A group of smugglers were arrested in Shenzhen in a case involving more than 500 million yuan and 100,000 electronics products, such as iPhones, that were purchased in the low-tax territory of Hong Kong before being resold on Chinese websites.

One of those outlets, Lanyou Digital, which advertises at online marketplace taobao.com, was accused in newspaper reports of selling the iPhone 4S before its official launch on the mainland. Lanyou said, in an online statement, that it rejects the accusations and is considering legal action.  

The police arrested 68 people in Shenzhen and their investigations are continuing.
The Beijing News’ report said Lanyou sells around 20,000 iPhones a month – most of which are smuggled - in more than 100 cities across China.
 
The firm processes orders for the phones on its Chinese website and then buys the handsets in Hong Kong, where lower taxes make them cheaper than on the mainland.

Shenzhen Customs have pledged to pay closer attention to so-called “ant transporting”, when goods are smuggled in small batches. The smugglers sometimes use the elderly, disabled and even primary school students to get goods past customs.  These “mules” may get prison sentences if they’re caught bringing goods in illegally more than twice.