A businessman has set up an 'offshore off-licence', 13 miles off the Cleveland coast.
Mr Berriman is anchored 13 miles off Hartlepool
Phil Berriman, 46, from Stockton-on-Tees, is selling cigarettes and alcohol at duty-free prices to anyone who is willing to sail out to meet him.
But Mr Berriman says customs officials have threatened to seize his boat, which is anchored off Hartlepool.
Customs and Excise says it is investigating the matter to see if any rules have been broken.
Mr Berriman said he has been doing a brisk business from his 72ft schooner, Rich Harvest.
'Goods can be seized'
He sailed to Germany with his business partner Trevor Lyons, 53, to buy 5,000 boxes of cigarettes and 1,000 litres of spirits.
A Customs and Excise spokesman said: "Any member of the public who purchases alcohol or cigarettes in these circumstances should pay duty on arrival in the UK.
"If they do not, the goods can be seized as well as their boats."
The EU has warned the UK that its methods of seizing drink and cigarettes at Channel ports if they think the goods are not for personal consumption, contravene rules on free movement.
Mr Berriman said: "I know I am not doing anything wrong.
"Customs are trying to make out that I could have my boat seized, but they have not been able to tell me anything that I am doing wrong.
"If people are prepared to come out to sea 13 miles then they are entitled to a cheap packet of cigarettes or a bottle of booze."
Until bad weather took hold, Mr Berriman said he was averaging around eight customers a day and even had a night-time visit from a jet-ski rider.