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CDFG leads “protracted battle” against daigou China Duty Free Group (CDFG), the world’s number one travel retailer by sales and the dominant force in Hainan with a close to 90% share, is playing a leading role in combating daigou activity in the province. ![]() CDFG signalled its perspective on 1 July this year, noting that offshore duty free had become a “huge engine” for Hainan’s economic development that needed appropriate protection. “In order to enable this engine to exert its strongest momentum and provide tourists with a better shopping experience, it is necessary to maintain the healthy ecology of the offshore duty free industry, severely cracking down on purchasing agents and preventing market risks,” CDFG commented. “That has become the unshirkable responsibility of market entities.” In its July statement, CDFG underlined its support for a multi-participatory social governance community system to maintain the integrity of the offshore duty free system. It pointed out that from 1 July 2020 to 1 July 2021, Hainan Customs had carried out 12 special crackdown operations, knocking out 80 pirate buying gangs, imposing ‘eligibility penalties’ for passengers who had violated the regulations (and therefore could not enjoy the offshore free shopping policy for three years) and documenting ‘seriously untrustworthy entities’ into a shared platform. “As a leading company in the Hainan offshore duty free market, CDFG actively responds to the policy call,” the company said at the time. “Under the leadership of the parent company China Tourism Group, CDFG’s Sanya International Duty Free City, Sanya Phoenix Airport Duty Free Shop, Haikou Riyue Square Duty Free Shop, Haikou Meilan Airport Duty Free Shop and Qionghai Bo’ao Duty Free Shop have made concerted efforts to combat and prevent the act of purchasing purchasing agents as their unique responsibility for corporate development, and contribute positive energy to the healthy operation of Hainan’s offshore duty free market. “Currently, Hainan is moving steadily towards an international tourism consumption centre with world influence. In order to maintain the sustainability of the high-speed and high-quality development of Hainan’s duty free industry, cracking down on purchasing agents will become a protracted battle. “Under the leadership of its parent company, China Tourism Group, CDFG will continue to actively perform corporate responsibilities and help Hainan’s duty free market prosper.” |
CHINA. Tough new regulations to control “seriously untrustworthy” daigou-driven duty free purchases in Hainan will come into effect on 1 January, 2022 after being reviewed and approved at the 31st meeting of the Standing Committee of the Sixth People’s Congress of Hainan Province.
The wide-ranging measures underline the local government’s determination to curb daigou trading activity out of Hainan into the Mainland.
The regulations have been struck to “prevent and punish the serious untrustworthiness of duty free shopping in the Hainan Free Trade Port”, said the Office of the Free Trade Port Working Committee of the Hainan Provincial Committee of the Communist Party of China in a statement on WeChat yesterday.
Appropriate disciplinary action [see details below] will be taken against people and organisations breaching regulations.
“The promulgation of this law shows the determination of the Hainan provincial government and the Chinese government to resolutely crack down on illegal daigou and smuggling,” Mirko Wang, Founder of Chinese duty free services company Jessica’s Secret told The Moodie Davitt Report.
“The new regulation contains several provisions for the punishment of dishonesty in duty free shopping within the Hainan Free Trade Port. It defines the identification standard for ‘serious dishonesty’ in duty free shopping and also defines the relevant disciplinary measures. The punishment mechanism is defined according to both companies and individuals. It will even have a serious impact on the daily operation of any enterprises involved.
“This will have a strong impact on daigou – both individuals involved in purchasing on behalf of others (transferring their tax exemption quota to a daigou company) as well as large-scale daigou companies that resell duty free products in violation of regulations. In particular, serious dishonesty will be incorporated into the credit investigation system, which will have an impact on personal work, individual or company reputation, future company operations, bank loans and government support.
“Due to the far-reaching impact of this regulation, more and more individuals and companies will stay away from daigou activities and violations of duty free purchasing regulations.”
Takeouts: Key points from the announcement on the Hainan Free Trade Port WeChat Official Account
- The leading department of a comprehensive anti-smuggling management programme will be responsible for the identification of “serious untrustworthy entities” in duty free shopping.
- Customs and maritime police will perform duties related to punishment for dishonesty in accordance with the law.
- Relevant government departments and units such as public security, development and reform, market supervision and management, transportation, commerce, postal administration, the People’s Bank, and the People’s Court will all act to closely control duty free shopping and punish dishonesty.
- People and unincorporated organisations that violate the relevant regulations pertaining to offshore duty free shopping or ‘zero-traffic’ goods consumed by residents of Hainan Island will be included in the list of ‘serious untrustworthy entities’ for duty free shopping. This group to include:
(1) Those who commit a crime and are punished or exempted from criminal punishment;
(2) Those who have been given administrative penalties for major violation or who have been punished by two or more administrative penalties;
(3) Other violations of the regulations on duty free shopping
Information on administrative penalties, criminal punishments, or exempted criminal punishments will be shared with the anti-smuggling government bodies within 15 days of the ruling/verdict. The list will be shared with the Reform and Development Commission, Market Supervision Commission, employer of the person (if applicable) and relevant companies and financial institutions.
Hainan Free Trade Port’s list of serious untrustworthy entities will be identified and widely published over a three-year period on the websites of Credit China (Hainan) and the National Enterprise Credit Information Disclosure System (Hainan). The publication period is three years.
A range of punishments for organisations deemed to have carried out serious untrustworthy activities includes increased daily supervision and inspection efforts, and increased frequency of random inspections; restricted participation in key construction projects; restriction of government preferential policy support; and the restriction of access to financial capital projects.
For individuals included in the serious untrustworthy entities list pertaining to duty free shopping, penalties include the loss of duty free shopping rights; and being listed as a key subject of daily supervision in Hainan and inspected when leaving the island.
Such individuals will be banned from working in the duty free sector and have personal qualifications and awards cancelled, including any recommendation for admission to higher education.
Additionally, credit rating agencies may collect information on ‘serious untrustworthy’ behaviour and report it to financial institutions.
In addition, commercial banks, insurance companies, and securities companies are also given access to such information in compliance with laws and regulations, and are allowed to increase mortgage interest rates, property insurance premiums and trading commissions on a risk-based pricing rule.
Note: Every fortnight The Moodie Davitt Report publishes Hainan Curated, in association with Foreo, a curated selection of all recent stories from the offshore duty free sector. Click here to subscribe free of charge and to view all back issues.
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