Retailers sentenced for skirting import tax

A Shanghai court on Monday sentenced two female shop owners to one year in prison, suspended for 18 months, for buying duty free goods in South Korea and bringing them into China to sell online in 2012, avoiding tens of thousands of yuan in import taxes.

The sentence, which includes fines for the two smugglers, recalls the high-profile case of former flight attendant Li Xiaohang, who has launched an appeal against her 11-year prison term imposed by a court in Beijing for her evasion of 1.09 million yuan ($170,000) in taxes when transporting cosmetic products from South Korea to China on numerous occasions between 2010 and August 2011. Li is still waiting for a decision by the High People's Court of Beijing.

Li's case has been hotly debated, and her sentence is widely considered too harsh.

Legal experts said law enforcement departments should not be arbitrary or selective when deciding who to charge with criminal offenses, because overseas purchase services are rampant. It is estimated there are 100,000 such purchasing agents across the country.

They also urged lawmakers to review customs taxes which are much higher than the world average, giving rise to overseas purchasing services.

According to the No 1 Intermediate People's Court of Shanghai, the two suspects, identified as Liu Xinxin and Fan Lin, were convicted of smuggling goods. In addition to their suspended prison terms, Liu was fined 100,000 yuan and Fan was fined 81,000 yuan.

This is the first case in Shanghai convicting overseas buyers, the court said. Fan carried 473 cosmetic products, wristwatches, bags and small medical instruments — including 411 pieces commissioned by Liu — in her luggage and did not declare them as imported goods at customs in Shanghai Pudong International Airport in April 2012.

One month later, Liu was caught carrying 307 cosmetics, wristwatches and bags without declaring them to customs officials when flying to Shanghai from Seoul.

Both are shop owners on Taobao, the country's largest online trading platform, where they sell products that are first ordered on the website of a duty-free shop in South Korea and later picked up from the country, the court said.

Liu evaded 99,000 yuan in taxes and Fan 80,000 yuan, according to the court, which took into account the smugglers' attitude, confession to the court and the nature of their crimes when determining the sentence. Both women said they would not appeal their sentences.

Zhang Yan, a lawyer who represented the former flight attendant Li, said on Tuesday that the Shanghai court's decision is more objective and fair than in his client's case.

"In the Shanghai case, it is quite clear that the two suspects were caught crossing the line, and the court handed down the judgment based on what police found," said Zhang, who works for Beijing-based Yida Law Firm.

But the 11-year prison term for his client Li, 30, is partly based on Li's confession of the total amount of goods she smuggled in that period, not on what police caught her doing.

"That's very controversial," Zhang said.

Zhang said courts must be consistent in their sentencing because there cannot be a situation where a few people can be convicted while the majority of smugglers are given administrative penalties.

"When law enforcement is not universal, all you can do is pray criminal charges won't be laid against you," he added.

You Yunting, a partner at Debund Law Offices in Shanghai, said on Tuesday that the popularity of overseas purchases reflects China's duty import costs, which are higher than the world average, especially on cosmetics. You said lawmakers should review whether the cost is too high.

He also called for overseas producers not to use differentiated pricing methods to sell their products at a higher price in China than in their home countries.

"Both of those can be called systematic loopholes that need time to mend," he said. "But in the short term, purchasing agents should stop their illegal services because the sentences in Beijing and Shanghai show the country is taking notice and is serious about tackling the offense."