Big Boost For Offshore Duty Free as Hainan Gains Right to Import Cosmetics Directly

This post originally appeared on The Moodie Davitt Report, our content partner.

CHINA. In a key boost for Hainan’s booming offshore duty-free sector, travel retailers will from this month be able to import certain international cosmetics brands direct rather than wait for them to be cleared through the Mainland and then shipped on as in the past.

While not representing new regulations as such, Hainan has now passed the relevant authorities’ stringent assessment process, meaning that certain cosmetics can be imported to the island through a similar process as the one implemented in Shanghai.

China Duty Free Group has experienced extraordinary success at its Haitang Bay shopping mall since the vast retail emporium opened in late 2014. For beauty products, in particular, the mall has become one of the world’s most important doors.

China Duty Free Group President Charles Chen and three major brand companies confirmed the development to The Moodie Davitt Report, though all parties are still studying the complexities of the arrangements.

The news, covered in detail by Jason Cao’s Duty Free Expert, The Moodie Davitt Report’s close colleague in China, will be welcomed by China Duty Free Group and international beauty companies in easing severe supply chain pressures prompted by surging consumer demand. Due to the complex product clearing procedures that existed, many skus were out of season by the time approval had been granted to sell in Hainan.

The ability to import directly, which is subject to strict controls on product safety and regulatory compliance, is seen as crucial in advancing Hainan’s tourism sector.

The regional travel retail head of one leading beauty house told The Moodie Davitt Report, “This will give Hainan’s offshore industry a boost for sure as new brands will then be able to go directly to Hainan even if they are not currently registered in China. To me that is clearly the most obvious benefit.

“As for the brands already registered in China, we need to further understand the added value of this new registration opportunity vs the current one.”

Underlining the importance of offshore duty free, Estée Lauder last December opened its renovated flagship store – the brand’s largest in travel retail – at China Duty Free Group’s Haitang Bay International Shopping Complex

(Above and below) Many of the year’s biggest beauty launches and activations have been held at Haitang Bay

Another leading international beauty house executive pointed out to The Moodie Davitt Report that for any brand company to be able to leverage the new Hainan situation for offshore duty free it would require:

That the company be a registered entity on Hainan or that it authorize China Duty Free Group (which has a legal entity in Hainan) to register on its behalf;
That the product is only registered in Hainan and not in other provinces (currently the government only allows a single point of registration for any single sku – one product can only be authorised to one domestic entity for registration).
If the brand affiliate registers the sku in Shanghai, it would not need Hainan registration, but can simply add China Duty Free Group/Hainan Duty free as consignee to ensure the products can be imported to Hainan.

If the sku is a travel retail exclusive, the brand company can either leverage registration via China Duty Free Group or request the affiliate to do the registration in Shanghai.

We will bring you further details once final clarification has been obtained by CDFG and the brands but for now it is clear that high-level support for China’s burgeoning offshore duty free sector has just been taken to a new level.

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