The Growing Pains and Rebirth of Cross-Border E-Commerce Logistics: From the “Tax-Inclusive DDP” Era to a Future of Compliance

August 2025 — Shenzhen Case Sparks Industry Alarm
In August 2025, a cross-border e-commerce company in Shenzhen was penalized by Chinese Customs for using “Tax-Inclusive DDP” services. The company faced a fine of RMB 196,000 and additional detention-related costs of RMB 73,000. The court ruled that both the shipper and the freight forwarder must share the liability equally. This case has sent shockwaves through the industry, serving as a stark warning to all cross-border sellers.

At the same time, the U.S. Customs and Border Protection (CBP) introduced a new regulation requiring that all full-container inspections at the Los Angeles/Long Beach ports must be transported exclusively by designated CES trucking companies, eliminating the option for shippers to choose their own carriers. This policy further squeezes the survival space of the traditional “Tax-Inclusive DDP” model.

1. The Rise of the “Tax-Inclusive DDP” Model

The so-called “Tax-Inclusive DDP” became a popular logistics solution in China’s cross-border trade due to its simplicity and cost savings.

Shippers’ motivations: Save money, save time, and avoid complexity.

Forwarders’ motivations: Higher profits by manipulating declarations.

Typical practices include under-declaring product value, misclassifying HS codes, or splitting bulk shipments into smaller parcels. For example, exporting women’s apparel worth RMB 800 per unit via airfreight to France under DDP could save shippers up to one-third of logistics and tax costs compared with standard declaration.

2. The Risks and Hidden Dangers

However, risks are always present. Once irregularities are discovered, penalties and detention costs quickly outweigh the savings.

Recent enforcement: Shenzhen Customs seized a shipment falsely declared as “soap” but actually containing 11 categories of cosmetics (lipsticks, face masks, heating eye masks, etc.). Seven of these required statutory inspection, yet no procedures were filed. The result:

Fine: RMB 196,000

Storage + detention fees: RMB 73,000

Disputes often follow. Shippers claim freight forwarders promised “all-inclusive clearance,” while forwarders argue they only charged minimal agency fees and lacked full documentation.

3. A Global Shift in Compliance

Regulatory tightening is not limited to China:

United States: From August 25, 2025, CBP mandates all inspected FCL shipments at LA/LB must be transported by CES-designated fleets, including returns. Shippers and forwarders lose flexibility in choosing carriers, increasing costs and limiting control.

European Union: Germany has upgraded its VAT audit system with real-time data integration between platforms, payment processors, and logistics providers. EPR compliance has expanded from packaging to electronics and batteries.

United States (Tax Policy): The long-standing USD 800 de minimis exemption has been revoked, reshaping financial and operational structures for global sellers.

4. China’s Regulatory Upgrade

On June 26, 2025, the State Taxation Administration of China issued Announcement No. 15, introducing the “Three-Penetration Mechanism”:

Platform penetration (direct reporting of store control)

Income penetration (real trade flow traced)

Identity penetration (beneficial ownership revealed)

This means “China Supply Chain + U.S. Store + Hong Kong Payment Company” models face triple pressure:

Storefront data automatically reported as “China-controlled”

Offshore entities may be deemed shell companies, triggering 25% CIT + penalties

U.S. entities lacking substance may be reclassified as Chinese tax residents, requiring global tax payment in China

In addition, the draft VAT regulation requires sellers to file export tax rebates within 36 months or face reclassification as domestic sales.

5. Compliance as a Long-Term Advantage

Although compliance raises short-term costs, the long-term benefits are substantial:

Tax rebate opportunities: Standard declarations allow for 9–13% VAT refunds

Risk avoidance: Prevents back taxes and 18% annualized penalties

Platform benefits: Higher compliance rating leads to better traffic exposure and market share

Logistics efficiency: Overseas warehouse deployment enables faster delivery (3–5 days, even next-day in some regions), higher customer satisfaction, and improved repurchase rates

6. Practical Compliance Roadmap

Experts suggest a “Four-Isolation Framework”:

Identity isolation: Separate legal entities in the U.S., Hong Kong, and Mainland China

Data isolation: Segregated systems for customer service, contracts, and backend

Funds isolation: Independent payment channels for U.S., Hong Kong, and China operations

Tax isolation: Avoid shell companies, ensure substance in the U.S.

Action timeline:

Within 30 days: Switch Amazon backend IP, return address, and payment accounts to U.S.

Within 60 days: Hire staff and lease offices in Hong Kong, complete ODI filings

Within 90 days: U.S. lawyers provide board resolutions proving “management body” resides in the U.S.

7. Outlook: A New Era of Compliance in Cross-Border E-Commerce

With customs tightening and tax transparency rising, 2025 is the watershed year for the industry. The survival of cross-border sellers will depend on compliance capabilities, not just price competition.

Digitalization: By 2030, the EU will enforce a real-time B2B e-invoice reporting system with 12 compliance indicators.

Green compliance: The new EU Battery Regulation takes effect in August 2025, requiring registration, recycling fees, and traceable labeling.

Market diversification: To hedge U.S. policy risks, sellers are increasingly expanding to Southeast Asia and the Middle East.

The global compliance network is tightening. For Chinese exporters, the only way forward is to embrace compliance, upgrade operations, and secure a sustainable future in international trade.

👉 For tailored compliance-driven logistics solutions and expert guidance on navigating U.S.–China trade complexities, contact Passionship International Logistics today.