E-commerce and trade regulation-facilitation

The Chinese market has been warm to e-commerce in recent years. Approximately 300 million individuals were online in China by 2008 and e-commerce trade volume reached US$440 billion. However, the legal infrastructure and compliance environment for global e-commerce – and Asian e-commerce in particular – are critical to its healthy development. Yet it is still not sophisticated enough to tackle major legal and regulatory issues. These include consumer protection law, VAT rules, distribution and logistics regulation, intellectual property protection, customs and international trade regulation. If unjustified, these undermine consumer confidence relating to issues of payments, delivery, complaints, application of guarantees, requests for refunds, after sales support, as well as privacy issues.

Great efforts have been made by the international community on e-commerce legal infrastructure, yet little has been accomplished. The Declaration on Global Electronic Commerce, adopted by the Second (Geneva) Ministerial Conference on May 20 1998, urged the WTO General Council to establish a comprehensive work programme to examine all trade-related issues arising from global electronic commerce. The General Council adopted the plan for this work programme on September 25 1998, initiating discussions on issues of electronic commerce and trade by the Goods, Services and TRIPS (intellectual property) Councils and the Trade and Development Committee. WTO members also agreed to continue their current practice of not imposing customs duties on electronic transmissions. Thus far, due to delay of the Doha Round, there is no agreement reached under WTO.

The WTO defines e-commerce as “the production, distribution, marketing, sale or delivery of goods and services by electronic means”. Through the General Council comprehensive work programme, it found the following issues to be addressed: classification; development; fiscal implications; e-commerce vs. traditional commerce; customs duties and licensing requirements for e-commerce transactions; internal taxation; competition; IP rights protection; standards of paperless trading environment; and, jurisdiction/other legalities.

UNCITRAL's Model Law on Electronic Commerce (Model Law) is intended to facilitate the use of modern means of communication and storage of information. It is based on the establishment of a functional equivalent in electronic media for paper-based concepts such as writing, signature and original. By providing standards by which the legal value of electronic messages can be assessed, the Model Law should play a significant role in enhancing the use of paperless communication. But it has received a mixed reception in Asia, where the countries to have adopted the Law include Australia, Hong Kong, Republic of Korea, Singapore, the Philippines, Japan, India, and China.

Many governments and regulatory bodies in Asia are beginning to recognise the economic potential of e-commerce and are considering a number of policy initiatives designed to encourage its development. These include attempts to overhaul or effect amendments to existing laws to deal with the issues that e-commerce raises. In China, for instance, a set of guidelines governing the development of e-commerce has already been prepared. These include comprehensive changes needed in China's legal system to address: business registration; e-signature; e-certification service; taxation for e-commerce users; customs and international trade regulation on e-commerce etc.

While governments will work diligently with industry on policy and regulatory matters, the private sector needs to focus on:

• projects across the global value chain to demonstrate the true value of e-commerce;

• process and information optimisation, harmonisation, interoperability and evolution across the global value chain: automation of workflows with a proper foundation for potential cost savings;

• continuation to identify, remove and avoid barriers to e-commerce and cross-border trade;

• global supply chain compliance with civil laws, such as contractual obligation and dispute settlement, and regulatory policies and requirements, such as product safety and IP rights protection;

• structure of the value chain, supply chain, and legal strategy and compliance process.

The long term success of an e-commerce business heavily relies on the true value it provides to customers. But it should also be supported by a sophisticated legal infrastructure and compliance environment.

Sandler, Travis & Rosenberg, PA

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