship via a bonded warehouse, then your products would need CIQ clearance.

Have you encountered any issues with the CIQ when helping clients to ship products to China?

Yes, of course. We once had a client that shipped baby clothing to our facility in Shanghai, to fulfill locally in China. However, when the products arrived the labeling was incorrect.

As such we hold the goods in a bonded area, re-tagged all the pieces with the correct Chinese labels, and then had it cleared with the CIQ.

These are some of the situations where we can really help when clients are unsure of the regulations or labeling requirements in China.

Thank you, Vince. How can our readers learn more about your services for the Mainland China market?

They can go to our blog or our website anytime to read more about our services: www.zhenhub.com. Alternatively, they can reach out to our team anytime via email: hello@zhenhub.com.