This came out in the AP yesterday. There isn't much new information for insiders following the ASC story, though it does mark a departure from ASC's murky language in the fact that they have admitted their CEO, Don St Pierre Jr, is being 'detained' by customs officials while they investigate customs violations.

What this boils down to is a situation bad for everyone who drinks or sells wine here. Consumers, who've been taken advantage of and importers, who will be placed under more scrutiny. One thing that's interesting about this unfolding story is that everyone seems to be waving around a different figure about import duties: Some say it's 48 percent, others 50, while the AP says duties have dropped from 65 percent down to 14. If this is true, consumers certainly haven't seen this reflected in pricing. Anyways, more below...

AP
Shanghai Customs Targets Wine Importers
Monday March 31, 11:30 am ET
By Elaine Kurtenbach, AP Business Writer
China's Customs Inspectors Target Wine Importers As Sales of Foreign Vintages Boom

SHANGHAI, China (AP) -- Importers of wines and spirits in China have watched sales soar amid a fast-growing class of connoisseurs -- but they're also attracting the attention of Chinese customs inspectors.

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Shanghai customs agents have detained an executive of at least one major wine importer as part of a broad review of the industry.

Shanghai customs officials confirmed that an "audit" of wine importers was under way.

"We are cracking down on some wine importing companies that are suspected of falsifying prices and the case has been handed over to the Customs Smuggling Prevention Department," said Yin Zong, a spokesman for the Shanghai Customs office.

Don St. Pierre, Jr., managing partner of ASC Fine Wines, was taken into custody, his father Don St. Pierre, Sr., confirmed in an e-mail to The Associated Press.

Don St. Pierre, Sr., a Beijing-based businessman who once headed American Motors' joint venture Beijing Jeep Corp., said his son was among a number of "wine importer executives being held while the investigation continues."

Don St. Pierre Jr. was cooperating with authorities while being held under rules that allow the detention individuals for up to 30 days without charge, his father said.

"Don has not been charged with any crime and has not been arrested," he said.

Staff at the Shanghai offices of several other major wine importers said their companies had not been targeted, though word of the increased government attention was spreading.

"I did hear that some wine importers are facing a customs crackdown," said a manager at Aussino World Wines' office in Shanghai, giving only his surname, Li.

Li said his company, which has dozens of outlets around China, ships its wines from the southern city of Guangzhou and therefore is not dealing with Shanghai customs.

Staff at wine counters at two downtown supermarkets said a handful of foreign vintages were not available, though it was unclear if the customs inspection was the cause.

In any case, any crackdown is unlikely to stem the craze among newly affluent Chinese for wine tasting and collecting.

Wine imports have soared since Beijing slashed import tariffs to 14 percent from 65 percent several years ago. Boutique wine shops catering as much to local Chinese as to foreigners have opened in many of Shanghai's upscale neighborhoods and major supermarkets.

Customs figures show imports surging 52 percent in the first nine months of 2007 from the same period a year earlier, to 102 million liters, according to industry Web site 21food.com.

Those figures have not been fully reflected in increased customs revenues, due to underreporting of the value of imported products, some in the industry say.

St. Pierre said ASC and customs officials had agreed on a "minuscule" $250,000 discrepancy in ASC's imports over three years, equal to 1.1 percent of the $22 million the company paid in import duties during that time.

"Even the $250,000 alleged underpayment of duties is not clear as there are mitigating circumstances that I am discussing with Customs now," he said.

ASC runs a "Wine Residence" in a Shanghai historic mansion dedicated to educating and cultivating a love of fine wines among its local clientele.

Its program of wine tastings and seminars continues despite the customs inspection, St. Pierre said.

"Stepping back, I've been living and doing business here in China for 22 years now and have gone through lots of these kinds of things and survived," he said. "China is not for the weak hearted."