[Weekly Preview] Border Traders Exploit Duty-Free Allowance Loophole: (AI Translation)
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文｜财新周刊 冯奕铭
By Caixin Weekly’s Feng Yiming
“我们做的是地方政府鼓励的事，为什么会被说成是走私？”时至今日，邹叶还是困惑不解。
"We are doing what the local government encourages, so why is it called smuggling?" Even today, Zou Ye remains perplexed by this.
邹叶的丈夫在云南省普洱市孟连口岸经营一家口岸运营公司，该公司于2018年7月进驻连接中国云南与缅甸的货运通道——芒信通道，投入1500万元建设了边民互市市场和查验货场。但2023年9月，海关缉私以伪报贸易方式走私普通货物的罪名，拘捕了包括她丈夫在内的五名责任人员。
Zou Ye's husband runs a port operation company at the Menglian Port in Pu'er City, Yunnan Province. The company entered the Mangxin Passageway, a cargo route connecting Yunnan, China, and Myanmar, in July 2018, investing 15 million yuan to establish a border trade market and an inspection yard. However, in September 2023, customs anti-smuggling authorities arrested five responsible personnel, including her husband, on charges of smuggling general goods by misreporting trade methods.
上述口岸运营公司在边民互市市场中的主要职责是协助疏通货运环节，疫情期间经手的贸易量突飞猛进。海关指出，通过边民互市渠道进口的货物应当属于边境居民，但调查发现该货场的货主大多数是境内外个人和企业。
The primary responsibility of the aforementioned port operating company within the border trade market is to facilitate the clearance of cargo operations, which saw a dramatic increase in trade volume during the pandemic. Customs authorities have stated that goods imported through border trade channels should belong to border residents. However, investigations revealed that most of the consignees at this cargo site are domestic and foreign individuals and enterprises.
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- Zou Ye's husband's company was implicated in a smuggling case despite following local government practices, highlighting regulatory challenges in China's border trade with Myanmar at Menglian Port.
- The use of "border residents' mutual trade" policies led to smuggling charges when goods exceeded allowances, revealing systemic issues in Guangxi and Yunnan's border markets.
- China's evolving policies and international dynamics, like Vietnam's upcoming restrictions, pressure local governments to enhance regulations and promote sustainable border trade practices.
The article centers around border trade issues on the China-Myanmar border, mainly focusing on the case involving Zou Ye's port operation company at Menglian Port, Yunnan Province, which has been accused of smuggling by misreporting trade methods. Zou Ye's confusion stems from the company's operations aligning with local government encouragement, especially during the pandemic when trade volumes surged dramatically, but the arrest of personnel, including her husband, highlighted the legal disconnect in implementing border trade policies [para. 1][para. 2][para. 3].
Border trade in this region typically leverages a specific policy, "border residents' mutual trade," which includes tax exemptions for goods valued below RMB 8,000 per day per person, designed to encourage local employment and regional stability. However, recent customs reports have spotlighted abuses of this system with many goods being funneled to domestic and wider markets, not solely consumed by local residents. This revelation fits within a broader trend, evidenced by the publication of 119 border trade-related smuggling judgments, showcasing active black and grey markets across regions like Guangxi and Yunnan [para. 4][para. 5][para. 6][para. 7].
The ease of digital platforms has simplified the declaration process, fostering misuse and transforming key border locales into smuggling hotspots. In response, local governments push policies like "border trade + on-site processing," aiming to catapult the "passage economy" into more controlled and beneficial forms while struggling against the limited enforcement and chaotic market practices. Revising policies to streamline border trade management is seen as pivotal to tackling these issues, with expectations of upcoming policy shifts to bolster development [para. 8][para. 9][para. 10].
The document highlights risks brought by neighboring countries like Vietnam, implementing Decree No. 122, which could severely impact trade by cutting duty-free allowances and enforcing stricter trade regulations by 2030. Located at a crucial trade juncture, the Mangxin Corridor exemplifies the billion-dollar potential of border trade while underscoring compliance challenges seen in Menglian's burgeoning trade value, which crossed significant milestones despite customs interventions in companies allegedly misreporting trade methods [para. 11][para. 12][para. 13][para. 14].
The intricacies of border trade extend, shadowed by illegal activities where companies use border residents as nominal importers, exploiting their duty-free quotas to evade tariffs. Cases in Guangxi and Yunnan depict companies undertaking sophistications like "ant-moving" operations and digital declarations, intertwining legal practices with contentious defenses reliant on interpretations of the China-ASEAN preferential tariff framework [para. 15][para. 16][para. 17][para. 18].
