Shenzhen customs cracks down on cross-border wine smuggling

Shenzhen Customs in China’s southern Guangdong province has stepped up its efforts to clamp down on cross-border smuggled wines from Hong Kong to Mainland China before the Chinese New Year holiday, dealing a major blow to parallel traders pedalling tax-free grand cru classé wines.

Bottles of wines deserted in Futian Checkpoint (Photo credit: Wine Distributor Insider Report)

According to a report by Wine Distributor Insider, Futian checkpoint, in particular, has launched “its biggest crackdown in history” on wines smuggled from Hong Kong last month. This is expected to adversely affect merchants relying on grand cru classé wines smuggled via this illegal channel, the report noted. Cross-border tourists are only allowed to bring back two bottles of wines from Hong Kong for each trip.

Pictures obtained by the media outlet showed bottles of wines being left abandoned. In one photo, a man was seen drinking straight from a bottle to salvage wasted wine.

“The customs have beefed up their efforts, many grand cru classé wines are stranded in Hong Kong and couldn’t make it to the mainland. I have more than 4,000 bottles of wines waiting to be transported back by parallel traders, but no one dared to take the order,” one fine wine merchant who sells cross-border smuggled wines told the media outlet. 

Cross-border parallel traders regularly transport cheaper and tax-free goods bought from Hong Kong including baby formula, cosmetics, wines and spirits, and sell them in Mainland China for higher profits. 

The report said since the launch of the clampdown in Futian last September, many parallel traders carrying tax-free wines from Hong Kong to Mainland China were blocked from entering Shenzhen after customs officials set up a special passage for tourists with large suitcases, hoping to separate alleged parallel traders from regular visitors. 

A guy in a dark hoodie is seen drinking straight from a bottle (Photo credit: Wine Distributor Insider Report)

The first day when Futian customs introduced the special passage, cross-border visitors’ number dropped 6,000 during peak hours from 5pm – 7pm, the media outlet wrote in a separate report.

Figures released by Shenzhen Customs Department showed that in the first three weeks of October 2016, the total number of parallel traders entering from the Futian checkpoint decreased by more than 90% compared with the same period in 2015.

The effects of the crackdown are still yet to be seen, but demand for grand cru classé wines in China is still fervent, and cross-border smuggled wines will likely persist, especially at a time when most fine wine retailers, including ASC Fine Wines, have recently announced price hikes for its wines in Mainland China, “due to cost increases”. 

A wine merchant based in Shenzhen called Pan Jiajia told Wine Distributor Insider Report that a smuggled bottle of 2012 Château Lafite Rothschild can sell for over RMB 3,000 (about €414) compared with the same wine sold through legal channels for RMB 4,000 (about €551) – RMB 5,000 (about €690). So even with increased risks, smuggled wines of top châteaux are still profitable, he explained.