Authorities in Zhuhai, Guangdong have uncovered a massive wine and spirits smuggling operation, with over 1 million bottles seized. The case, valued at more than RMB 1 billion (US$137.2 million), is one of the largest ever recorded in China’s wine and spirits sector.
An investigation revealed that the operation was run by a supply chain services company led by a suspect identified as Zhang. The company under-reported the value of imported alcoholic beverages to exploit customs loopholes in China’s free trade zones (FTZs) and special customs supervision areas. The goods were then falsely declared as cross-border e-commerce (CBEC) transactions, allowing them to enter mainland China under lower tax rates.
Authorities have arrested 58 suspects and seized 1,178 bottles of alcohol at the scene, Gongbei Customs officials said.
Among the confiscated items was Martell Blue Swift, a brandy aged in bourbon casks that has not been officially launched in mainland China. While it does not meet the traditional classification of cognac, its sweet, smooth profile has made it highly sought after by Chinese consumers, creating opportunities for parallel importers and smugglers.
Cross-Border E-Commerce Loopholes
Cross-border e-commerce allows Chinese consumers to purchase foreign goods online under a tax-friendly policy. The Chinese government waives import tariffs and applies a 30% reduction on VAT and consumption tax for these transactions.
For wine and spirits, the CBEC tax rate is 17% to 28.875%, significantly lower than 42.13% to 48.3125% under general trade rules. While CBEC tax calculations are based on retail transaction prices, the system provides significant cost advantages for high-value branded wines and spirits.
Authorities allege that the supply chain company in this case manipulated import pricing by under-declaring goods upon entry into bonded zones. Once cleared, the products were resold through CBEC platforms, violating regulations that restrict CBEC sales to personal use only and prohibit resale.
“Since CBEC taxation is based on retail pricing, customs authorities primarily focus on transaction values rather than landed costs,” an industry expert familiar with cross-border e-commerce wine sales told Vino Joy News. “This creates an opportunity for smugglers to manipulate import prices.”
He also noted that smugglers may have used an alternative approach: “Some could be initially bringing goods into bonded warehouses under CBEC rules, where customs scrutiny is lower, before later reclassifying them as general trade imports to reduce tax liabilities.”
Surge in Smuggling via Hengqin Free Trade Zone
Gongbei Port in Zhuhai is one of China’s most important import hubs for wine and spirits, located near Macau, where zero tariffs on wine make parallel imports and smuggling a growing concern.
Unlike previous “hand-carry” smuggling operations, where individuals transported small quantities across the border, this case highlights emerging risks linked to FTZ clearance procedures, exposing new regulatory loopholes.
The Hengqin Free Trade Zone, a key collaboration hub between Macau and mainland China, has recently eased trade regulations to streamline imports. Since March 1, 2024, individuals entering Hengqin from Macau can bring in duty-free goods for personal use, while goods moving from Hengqin to Zhuhai are subject to simplified clearance procedures. Authorities suspect smugglers exploited these looser regulations to bypass customs checks.
Zhuhai Gongbei Customs reported that in 2024 alone, authorities launched 44 investigations into smuggling activities related to FTZs and special customs supervision areas, with a total case value of 13.67 billion yuan (US$1.88 billion). Officials also imposed 13 administrative penalties, amounting to 1.14 million yuan (US$158,000).
The alcohol smuggling case has been transferred to customs enforcement for prosecution, officials said.
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