49 Asian Legal Business | November 2024 Multi-account operation: a seller may not own or operate more than one seller account without Amazon’s permission. Once violation of Amazon policies occurs, Amazon may take the following measures: 1. Account suspension: this is one of the most common penalties by Amazon. When a seller violates the policies, Amazon may suspend the account and the seller will not be able to conduct sales until the issue is resolved. Common violations include intellectual property infringement, selling restricted or prohibited products, and providing misleading or inaccurate product information. 2. Product removal: if an item is found to be in violation of Amazon’s policies, such as selling counterfeit or shoddy products or products that do not have necessary certifications, Amazon may remove the item. Sellers will need to resolve the issue and submit a Plan of Action (POA) to get the item listed again. 3. Account blacklisting: in the most serious cases, the seller’s account may be permanently banned. This means that the seller will no longer be able to sell goods on Amazon and Amazon will usually reject any further appeals. 4. Frozen funds: in some cases, Amazon may freeze available funds on the seller’s account, such as suspected fraudulent or illegal activities; the seller being sued and temporary injunctions issued on his account by the Court; or Amazon suffering from third-party lawsuits due to the seller’s products, while the seller is not active in hiring lawyers to defend. 5. Negative performance notification: Amazon will send negative performance notification to sellers to remind them of problems on their accounts, such as high order defect rate, high cancellation rate, delayed shipment rate and so on. Sellers need to improve in a timely manner, otherwise account suspension may take place. 6. ASIN inhibition: Amazon may inhibit the ASIN (Amazon Standard Identification Number) of a particular item, which means that the seller will not be able to sell the item until the issue is resolved and sales access is reopened through appeals. III. Logistics, Customs and Overseas Warehousing Risks In traditional foreign trade model, Chinese companies generally export on FOB or CIF terms. Under these terms, importers in the local country are all overseas customers, so the compliance risks at overseas customs are mainly borne by the overseas customers, and then the risks are transferred to the Chinese company through terms of the contract to a certain extent. However, in cross-border e-commerce, many companies set up offshore subsidiaries. The offshore subsidiaries act as the importer, bearing tariffs and other customs compliance risks, and become responsible for overseas customs investigations directly. Of course, in some cases, Chinese sellers export through DDP (Delivered Duty Paid), in which the freight forwarder plays the role of importer. But for cross-border e-commerce enterprises, actual payment collection requires completion of sales in the destination country, so the risks like products being held in custody at customs are still borne by Chinese sellers in fact. Although Chinese sellers may try to transfer such risks to freight forwarder by buying value-added insurance services, the actual effects of reducing such risks remain to be seen. As mentioned above, traditional exporters mainly employ FOB, so the sellers bear the risks of sea transportation. Crossborder e-commerce enterprises usually sell their products to their offshore subsidiaries, so such risks are mainly borne by themselves. Moreover, cross-border e-commerce sellers often lease third-party warehouses or self-build overseas warehouses. Regardless of specific means, various risks that might occur before the warehoused products reach end buyers have also become a central concern, while such risks are borne by overseas customers in traditional international trade. IV. Payment Risks Traditional international trade enterprises normally employ OA (Open Account) for payment. Enterprises will purchase credit insurance at the same time. The main risk of this method is that both the customer and credit insurance do not pay, in which circumstance the enterprise should resort to litigation or arbitration for payment. As for cross-border e-commerce, collection is generally managed through e-platforms, and enterprises can get paid as soon as the sales are done. Of course, if sales are conducted on third-party platforms, sellers usually have fund in its account associated with the third-party platforms, and the main risk will be that of being frozen by third-party platforms or the Court’s injunctions. V. Local After-sales and User Claim Risks As cross-border e-commerce companies are deeply involved in overseas sales and self-branded products, they also begin to participate in local after-sales services, and therefore directly face various user complaints and handling of user relations. If infringement of rights or other non-compliance of the products occurs, they will also directly face claims and lawsuits by users. In addition, their offshore subsidiaries can also be subject to local authorities’ supervisions as to product quality and consumer protection. They may be required to report issues under local laws, otherwise fines or other administrative penalties can take place. VI. Local Market Compliance Risks The fact that cross-border e-commerce companies are already involved in local sales also results in more local compliance requirements, including advertising compliance, personal privacy data compliance and tax compliance. Many cross-border e-commerce companies primarily focus on self-brands, independent sales and marketing promotions. They may market the advantages of their products and prices on third-party platforms, self-built platforms and offline stores. The Greater Bay Area
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