A wine importer in China has been handed a one-year-and-three-month sentence and a hefty fine of RMB 550,000 (US $86,460) for wine smuggling, taking advantage of cross-border e-commerce platforms that more than halved wine taxes.
According to Chinese media reports, the merchant Bu Xiaoyan (卜晓燕) smuggled 202 bottles of wine through e-commerce platforms and evaded RMB 543,581.07 (US $85,451) in taxes, implying that the average amount of tax evasion per bottle was as high as RMB 2,690.99 (US$423).
The court documents did not disclose the wines involved, but the evaded average tax would indicate bottle price to be around RMB 6,000.
Cross border e-commerce is an advantageous option for fine wines, as it is not subject to import tariffs, and enjoys a 30% reduction in consumption tax and VAT. Its total tax rate is 17.89%, which is 25.56% lower than the general trade’s tax rate of 43.14%.
However, cross-border e-commerce wine trade caps single transaction and annual transaction amount, and most importantly, it’s only intended for B2C, not B2B.
Bu therefore knowingly disguised the imported wine through cross-border e-commerce channel instead of through general trade.
According to court verdict, heagain understated the imported wine price and amount on the cross-border e-commerce platform in order to gain illegal profits. He’s also found to have made false documents, arranging logistics and collecting commission fees.
Given Bu turned himself in, the court in Shanghai gave him a relatively lenient sentence.He was handed a fine of RMB 550,000 (US $86,460) and a one-year-and-three-month sentence.
In China, the goods imported via cross-border e-commerce can only be sold to individual consumers, which requires a real-name system, online payment, online transaction, and is subject to a limit of RMB 5,000 for each transaction.
In a drive to boost cross-border e-commerce, consumers in China are allowed to spend up to RMB 26,000 (US$3,773) on goods imported through e-commerce channel, up from RMB 20,000.
Each transaction needs to be reviewed and declared. It is considered illegal if it involves secondary sales.