Hainan’s Island-Wide Customs Closure: When Does Taking Duty-Free Goods Off the Island Become Smuggling?

1. The “closure” is about goods, not people

On 18 December 2025, the Hainan Free Trade Port formally launched island-wide special customs operations (Hainan Provincial Government Notice, 琼府函〔2025〕278号), with accompanying documents on goods taxation, the catalogue of taxable imports and customs supervision taking effect the same day. Many people assume “closure” makes visiting Hainan harder; in fact, travel between the mainland and Hainan is unchanged.

The arrangement can be summed up as “first line open, second line controlled, freedom within the island”: the “first line” is between Hainan and places outside the customs territory; the “second line” is between Hainan and the mainland. The change is that “zero-tariff” imports moved from a positive list to a negative list managed through a “catalogue of taxable imports” — goods outside the catalogue basically enter the island free of import tax; officially, the share of tariff lines enjoying zero tariff at the first line rose from 21% to 74%.

The crucial point: goods entering the island duty-free does not mean they can enter the mainland duty-free. Zero-tariff goods leaving through the “second line” into the mainland must still pay import duty, import VAT and consumption tax (财关税〔2025〕12号) — that is the risk this article discusses.

2. The current rules for visitors buying duty-free goods

The offshore duty-free policy remains in force, based on the Ministry of Finance, General Administration of Customs and State Taxation Administration Announcement on the Hainan Offshore Duty-Free Shopping Policy (2020 No. 33). In October 2025 the three agencies adjusted it by Announcement 2025 No. 9, effective 1 November 2025:

• the range of duty-free goods was expanded to 47 categories; the minimum age rose from 16 to 18;
• travellers leaving Hainan and departing China may also shop duty-free;
• the RMB 100,000 per person per year allowance and per-purchase quantity limits remain; purchases by departing international travellers count towards the allowance with no limit on the number of trips;
• island residents (Chinese citizens holding a Hainan ID card, residence permit or social security card, etc.) who have left the island at least once in a calendar year may buy offshore duty-free goods under the “buy and collect immediately” mode without limit on the number of purchases.

So buying within the allowance and quantity limits and collecting and taking goods off the island as required is lawful consumption expressly permitted by the policy. The problem lies in “who the goods are for and what they are bought for”.

3. A real Hainan case: duty-free goods bought on others’ allowances and resold — six and a half years

The case of Li Mouheng and Li Muxian, smuggling ordinary goods (first instance: Haikou Intermediate People’s Court (2020) Qiong 01 Xing Chu No. 132; second instance: Hainan High People’s Court (2021) Qiong Xing Zhong No. 39), draws the line clearly.

Li Mouheng had worked as an assistant at Haikou Meilan Airport customs. He had used travellers’ identity information and tickets to buy duty-free goods and had relatives and friends leaving the island carry them off and post them back for profit; he was dismissed in 2018. From 2019 he used other people’s duty-free allowances to buy goods and sold them on WeChat Moments, and acted as a “buyer” for others, organising and using purchasers’ allowances to buy goods for resale, charging RMB 50–100 per “head”; the “heads” came from borrowing tickets on the spot, relatives and friends, tour guides and smuggling-courier bosses. From March 2020 Li Muxian helped him; the pair also bought at the airport without actually boarding, slipping out through the passage during security shift changes.

Anti-smuggling investigators found that Li Mouheng had used others’ allowances to buy and sell duty-free goods worth over RMB 12.2 million, evading over RMB 2.1 million in tax; Li Muxian took part in buying 1,991 items worth over RMB 1.06 million, evading over RMB 220,000. On appeal, Li Mouheng was convicted of smuggling ordinary goods and sentenced to six years and six months’ imprisonment and a RMB 2.2 million fine; Li Muxian received one year’s imprisonment suspended for two years and a RMB 150,000 fine. The judgment’s key holding: duty-free goods on the island are goods imported with specific tax reductions or exemptions; reselling them for profit within China without customs permission and without paying the tax due, in amounts of RMB 100,000 or more, is punishable as smuggling ordinary goods.

4. The law: why “buying for others” can become smuggling

Article 153(1) of the Criminal Law covers smuggling goods and articles other than those in Articles 151, 152 and 347. Item (1): where the tax evaded is relatively large, or the person smuggles again after receiving two administrative penalties for smuggling within a year, the sentence is up to three years’ imprisonment or criminal detention plus a fine of one to five times the tax evaded.

What brings offshore duty-free goods within this offence is Article 154, item (2): selling for profit within China, without customs permission and without paying the tax due, goods or articles imported with specific tax reductions or exemptions — punished under Article 153.

