Parallel trading

The influx of parallel traders who buy their stock tax-free in Hong Kong to resell it in mainland China at a profit is causing growing unrest. Residents of Sheung Shui, a town close to China's border, say the increase in parallel importers has pushed up retail prices and causes a general nuisance. Importers argue that their trade benefits the Hong Kong economy.

NewsHong Kong
PARALLEL TRADING

Traders try to beat rule on baby formula with sachets

Traders are attempting to beat the two-tin limit on exporting infant formula by selling small plastic bags filled with individual servings

PUBLISHED : Tuesday, 05 February, 2013, 12:00am
UPDATED : Tuesday, 05 February, 2013, 12:14pm
 

Parallel-goods traders are already finding ways to dodge the two-tin limit on baby formula – weeks before the government is set to approve the new rule.

On Monday, the South China Morning Post found traders outside Sheung Shui station – a large-scale distribution centre for the parallel-goods business – apparently loading bags with milk powder packed in small sachets of individual servings instead of the usual large tins.

The tactic raises doubts about whether understaffed customs officials at the border will be able to enforce the new restrictions, designed to maintain supplies in Hong Kong in the face of a continuing backlash from the 2008 tainted milk formula scandal on the mainland.

Bernard Lee Kwan-kit, vice-chairman of the Association of Customs and Excise Service Officers, insisted such tricks did not mean the rules would fail.

"Officers are fully capable of detecting milk powder even if it is disguised. But the main difficulty for us is the tight resources," he said. "The additional work is going to be quite a heavy burden to us. We will be needing extra manpower, space and facilities such as X-ray machines in order to carry out this new duty."

We will be needing extra manpower, space and facilities such as X-ray machines in order to carry out this new duty

Health secretary Dr Ko Wing-man said he was inclined to push for tougher restrictions by limiting anyone leaving Hong Kong to two tins – or 1.8kg – a day rather than each trip. This would prevent mainland parallel-goods traders from simply making more trips each day to move their stock.

He said they were considering whether the two-tin limit with a time restriction was legally and tactically possible.

Ko said that his bureau would hold talks with milk powder manufacturers on the amendment to the law and it was aiming to submit a proposal to the Executive Council .

Most parallel traders seen in Sheung Shui on Monday were carrying Enfamil infant formula in yellow packaging as opposed to the brand's normal blue packaging seen in Hong Kong stores.

A spokeswoman for Mead Johnson, which owns the brand, said the company had not imported the yellow version into Hong Kong. A Google search suggests this version is sold overseas and is available as individual servings packed in sachets.

A spokeswoman for Customs and Excise said the department would deploy additional manpower to help with checks on outgoing traffic. She added that under existing export regulations, the maximum penalty for a criminal offence is a fine of HK$500,000 and two years in jail.

Ko said figures showed that the parallel-goods trading was mainly affecting Mead Johnson and Frisco brands.

A government hotline set up last Friday has so far received more than 4,600 calls, of which around 2,500 were orders transferred to formula suppliers.

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