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China's customs inspectors target wine importers as sales of foreign vintages boom
SHANGHAI, China: Importers of wines and spirits in China have watched sales soar amid a fast-growing class of connoisseurs — but they're also attracting the attention of Chinese customs inspectors.
Shanghai customs agents have detained an executive of at least one major wine importer as part of a broad review of the industry.
Shanghai customs officials confirmed that an "audit" of wine importers was under way.
"We are cracking down on some wine importing companies that are suspected of falsifying prices and the case has been handed over to the Customs Smuggling Prevention Department," said Yin Zong, a spokesman for the Shanghai Customs office.
Don St. Pierre, Jr., managing partner of ASC Fine Wines, was taken into custody, his father Don St. Pierre, Sr., confirmed in an e-mail to The Associated Press.
Don St. Pierre, Sr., a Beijing-based businessman who once headed American Motors' joint venture Beijing Jeep Corp., said his son was among a number of "wine importer executives being held while the investigation continues."
Don St. Pierre Jr. was cooperating with authorities while being held under rules that allow the detention individuals for up to 30 days without charge, his father said.
"Don has not been charged with any crime and has not been arrested," he said.
Staff at the Shanghai offices of several other major wine importers said their companies had not been targeted, though word of the increased government attention was spreading.
"I did hear that some wine importers are facing a customs crackdown," said a manager at Aussino World Wines' office in Shanghai, giving only his surname, Li.
Li said his company, which has dozens of outlets around China, ships its wines from the southern city of Guangzhou and therefore is not dealing with Shanghai customs.
Staff at wine counters at two downtown supermarkets said a handful of foreign vintages were not available, though it was unclear if the customs inspection was the cause.
In any case, any crackdown is unlikely to stem the craze among newly affluent Chinese for wine tasting and collecting.
Wine imports have soared since Beijing slashed import tariffs to 14 percent from 65 percent several years ago. Boutique wine shops catering as much to local Chinese as to foreigners have opened in many of Shanghai's upscale neighborhoods and major supermarkets.
Customs figures show imports surging 52 percent in the first nine months of 2007 from the same period a year earlier, to 102 million liters, according to industry Web site 21food.com.
Those figures have not been fully reflected in increased customs revenues, due to underreporting of the value of imported products, some in the industry say.
St. Pierre said ASC and customs officials had agreed on a "minuscule" $250,000 discrepancy in ASC's imports over three years, equal to 1.1 percent of the $22 million the company paid in import duties during that time.
"Even the $250,000 alleged underpayment of duties is not clear as there are mitigating circumstances that I am discussing with Customs now," he said.
ASC runs a "Wine Residence" in a Shanghai historic mansion dedicated to educating and cultivating a love of fine wines among its local clientele.
Its program of wine tastings and seminars continues despite the customs inspection, St. Pierre said.
"Stepping back, I've been living and doing business here in China for 22 years now and have gone through lots of these kinds of things and survived," he said. "China is not for the weak hearted."
by The Associated Press
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ASC denies threat of fines under Chinese customs clam pdown
Chinese importer ASC Fine Wines has strongly denied it is facing hefty fines and the possible deportation of its directors for underpayment of duties.
In an article published on jancisrobinson.com, wine consultant Simon Tam, director of the International Wine Centre in Shanghai and Hong Kong, said ASC 'is looking at a fine rumoured to be in the neighbourhood of €5m, and the potential deportation of some of its top executives…'
According to Tam - who is not involved in selling wine - customs are cracking down on the 'subtle manipulation' of declared wine value, and the 'common practice' of undervaluing wine by up to 50%.
ASC spokesman Matthew Gong told decanter.com the report is 'based on rumour and lacks any evidence to support the allegation'.
The mention of a €5m fine and possible deportation is 'absolutely false', he said.
Gong added that the inspection was routine: 'Customs do it every year. Sometimes it is textiles, sometimes it is wine, sometimes another industry.'
In a statement ASC said it is 'cooperating fully and managing partner Don St Pierre Jr and vice president Ms Carrie Xuan are with Customs inquiries personnel now.'
ASC is China's leading importer of fine wines, representing more than 800 wines and 80 producers in 13 countries. Don St Pierre Jr featured in Decanter's 2007 Power List.
The statement added that 'the value of ASC's imported wine declarations under review is approximately 1.5 days business for ASC'.
Gong clarified this figure by saying, '1.5 days business simply means it is not a big deal.'
Another major importer, Shanghai- and Hong Kong-based importers Summergate Fine Wines, said it could not comment on the situation.
