Customs officers in Shenzhen Bay Port have seized RMB 1.5 million (US$ 236,637) worth of fine wines smuggled from tax-free Hong Kong to mainland China, mostly consisting of Australian wines. Frequent cross-border smuggling has raised concerns about parallel imports of Australian wine from Hong Kong to bypass mainland tariffs, when the city’s Australian import figures are rising.
According to China media reports, the smuggling case came to light after the Shenzhen Customs discovered a suspicious batch of imported wines that was declared as Chilean wines. Inspection found that import quantity does not match and some of the red wines mixed in the batch are undeclared.
The smuggled wine included over 1,000 bottles of Australia’s most famous wine brand, Penfolds, and more than 100 bottles of Bordeaux fine wines including first growths, Château Margaux and Château Lafite Rothschild.
Chinese authorities did not disclose the range of Penfolds wines intercepted but based on images released by the General Administration of Customs, the Australian wines appear to be Penfolds Bin 389 and Penfolds Bin 407.
This is not the first time smugglers have attempted to illegally funnel wines into mainland China from Hong Kong. Last July, authorities in Shenzhen seized over 4,000 bottles of fine wines including Lafite, Mouton and Penfolds 707 worth more than RMB 18 million (US$ 2.83 million) at Liantang port, Shenzhen.
Imported wines entering mainland China are usually subject to 43.2% taxes, but Australian wines are slapped with an anti-dumping tariff up to 218%.
Treasury Wine Estates, the parent company of Penfolds and the biggest Australian wine exporter to mainland China, is subject to a 175.6% anti-dumping tariff. This means that importing a bottle of Penfolds priced at RMB 500 would now require RMB 878 just in anti-dumping taxes.
In contrast, Hong Kong imposes a zero-tariff policy which is speculated as a strong incentive for smugglers to transfer wines to mainland China at a lower cost.
Australian wine imports to Hong Kong rose after China’s tariff
Given that the figure of Australian wine exported to China has plunged after China’s harsh tariffs, the frequency of wine smuggling cases raised concerns of whether some wines are entering China through parallel imports from Hong Kong, especially where the city has recorded promising growth in wine imports.
According to Wine Australia’s latest report, Australia’s exports to China in 2021 have significantly declined by 97% in value to AUD 29 million (US$21 million) compared to 2020. Meanwhile, Australian wine exports to Hong Kong in 2021 soared by 131% to HKD 1.9 billion (US$ 244.3 million), data from Census and Statistics Department shows.
The increase in exports to Hong Kong may have reflected the local consumer market’s gradual recovery in 2021, but some suggested that more producers are storing Australian wines to Hong Kong temporarily in hope to ship those wines to mainland China when the diplomatic tension eased.