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iPhone Smuggling Housewives Brought to Trial

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iPhone 5 will launch in China soon.

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MINYANVILLE ORIGINAL A large grey market for Apple (NASDAQ:AAPL) products has grown over the past two years. Some impatient Apple enthusiasts would rather pay more for a smuggled product then wait the usual three months for its official release while others just want to find a better deal. However, mainland Chinese and Hong Kong authorities have been cracking down on electronics smuggling rings.

According to Reuters, 25 smugglers have been tried by the Shenzhen Intermediate People's Court this past Wednesday for participating in five smuggling rings that were busted in April. Hong Kong and mainland Chinese officials arrested 104 individuals, some of whom had ties to LanyouShuma.com, which previously held the position as a top seller of Apple products on Alibaba's Taobao C2C marketplace. Most of the 104 have pleaded guilty. The Hong Kong Independent Commission Against Corruption forced Lanyou to close its shop after authorities launched an investigation and discovered LanyouShuma sold the iPhone 4S at below market prices in mainland China. At one point, 20,000 items were sold per month through the website.

Over the past two year, the rings have smuggled over 162,000 mobile phones worth over 500 million yuan, or $80 million, from Hong Kong. The court tried 25 of them for smuggling both iPads and iPhones and evading 54.87 million yuan in taxes.

Half of the suspects are housewives who frequently traveled to Hong Kong pretending to be tourists. Each received 20 yuan to 30 yuan for every phone smuggled into China. On average, each of them smuggled over 60 handsets to China daily.

China imposes high import and luxury duties on electronics and luxury products. In 2010, the Chinese government levied a tax on imported iPads. Even with the elevated grey market prices, smugglers can still turn a profit while undercutting other traditional retail locations. Individuals from China commonly shop in Hong Kong or in Europe for electronics and luxury goods to circumvent the higher prices caused by the taxes.

Despite the tougher measures by authorities, smugglers still exploit the lack of the iPhone 5 in mainland China.
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