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Fine Wine, recycled paper and the problem with
customs in China
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9th February 2012
By Thomas Gearing (Director) - Cult Wines Ltd -
http://www.cultwinesltd.com
Despite
China becoming one of the world’s biggest importers
of wine, problems with the importation of fine
wines, which have become the latest focus for the
Chinese super-rich, continue to exist. Hong Kong,
the Special Administrative Region of China, has
usurped New York and London in recent times to
become the world’s largest fine wine hub as a result
of the abolition of import duties. However, with a
punitive import tax of 50% applied on fine wine in
mainland China, importers and merchants in Hong Kong
have looked to alternative methods in order to
satisfy demand.
As the Far East has become the big focus of the wine
world, stories of Premier Grand Cru Classés being
smuggled into mainland China have been as common as
consumers drinking Lafite with Coca-Cola and Petrus
with Lemonade. It seems despite the many stories
importers have favoured smuggling fine wine,
predominantly through Shenzhen, which not only is
immediately north of Hong Kong but is the third
busiest container port in China (after Shanghai and
Hong Kong). It has been suggested that the favoured
option for smugglers is to conceal expensive wine
within containers of recycled paper, something that
isn’t liable to tax and which at a larger container
port may easily pass through undetected.

Shenzhen has become a hot bed for fine wine
smuggling
Avoidance of the 50% import tax is not the only
motivation for the wine merchants and importers.
Import licenses are notoriously difficult to obtain
from the Chinese Tax Bureau and in many cases
different licenses are required for specific
products, regions etc. Furthermore, even when wine
is imported in the correct manner it doesn’t always
go as smoothly as anticipated. Stephen Chun, a wine
consultant based in Shanghai explained that
sometimes ‘wine can be held for 30 days then 60
days, with some containments being held indefinitely
or destroyed’.
Despite being China’s Southern economic powerhouse
the minimum monthly wage in Shenzhen is just 200$
per month – far less than the price of a single
bottle of some of the wines which are being
imported. Chun hinted that this might well be the
problem, as Custom officials may be tempted to
subsidise their annual wage. In order to ensure the
ease of movement of wine stocks, Chun admits ‘it
has been necessary for importers to take the customs
guys out to dinner’.

Shenzhen
Customs Officials inspect ‘contraband’ wine
Anna
Tam, a wine trainer for ASC fine wines (one of the
biggest fine wine importers in China) concludes the
same, ‘if you [want to] have transaction more
quickly, it is better for you to know some
government officials’. Considering China
maintains a unitary government centralizing the
state, media and military it is of no great surprise
that this control filters through to all levels of
social function. Therefore at local level government
officials have the control and authority, in this
scenario they’re the necessary contacts required by
wine importers and merchants to ensure the safe
passage of shipments. Anna confirms that ‘most of
the business trade is done by 'friendship'…it really
takes time to make the government officials (become)
your friends’.
In 2011, Chinese authorities increased their efforts
to restrict the illegal importation of fine wine.
Decanter recently reported that the Chinese
authorities had sentenced a businessman to life in
jail for ‘illegally importing millions of dollars
of fine wine into China’. In this case the man
was found guilty of ‘forging invoices and import
contracts to evade import duties’ but the
businessman argued that his actions were necessary
as ‘it would (have been) difficult to stay in
business if (he) went through the official channels’.
The authorities in China have also recently
installed new technology in order to combat the
problem. New infrared scanners, used extensively in
the Western world, have been implemented at Shenzhen
container port. The new technology can quickly
examine entire containers in order to identify any
contraband items. This is especially useful in
trying to detect fine wine being passed through in
containers of recycled paper, which had been rife.
This news will serve as a deterrent to those
involved with the wine trade in China; that the
authorities are better equipped and willing to mete
severe punishments to guilty parties.
The evidence supports recent suggestions that the
slowdown in the fine wine market can be in part
attributed to problems with transporting the backlog
of stock currently in Hong Kong and satisfying
mainland Chinese demand. The solution doesn’t seem
obvious at this stage but the number of those
willing to take the risk and smuggle fine wine into
China will certainly have reduced. A more efficient
and transparent system needs to be established in
the long-term. With the proliferation of fine wine
consumption being partly accredited to Chinese
Government officials, it seems that it is within
their interests to find the solution.
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