High tariffs force costs for products to increase thus, the retail value for imported products is higher than products made locally or by local joint ventures. However, different ports of entry may charge different entry rates on the same or similar products. Because there is flexibility at the local level in deciding whether to charge the official rates, often the actual duties are a result of negotiations between business people and Chinese custom officials. To avoid high tariffs, some foreign companies resort to using grey channels to import products via Hong Kong or Guangzhou. This method was very often used in the past, however it is decreasing as regulations become increasingly enforced.
Companies suffer stiff penalties if caught.
They will most likely be fined and furthermore, may be forbidden to do business in China for an extended period of time. Although this is a significant expense for companies, labelling is necessary to protect local consumers. If necessary, local consumers can contact the manufacturer shown on the label for product complaints. For example, a European dairy company investing in China discovered that local consumers prefer mild and processed cheeses. However, good marketing is necessary to inform and convince consumers of the benefits and quality of the imported dairy products.