Enhancing the appeal of offshore duty free

“The two most important aspects of the announcement are firstly, that tourists can pick up goods directly and secondly that for purchases under RMB20,000 no guarantee is required,” Mirko Wang, Founder of Jessica’s Secret, the renowned Chinese travel retail specialist, told The Moodie Davitt Report.

Chinese B2B media DFE (WeChat ID: DutyFreeExpert) said: “At present, the per-capita offshore duty free purchase is only between RMB7,500-10,000/US$1,090/US$1,450 (the total amount is RMB100,000/US$14,500 per year).

“The implementation of the ‘Buy and pick-up’ policy will help drive immediate consumption by tourists to the island and further stimulate their spending.”

The report added: “It is also beneficial for offshore duty free retailers to save logistics and other costs and increase efficiency.

“Previously, consumers could only order their shopping and retailers had to package and deliver to the airport, seaport or designated self-collection point before the consumer left the island.”

DFE commented: “Consumers demand for ‘buy and use immediately’ and ‘an instant sense of ownership’ further enhances the appeal and shopping experience of offshore duty free.”

CHINA. This week’s news of an enhanced pick-up policy for duty free purchases in Hainan province has been welcome by the travel retail community and analysts.

As reported, in a move with highly positive ramifications for Hainan province’s offshore duty free sector the State Council has approved far-reaching changes to the current pick-up policy.

The enhanced policy is designed to make shopping easier and more immediate for consumers and ease logistical constraints for retailers.

Commenting on the two key principles of the new policy – ‘Guaranteed pick-up’ and ‘Buy and pick-up’ – one senior Sanya-based travel retailer told The Moodie Davitt Report: “Buy and pick-up on-site will surely provide more friendly purchasing initiatives to travellers. Convenience is the core function of this method in addition to boosting sales at the same time.

“Guaranteed Buying (pick-up)” is strictly regulated in terms of inspection at departure. So it will be helpful in sales of top luxury items such as watches & jewellery.”

Guosen Securities {国信社服|免税行业快评}, a leading Chinese analyst said: “After the implementation of ‘Guaranteed pick-up’ and ‘Immediate purchase’ (Buy and pick-up), it is expected to increase shopping convenience, increase the conversion rate , and partially reduce logistics costs.

“With the implementation of the immediate purchase and withdrawal policy, tourists can directly purchase [duty free] a limited amount of fragrances, bags, clothing, silk scarves, sunglasses, belts, sporting goods and other products according to the requirements of the list every time they leave the island. Using it will help marginally increase the purchasing power and customer unit price.

“At the same time, shopping is more convenient for tourists on the island. In this case, duty free operators in Hainan are expected to benefit marginally in the future. Considering that China Duty Free Group has the most abundant categories, especially the higher proportion of boutique sales, the degree of benefit is relatively  higher for them.”

From our earlier story: Full background to the new policy

In an official announcement released on 21 March through the General Administration of Customs, Ministry of Finance and General Administration of Taxation, the powerful central body agreed to “temporarily adjust” the current pick-up regulations, effective 1 April.

The new ‘Guaranteed pick-up’ and ‘Buy now and pick-up’ delivery methods and categories (which exclude wines, spirits, watches and jewellery – see table) are outlined below.

The Moodie Davitt Report is studying the detail and repercussions of the changes and will bring you further feedback and analysis soon.

1. Increase of ‘Guaranteed pick-up’ and ‘Buy and pick-up’ methods

When purchasing duty free goods in Hainan’s duty free shops (excluding online sales windows), customers with valid identity documents or travel documents and departure information, can choose ‘guaranteed pick-up’ for purchases with a unit price of over RMB50,000/US$7,265 (inclusive).

This is in addition to picking up goods at designated areas within airports, railway stations and port terminals, and choosing delivery by mail (or pick-up by island residents on their return to the island).

For duty free goods whose unit price does not exceed RMB20,000/US$2,900 (inclusive) the ‘Buy and pick-up’ method (see below) can be selected.

Duty free products purchased under the ‘Guaranteed pick-up’ or ‘Buy and pick-up’ methods are final goods for consumers’ personal use and shall be carried off the island at once and shall not be re-sold.

2. ‘Guaranteed pick-up and delivery’ method of picking up goods

Key stories from China and related to Chinese travellers are featured each week on The Moodie Davitt Report’s WeChat Official Account. Please scan the QR code to follow us.

(1) Duty free goods with a unit price exceeding RM 50,000 (inclusive) purchased by a customer before each departure from the island can be picked up under the ‘Guaranteed pick-up’ method. Duty free goods purchased under this method cannot be used on the island.

(2) If a passenger needs to return the guarantee for the purchased goods when leaving the island, they should apply to Customs for verification of the duty free goods that have not been used or consumed. They must also submit the proof of purchase of the goods and show a valid identity document or travel document.

After verification by Customs, if the duty free goods handed in by the passenger are consistent with the purchase information, Customs shall confirm the signature on the purchase voucher.

(3) Customs shall not process the verification and signature of the offshore passengers under any of the following circumstances:

(a) The duty free goods submitted by the outlying island passengers have already been used or consumed.

(b) The duty free goods handed in by the passenger do not match with the goods listed in the shopping voucher

(c) Where the information of the person making the purchase does not match the information of the passenger handing in the inspection.

(d) If the physical verification by the Customs is approved and the shopper has actually left the island, the Customs shall refund the guarantee. If the shopper has not left the island for more than 30 days from the date of purchase and has not taken the initiative to apply to the Customs for verification of the duty free goods or has not passed the verification, the relevant guarantee will be directly converted into tax.

Here are the categories affected by the new regulations. Click on the table to expand.

The General Administration of Customs announces the changes

3. ‘Buy and pick-up’ method

When purchasing the duty free goods listed in the annex to the notice (see table) before each departure from the island, passengers can choose the ‘Buy and pick-up’ method for goods whose unit price does not exceed RMB20,000 (exclusive), in accordance with the requirement of the limited quantity of each category per person.

Passengers who have paid for the goods can pick up the goods on site, and Customs will not inspect the physical goods.

4. Relevant legal liability

(1) Passengers using the above two methods of picking up goods must leave within 30 days from the date of purchase (inclusive). Those who have not left the island within 30 days and cannot give a valid reason shall not be allowed to purchase duty free goods on the island for three years.

For acts constituting smuggling or violations of customs supervision regulations, customs shall deal with them in accordance with the relevant regulations, and if they constitute crimes, criminal responsibility shall be investigated in accordance with the law.

(2) For offshore duty free shops that fail to sell duty free products in accordance with the regulations, Customs shall deal with them in accordance with Article 26 of the Regulations of the People’s Republic of China on the Implementation of Customs Administrative Punishment and Article 28 of the Measures of the People’s Republic of China on the Supervision of Duty-free Shops and Duty-free Products by Customs.

(3) Other regulatory matters regarding the ‘Guaranteed pick-up’ and ‘Buy and pick-up’ methods for duty-free shopping by Hainan’s outlying island passengers shall be in accordance with the relevant provisions of General Administration of Customs Notice No. 79 of 2020. ✈

Follow The Moodie Davitt Report on Linkedin:


Share this article:

Related Articles