Regulate parallel trading by interception and diversion

Updated: 2013-01-26 15:49

By Yeung Chi-hung in Hong Kong (China Daily)

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The Individual Visit Scheme (IVS) has made significant contributions to Hong Kong's economic growth over the years, but has also been exploited by some parallel traders for profit. This exploitation has been carried on to the degree of jeopardizing harmonious ties between Hong Kong and the mainland and disrupting normal trade with a resultant loss in state tax revenue.

Therefore, it is high time that illegal parallel trading come under effective control. We suggest that the Guangdong provincial authorities and Hong Kong law enforcement departments join in clamping down on organized illegal parallel trading under the guise of IVS trips. Masterminds and organizers should be brought to justice, issuance of multiple-reentry permits should be tightened and additional technical assistance should be provided to the immigration departments on both sides of the common boundary. There also needs to be a list of parallel traders, and for those who buy large amounts of consumer goods for legitimate, personal consumption, there should be an "IVS Shopping District" near the border.

The number of mainland residents allowed to enter Hong Kong under the IVS has grown to more than 200 million since it was launched in the second half of 2003. The mainland is now the largest source of tourists for Hong Kong, accounting for some 70 percent of the annual total. The cross border tourist traffic has boosted the growth of retail businesses, the hospitality industry including bars and restaurants and has served the economy as a whole.

However, the expansion of the IVS has inadvertently given rise to some negative developments, too. Illegal parallel trading is one type of malpractice that has taken excessive advantage of the IVS at the expense of local residents, who have seen their normal lives disrupted. In addition to creating shortages and price hikes in certain consumer goods, parallel traders also make it harder for others to cross the boundary as they occupy the already overcrowded public transportation and other facilities. The inconvenience caused by throngs of parallel traders in some neighborhoods became so outrageous, local residents took to the streets to protest and pressured the SAR authorities to take urgent action to halt illegal parallel trading.

Besides causing many headaches in Hong Kong, rampant illegal parallel trading also disrupts normal operation of many services on the mainland. Some parallel traders hide restricted import items in ordinary consumer goods to avoid paying import duties: cigarettes, spirits, cosmetics, mobile phones, digital cameras, computers, auto parts and certain high-tech products. These goods typically are considerably more expensive on the mainland because of high tariffs. Thus the smuggling of these goods costs the government millions, if not billions of dollars in lost tax revenue, apart from hurting imports through regular channels and upsetting the market order.

Needless to say, illegal parallel trading must be stopped immediately for the sake of maintaining Hong Kong's prosperity and stability, protecting harmonious ties between the SAR and the mainland and safeguarding national interests. However, it should be noted that not all mainland residents coming here under the IVS are "parallel traders" nor are most of them. And if restrictive measures are to be implemented, they should be aimed at the illegal parallel traders only. As for those who shop for their own consumption, a designated shopping facility should be created near the border to divert the flow of visitors and ease the pressure on customs officers manning the checkpoints.

Today some people who travel between Hong Kong and Shenzhen regularly have taken to acting as "part-time" parallel traders, including senior residents, persons with disabilities, school students and even "white-collar" commuters. Some even spend their weekends carrying consumer goods from Hong Kong to Shenzhen in small quantities to avoid paying duties and earn some money in return.

According to some official counts, more than 20,000 parallel traders now travel between Hong Kong and Shenzhen every day and the many individuals have become members of organized parallel trading groups offering services from purchase, transport and storage to sales. Many pack luggage that exceeds the permitted quantity, but they can get away with it because the excess is not large enough for customs officers to take action. We suggest, therefore, law enforcement authorities on both sides of the border join efforts to crack down on such groups and destroy the smuggling networks.

Quite a few experts have pointed out that multiple-entry permits have allowed the number of parallel traders to grow exponentially and therefore should be put under tighter control, such as removing "unlimited entries within a year" and stipulating "twice a day" or "thrice a day".

Also, given that customs, immigration and health quarantine officials cannot check every piece of luggage passing through the checkpoints in addition to performing their specific duties, we believe authorities on the Guangdong side should cooperate with their Hong Kong counterparts by keeping tabs on travelers carrying heavy baggage and inform the Hong Kong side through a dedicated communications channel regularly, so that the Hong Kong side can act against rule breakers with good reason.

The author is vice-chairperson of the Hong Kong Federation of Guangdong Associations and a HK member of the Guangdong Provincial People's Political Conference.