Offshore Duty Free's Flaw: "Set Purchase" Illegal Black Chains
- Chaileedo Press
- Jun 9, 2022
- 3 min read
Relevant Chinese customs anti-smuggling departments successfully cracked a case of offshore duty free business cosmetics in Hainan, arrested 2 suspects, and seized a batch of high-end cosmetics with a value of 1.04 million yuan (about $157,000). Since July, 2020, the gang has organized its family members to Hainan for many times to purchase duty-free commodities from Hainan, and then resell them on e-commerce platforms for profit.
A few days ago, the anti-smuggling department of Gongbei Customs District P.R.China successfully cracked a case of smuggling cosmetics from Hainan's offshore duty free "Set Purchase". During the operation, the anti-smuggling department successfully destroyed a smuggling gang, arrested 2 suspects, and seized a batch of high-end cosmetics with a case value of 1.04 million yuan (about $157,000). The seized cosmetics brand products include NARS, ANESSA, Elizabeth Arden, MAKE UP FOR EVER, etc.
After investigation, the suspects adopted "family-style" smuggling, using the family's "capital" quota, to organize family members to go to Hainan to buy offshore duty free goods many times, and then sell them again on e-commerce platforms for profit.
In addition, recently, Zhanjiang Customs District P.R.China has cooperated with the Hainan Provincial Anti-Smuggling Comprehensive Management Office and other departments to carry out an operation. A total of 12 professional smuggling gangs of "contained purchasing" were destroyed, 12 criminal cases were filed, and 22 criminal suspects were arrested. On the spot, 1,033 pieces of suspected smuggled offshore duty free cosmetics and foreign wine were seized. The case is worth about 50 million yuan (about $7.48 million), and the suspected tax evasion is about 10.5 million yuan (about $1.5708 million).
The so-called "Set Purchase" refers to the act of purchasing duty-free goods for others or reselling the purchased duty-free goods in the Chinese market for the purpose of profit, or the act of organizing and using the qualifications and quotas of others to purchase offshore duty-free goods and seek illegal benefits.
The illegal behavior of Hainan's "Set Purchase" comes from the preferential offshore duty free policy of Hainan. In June 2020, the Ministry of Finance of the People's Republic of China and other departments jointly issued the "Announcement on Hainan's Offshore Duty Free Shopping Policy", requiring passengers leaving Hainan to have a duty-free shopping quota of 100,000 yuan per person per year (approximately $15,000), with unlimited times.
As a result, the illegal act of "Set Purchase" breeds, forming a black industry chain: upstream members line up to buy goods in Hainan duty-free shops, while mid-stream members leave Hainan to pick up the goods, and downstream members would distribute and sell the goods at higher prices to others.
It is reported that individuals who purchase and smuggle duty-free goods in China will be included in their credit records and cannot purchase offshore duty-free goods within three years; and those that constitute smuggling or violate China's customs supervision regulations will be dealt with by General Administration of Customs P.R.China based on relevant regulations; if a crime is constituted, criminal responsibility will be investigated according to law.
In order to crack down on the illegal acts of "Set Purchase", relevant Chinese departments have also launched many special crackdown actions. In June 2021, Hainan Province held the launching ceremony of a special campaign to combat and control offshore duty-free "Set Purchase" smuggling, and launched a one-year special campaign against this kind of behavior; in January 2022, in order to effectively prevent "Set Purchase" Smuggling risks to ensure the sustainable and healthy development of duty-free shopping consumption, Hainan Province launched a 3-month offshore duty-free "Set Purchase" special campaign to crack down on winter and spring...
In addition, Hainan Province has also implemented a "traceability management system", which is affixed with traceable source code sales for three categories of offshore duty-free perfumes, cosmetics, drinks and mobile phones.
The traceable source code has a unique global number, which is the unique identification of duty-free commodities in Hainan Free Trade Port. In addition, the product label contains graphic information, exclusive Hainan duty-free logo and duty-free commodity traceability. The law enforcement officers of China Customs can inquire about the products, sales, delivery and other information just by scanning the commodity traceability source code.
The traceable source code also adopts an anti-tear damage design. If it is forcibly torn up, it will destroy the overall packaging of the product. Even if it is torn by hand or scraped with a knife, it is difficult to destroy the traceable source code, and even if a small part remains, traceability can be achieved.
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