The Gongbei Customs in Shenzhen has busted a Macau driver smuggling 12 bottles of Hennessy X.O in his modified car stereo system, revealing the rampancy of cross-border smuggling cases between Macau and mainland China.
According to Chinese media reports, the driver surnamed Wang from Macau was busted by the customs officials when he was entering Hengqin Port in Zhuhai on 30 March. The officials inspected his vehicle after noticing the modified car stereo system and uncovered 12 bottles of Hennessy X.O inside, including 6 bottles of 3L edition and 6 bottles of 1L edition.
Based in Cognac of France, Hennessy is one of the world’s biggest producers of cognac owned by LVMH. Its famed Hennessy X.O is highly priced as it undergoes prolonged ageing time in quality barrels before releasing to the market.
On China’s popular ecommerce platform JD.com, a bottle of 3L Hennessy X.O is priced at RMB 8,009 (US$1,238), while its 1L edition is priced at RMB 2,099 (US$325) per bottle.
Imported spirits in China are subject to heavy tariffs. For example, the overall tax for imported Scottish whisky is 48.31%, combining 5% tariff, 20% consumption tax and 13% value-added tax. In Macau, spirits above 30% alcohol level impose a consumption tax of 10% of its cost and 20 Macau Patacas (US$2.46) per liter.
While the amount of tax evasion in this case is not clear, smuggling goods and articles carrying a tax of over RMB 500,000 (US$77,298) can face imprisonment of over 10 years or life imprisonment in China, with a fine of over 100% but less than 500% of the evaded taxes or forfeiture of property, according to Article 153 (1) of China’sCriminal Law.
Surge in smuggling cases from Macau
It is a long-established practice that some merchants in Hong Kong and Macau would hire middlemen known as ‘coyotes’ to smuggle wines or other goods including milk formula and iPhones into mainland China. Yet the harsh penalties of previous cases have not deterred wine merchants and smugglers from the risky practice.
One of the biggest incentives was the huge tax discrepancy. While imported wines entering mainland China are generally subject to 43.2% taxes, Hong Kong and Macau impose zero tariff for imported wines.
Another notable phenomenon was the rising smuggling cases from Macau during the COVID-19 pandemic, when its neighbour Hong Kong has shut its border with mainland China for two years to combat the virus.
This year, a total of MOP 12.25 million (US$1.5 million) in smuggled goods were seized alone in the first two months, of which 20% were involved with Macau residents.
Wine merchants should be aware of the legal and financial risks behind the smuggling business.
Earlier in March, a wine company in Macau lost 2600 bottles of wines worth RMB 2.9 million (US$457,000) after entrusting the wines to smugglers who promised to funnel the wines into mainland China, as we have reported.