Each morning, amid the steady поток of travellers moving between Macau and Zhuhai, a group of low-profile “water mules” quietly blends into the crowd. Individually, they carry only small quantities of alcohol. Collectively, through repeated cross-border trips, they help assemble a fully fledged smuggling operation.
China’s Guangdong High People’s Court recently disclosed the details of a smuggling case involving Penfolds wine and Hennessy XO cognac. Notably, part of the Penfolds smuggling took place during the period when Australian wine was subject to China’s anti-dumping and countervailing duties, with punitive tariffs ranging from 116.22% to 218.4%.
The defendant, identified as Xiao Shaoqin, who has no formal employment and did not complete primary school, organised two rounds of smuggling between 2021 and 2024. During that period, Xiao recruited “water mules” to transport Penfolds wine and Hennessy spirits in batches from Macau into Zhuhai.
According to court disclosures, Xiao evaded RMB 1,338,971.47 (about US$187,300) in taxes between May 2021 and September 2023. Between June and August 2024, he again evaded RMB 1,340,923.51 (about US$187,500). Combined, the total amount of unpaid taxes reached RMB 2,679,894.98 (approximately US$374,800).
Investigators found that Xiao employed a classic “water mule plus ant-moving” smuggling model. After confirming orders with mainland clients, he sourced alcohol from merchants in Macau and arranged for individuals to carry the products across the border in small quantities. The goods were then transported to Xiao’s shop in Zhuhai before being resold to customers on the mainland.
On Aug. 7, 2024, customs anti-smuggling officers arrested Xiao at his residence, seizing 36 one-litre bottles of unsold Hennessy XO. In the second-instance ruling, Xiao was convicted of smuggling ordinary goods and sentenced to three years in prison, along with a fine of RMB 300,000 (about US$42,000).
Zhuhai, where Xiao lived, borders Macau, which applies zero tariffs to most goods. The two cities see massive daily cross-border traffic, making the area a long-standing hotspot for smuggling activity.
A common tactic involves organised groups recruiting individuals who regularly commute between the two cities to carry goods within legal allowance limits. These items are then collected centrally and resold. Because each individual act appears compliant on the surface, the method significantly complicates customs enforcement and detection.
As previously reported by Vino Joy News, the Zhuhai Intermediate People’s Court recently disclosed another similar case. In that instance, smugglers used water mules to transport Hennessy, Martell and Kweichow Moutai from Macau into Zhuhai, evading approximately RMB 3.16 million (US$442,600) in taxes.
Significantly, part of Xiao’s smuggling activities occurred between May 2021 and September 2023, when China’s Ministry of Commerce imposed anti-dumping duties of 116.22% to 218.4% on Australian wine. The sharp tax differential widened arbitrage opportunities. As one of the most recognisable imported wine brands in China, Penfolds maintained relatively inelastic consumer demand, which further amplified incentives for smuggling under high-tariff conditions.
During the trial, Xiao argued that some offences occurred during the anti-dumping period and that changes in trade policy should be considered mitigating factors. The court rejected this argument, ruling that while external trade policies may have influenced transaction values, they did not alter the criminal nature or responsibility of the acts.
Xiao’s second smuggling episode, from June to August 2024, also coincided with China’s anti-dumping investigation into EU brandy, which was approaching a preliminary ruling. Heightened policy uncertainty made some importers reluctant to place formal orders due to tariff risks, inadvertently creating a market window for smuggled alcohol.
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