What is “relatively large”? Under Article 16 of the Supreme People’s Court and Supreme People’s Procuratorate Interpretation on Smuggling Cases (法释〔2014〕10号): evaded tax of RMB 100,000 to under 500,000 is “relatively large”; RMB 500,000 to under 2.5 million is “huge”; RMB 2.5 million or more is “especially huge”, corresponding to sentences of up to three years, three to ten years, and ten years to life. Article 153 also provides that repeated unpunished smuggling is punished on the cumulative tax evaded — so “a little at a time” can add up to one large figure.

5. What is compliant consumption and what is on the edge of crime

• For your own use, within the RMB 100,000 allowance and quantity limits, collected and taken off the island at the airport or port as required: permitted by the policy.
• Using your allowance to buy for others and charging a “head fee”, or being organised to serve as a “head”: already shows signs of selling for profit.
• Borrowing many people’s identities and ticket allowances, or organising people to split allowances: classic “allowance-pooling daigou”, a focus of anti-smuggling enforcement.
• Buying and then not actually leaving, slipping out of the duty-free zone through staff passages or during security shift changes: directly evading customs supervision.
• Reselling duty-free goods in bulk on WeChat Moments, groups or livestreams: falls within “selling for profit within China”; carrying excess quantities off the island or splitting goods among several people’s names will be added together once the evaded tax is assessed.

6. The three most common misconceptions

Myth 1: “It’s for my own use, so buying more is fine.” The allowance is for personal use, and the assessment looks not only at what you declared but at whether quantity, frequency and destination clearly exceed reasonable personal consumption: repeated purchases, large numbers of the same item, or listing goods on second-hand platforms straight after buying will all be questioned.

Myth 2: “I only make a small margin; it’s a small business.” Smuggling ordinary goods is measured by tax evaded, not profit, and RMB 100,000 is the threshold. Merely providing accounts, identity information or tickets, or helping transport and store goods, can also lead to liability — under Article 156, those who conspire with smugglers and provide loans, funds, accounts, invoices, certificates, or transport, storage or mailing are treated as accomplices.

Myth 3: “Paying the tax afterwards makes it fine.” In the case above, paying tax and pleading guilty were important grounds for leniency — that is how Li Muxian got a suspended sentence — but paying tax is a sentencing factor, not a defence; where the amount is large, the offence still stands. And smuggling again after two administrative penalties within a year can be prosecuted under Article 153(1)(1) even if the tax evaded is under RMB 100,000.

7. Another new policy that’s easy to confuse: zero-tariff daily goods for island residents

In February 2026 the three agencies issued the Notice on the Zero-Tariff Policy for Imported Goods Consumed by Island Residents of the Hainan Free Trade Port: imported goods bought by island residents at designated stores, within the allowance and product list, are exempt from import duty, import-stage and domestic VAT and consumption tax; the allowance is RMB 10,000 per person per year with no limit on the number of purchases, under a positive list mainly of food and drink, toiletries, household goods and baby products.

This policy lowers living costs for island residents; it is not for daigou. Reselling zero-tariff daily goods to mainland customers falls back under Article 154: once the threshold is reached, it is smuggling ordinary goods.

8. Practical reminders

• Keep purchase receipts, collection slips and outbound tickets; stop when your allowance is used up; don’t lend your allowance or identity to others, and don’t take bulk daigou orders on Moments or in groups.
• Bringing a few personal items for relatives is fundamentally different from “making a business of it”; quantity, frequency and profit are what matter.
• If customs or anti-smuggling officers have interviewed or are investigating you, check the facts truthfully, keep purchase, transfer and chat records, and don’t delete anything; it’s best to consult a lawyer about whether to pay the tax and how to make your statement.
• In allowance-pooling daigou cases, pleading guilty, paying the tax and confessing truthfully are usually key to leniency — but when and how you raise them matters just as much.

The purpose of Hainan’s customs closure is to let imports enter the island more freely and keep consumption in Hainan, not to turn the duty-free policy into cross-island trading. Between the policy dividend and the criminal red line often lies a single question: who were the goods bought for?

If you or your family are being investigated by customs or have been charged over offshore duty-free shopping, daigou resale or carrying goods across the border, contact Wang Xin: phone +86 186-0113-9509, WeChat wang223040.

This is an English edition of Wang Xin’s original Chinese article, 海南封关了：从海南买的免税品带出岛，什么时候会变成走私？. It explains the law of the People’s Republic of China in general terms and is not legal advice for any particular case; outcomes depend on the specific facts and on how local authorities apply the rules.