Dropshipping Law In India

[LuxuryDeals]

Hi, 
Anyone experienced the paypal limitation problem due to dropshipping business model ? 
We have just faced this problem saying the business model is not supported by india under a law even though we exactly do not do dropshipping , we have our warehouse in China.
Is there really a law on this ?  If there is, which law?  

Please share your experiences on this so we can solve as soon as possible. 

@dropshipping @India @Law 

[sharpiemarker · Accepted solution]

@LuxuryDeals 

https://www.paypal.com/in/webapps/mpp/ua/acceptableuse-full

Prohibited Activities

You may not use the PayPal service for activities that:

1. violate any law, statute, ordinance or regulation.
2. relate to transactions involving (a) narcotics, steroids, certain controlled substances or other products that present a risk to consumer safety, (b) drug paraphernalia, (c) cigarettes, (d) items that encourage, promote, facilitate or instruct others to engage in illegal activity, (e) stolen goods including digital and virtual goods, (f) the promotion of hate, violence, racial intolerance or the financial exploitation of a crime, (g) items that are considered obscene, (h) items that infringe or violate any copyright, trademark, right of publicity or privacy or any other proprietary right under the laws of any jurisdiction, (i) certain sexually oriented materials or services, (j) ammunition, firearms, or certain firearm parts or accessories, or (k) certain weapons or knives regulated under applicable law.
3. relate to transactions that (a) show the personal information of third parties in violation of applicable law, (b) support pyramid or ponzi schemes, matrix programs, other "get rich quick" schemes or certain multi-level marketing programs, (c) are associated with purchases of annuities or lottery contracts, lay-away systems, off-shore banking or transactions to finance or refinance debts funded by a credit card, (d) are for the sale of certain items before the seller has control or possession of the item, (e) are by payment processors to collect payments on behalf of merchants, (f) are associated with the sale of traveler's checks or money orders, (g) involve currency exchanges or check cashing businesses, (h) involve certain credit repair, debt settlement services, credit transactions or insurance activities, or (i) involve offering or receiving payments for the purpose of bribery or corruption.
4. involve the sales of products or services identified by government agencies to have a high likelihood of being fraudulent.

So explain your business model...is it your warehouse? You own it? Or, does the warehouse belong to someone else in China that operates on your behalf that when a buyer makes an order and you have to pay the China warehouse for the item and to ship it to the customer? Because it seems like you do not have the merchandise on hand and under your physical control.

Seems to me that PayPal is not favorable to businesses that do not invest in inventory to have on hand to ship at a moment's notice and instead fulfillment is delayed until someone in your china warehouse process the order. Then perhaps they get the wrong item or the China warehouse bungles the transaction and ship some incorrect item or bad quality item that you do not know is bad quality then that causes displeasure of the buyer so they open dispute.

[LuxuryDeals]

Hi, 

Thank you for the response. We do in fact hold stock well in advance. Its stored in a warehouse in China, and fulfilled as an when the order arrives. We have an agent who does this for us. 

This is the response we received from PayPal India :

"1. From your confirmation we understand that you manufacture, store, and ship all the products from China, which we consider as drop shipping as all products are made and shipped outside of India.
Due to the local regulation and restrains in India, the drop shipping business is not supported in India. Therefore your PayPal account will remain limited if you continue the business model. We appreciate your understanding as we need to meet the regulatory obligations.

Please kindly confirm whether you have any plan to migrate all the inventory of your business to India and ship from India?
If yes, please kindly provide the supporting documents for you inventory in India."

[sharpiemarker]

@LuxuryDeals 

Looks like your home country is very protective of their local industries and who can blame them, against China's massive manufacturing machine. Sorry, can't cut corners. You'll have to import the goods to India and pay tax on them. Real world business laws encroaching on the virtual world.