Meanwhile China industry insider Jim Boyce said on his Grape Wall of China blog that the investigation could be due to a number of factors, chief among them the abolition of wine taxes in Hong Kong prompting the mainland authorities to warn importers to abide by the law.
It could also be 'part of China's shift in numerous sectors toward an increasingly rules-oriented environment, a situation that would be bound to impact other sectors.'
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Chinese Customs continues to inquire into the import declarations of wine importers. Investigators, in what appears to be an industry-wide initiative, are looking for companies that under-declare the value of their imports.
ASC Fine Wines stated that its managing partner Don St. Pierre, Jr. and vice president Carrie Xuan are with Customs personnel, and that wine declarations worth 1.5 days of company revenue are under review.
ASC Chairman Don St. Pierre, Sr. told Grape Wall of China, “This is a ‘peanuts’ case blown out of all proportions.”
According to industry insiders, other wine importers also continue to be under investigation. I talked to Alberto Fernandez of Torres last week, who said Customs normally checks wine companies every year or two. He noted the quick growth of the industry - wine imports are up 400 percent over two years, major players are growing upwards of 50 percent per year, and many new importers have jumped into the market, he said. An increasing amount of money is at stake in the industry.
Fernandez said that Customs has checked and cleared Torres. Palette Wines also stated that its books have been found to be in order.
Such widespread investigations in China are sometimes routine and sometimes prompted by other issues. In terms of the latter, speculation is that the investigation is possibly due to one or more of the following:
- Part of China’s shift in numerous sectors toward an increasingly rules-oriented environment, a situation that would be bound to impact other sectors.
- A response to the sustained external pressure on China over product quality issues, from food safety to lead in toys.
- A result of the National People’s Congress being in session, which is a common time for campaigns against corruption.
- A warning shot, in the wake of Hong Kong abolishing its wine taxes, to mainland-based importers to abide by the law - many expect expensive wines to be smuggled from Hong Kong to the mainland, where importers pay up to 50 percent in duties.
- An acknowledgment of the growing value of the wine industry as a source of revenue for the government.
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To the Valued Customers and Suppliers of ASC Fine Wines:
As our valued business partners, we feel it is important to inform you about industry wide inquiries recently initiated by the Chinese Customs Bureau into the import declarations that has involved ASC Fine Wines. We firmly believe that this situation is either a misunderstanding or merely a routine industry by industry review of import practices.
ASC is cooperating fully and Managing Partner, Don St. Pierre Jr. and VP, Ms. Carrie Xuan are with Customs’’ inquiries personnel now. It is important to note that the value of ASC’s imported wine declarations under review is approximately 1.5 days business for ASC.
We expect a swift and mutually satisfactory resolution to this issue and note that ASC’s country wide business of importing and selling wine continues without interruption now.
Thank you for your continued support.
Sincerely,
Don St. Pierre, Sr.
Chairman, ASC Fine Wines
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Four contributors to Grape Wall of China have talked to sources in Hong Kong, Shanghai, and Beijing who report that China Customs is investigating wine importers.
The inquiry seems to be targeted at firms that under-declare the value of their imports.
Two well placed industry sources say that staff members are being questioned, with one source calling the inquiry “routine.”
Rumors abound about the detention of high-profile people from wine companies, but none of them are confirmed.
By www.grapewallofchina.com
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Australian wine-focused GELIPU and South African-wine focused Winelink will team up on Saturday, February 23, to present 100 ’boutique’ wines from, you guessed it, Australia and South Africa.
Intriguingly, the invite says, “In the future, don’t buy from the retailer, don’t buy from the wholesaler, don’t even buy from the importer, it’s the exporter that you need to talk to!”
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Special Report: NPC, CPPCC Annual Sessions 2007
BEIJING, March 16 (Xinhua) -- China's parliament, the National People's Congress, adopted the enterprise income tax law Friday morning with 2,826 votes for and 37 against, and 22 abstentions, a key signal of a phase-in end of superior treatments to foreign investors for two decades.
The 60-article law was ratified by the lawmakers as they concluded their 11.5-day annual full session at the Great Hall of the People in downtown Beijing. The law is due to take effect on Jan. 1,2008.
The voting result, announced by NPC Standing Committee ChairmanWu Bangguo, was warmly applauded by lawmakers. Four legislators did not cast their votes.
Experts say the law marks an adjustment of China's policies toward foreign investment in the current times.
The law, which sets unified income tax rate for domestic and foreign companies at 25 percent , came after years of criticism that the original dual income tax mechanism is unfair to domestic enterprises.
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