Lin Qian highlights the disconnect between business operations involving customs clearance companies and goods owners, suggesting that the true beneficiaries of import revenues often remain obscured or misrepresented under border trade documentation. Despite supporting local economies, only a fraction of goods appear to emerge genuinely from border residents, a contention exacerbated by the blurred lines between legal tax exemptions and customs smuggling violations [para. 19][para. 20][para. 21].
Insights into cases, such as the 2018 Guangxi Longzhou incident, reveal systemic smuggling tactics employed under the guise of border trades, often facilitated by cooperative structures masking the true ownership and intent behind transported goods. Legal repercussion disparity between tax evasion and smuggling rouses debates, as smuggling carries heavier penal discussions under Chinese criminal law, contrasting evasion’s relative leniency when rectified through tax settlements [para. 22][para. 23][para. 24][para. 25].
Overall, the evolving dynamics and legislative measures sought by Chinese authorities aim to not only consolidate border trades but ensure systemic resiliency against the backdrop of increasing international trade tensions and policy scrutiny, making the immediate future of border trade a pivotal frontier in China's economic strategy [para. 26][para. 27][para. 28][para. 29].
- DeHeng Law Offices
北京德和衡律师事务所 - DeHeng Law Offices is a law firm mentioned in the article, with Lin Qian as a senior equity partner. The firm provided statistical data on cross-border trade smuggling cases, noting 119 court judgments related to border trade smuggling between 2016 and 2021, predominantly in regions like Guangxi, Yunnan, and Hunan.
- Yunnan Pu'er Menglian Port Operation Company
云南省普洱市孟连口岸运营公司 - Yunnan Pu'er Menglian Port Operation Company, established in 2018, invested 15 million yuan to build a border market and inspection yard at the Mangxin Passage. Its main role was to facilitate cargo transport, which surged during the pandemic. In September 2023, five company officials were arrested for alleged smuggling by misreporting trade through the minority trade channel, where goods should belong to border residents but were largely owned by others.
- Guangxi Longzhou Zanmei Industrial
广西龙州赞美实业 - Guangxi Longzhou Zanmei Industrial was involved in a smuggling case, using border trade policies to evade tariffs on cashew imports, escaping 10 million RMB in duties. The company's goods were reportedly transported using local residents and processed minimally before being sold. Multiple individuals from the company faced legal action, with at least one shareholder sentenced to six years and another to life imprisonment.
- Beijing Lianggao (Shanghai) Law Firm
北京市两高（上海）律师事务所 - Beijing Lianggao (Shanghai) Law Firm is mentioned in the article through its lawyer, Shao Dan, who previously worked as a customs lawyer. Shao provided insights into how customs identify smuggling cases related to border trade, such as using risk management alerts and employee reports to investigate suspicious activities.
- Yunnan Honghe Prefecture Hekou Port Operation Management Co., Ltd.
云南红河州河口口岸运营管理有限公司 - Yunnan Honghe Prefecture Hekou Port Operation Management Co., Ltd., controlled by the Hekou County State-Owned Assets Supervision and Administration Bureau, facilitates cross-border trade between China and Vietnam. The company manages a platform that bridges procurement by local residents and purchases by enterprises, supporting the "border trade + local processing" model. It issues invoices and provides services to enhance transactional transparency and compliance with customs regulations in border trade.
- China Construction Bank
中国建设银行 - China Construction Bank is the only major bank offering settlement services for border resident mutual market transactions. However, the bank faces various challenges, such as account freezes or deductions, during these transactions. Despite policy support for border trade and related processing, uncertainties remain in executing these services.
- July 2018：
- A port operation company entered the Mangxin Passageway, investing 15 million yuan to establish a border trade market and an inspection yard.
- By September 2023：
- Customs anti-smuggling authorities arrested five responsible personnel, including Zou Ye's husband, on charges of smuggling general goods by misreporting trade methods.
- October 2023：
- The Yunnan Provincial Department of Commerce issued a notice encouraging border governments to introduce on-site processing enterprises and promote digitalization for trade facilitation.
- After October 2023：
- Yunnan residents' border trade volume reached 20 billion yuan, marking a 55.3% year-on-year growth.
- By January 23, 2024：
- Hekou Customs supervised and cleared 1,043 tons of processing goods under the border trade scheme since the launch of the first border trade processing project in November 2023.
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