Housewives On Trial In China For Smuggling In iPhones

This is a very common practice. Not just iPhones, but all kinds of electronics are being smuggled from Hong Kong to China. Regularly I hear about police intercepting a smuggling attempt, usually larger volumes of PCBs, computer chips, hard drives, and other components being smuggled to the mainland.

This has to do with taxes. Electronics, particularly expensive stuff, is smacked with a "luxury tax" of like 20% on sales value (I forgot the exact number), plus of course a VAT. So an electronic device produced in mainland and sold there, has these taxes added to it's price. But when the same device is exported to Hong Kong, the factory doesn't have to pay taxes. So indeed mainland factories produce electronics, export them tax-free to Hong Kong, from where it's smuggled back into the mainland.

iPhones are just a high-profile case (the same is happening for iPads and other wanted electronics), and in that case it's more than just taxes: the device is released in Hong Kong but not on the mainland (Apple controls when and where they're being sold), where it is a status symbol optima forma so people are willing to pay a big premium (think in the tunes of 50-100%) to have one *right now*, because having one well before it's officially being released is even better to impress friends and business relations (or, of course, to use as gift to business relations and government officials). So mainlanders come to Hong Kong, buy a lot of them, and have mules carry them across the border.

View the original article here