U.S., Chinese, Taiwanese Cos. and Execs Arraigned for False Import Docs to Avoid AD Duties
The chief financial officer of a Georgia-based paper supply company was arraigned Oct. 23 on charges of conspiracy to import paper products from China with fraudulent invoices and bills of lading, and to avoid customs duties on such products, said Immigration and Customs Enforcement. Jennifer Chen, 44, was indicted Oct. 17 by a federal grand jury charging her, her ex-husband Chi Cheng "Curtis" Gung, 45, and their Georgia-based paper company Apego, with conspiracy and 12 counts of importing notebooks and filler paper from China, which are subject to the antidumping duty order on lined paper products from China, using false documents.
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Three leading Chinese paper manufacturers, a Taiwanese company, and their respective CEOs were also charged with the conspiracy and 12 fraudulent importation counts, ICE said. Forth Wu, 69, a citizen of Taiwan and resident of Tainan, was indicted along with Fromus Psyche International, a Taiwanese company he owns and operates. Zuoru He, 66, a citizen and resident of China, was indicted along with three companies he controls and partly owns, Watanabe Paper Product (Shanghai) Co., Ltd., Watanabe Paper Product (Linqing) Co., Ltd. and Hotrock Stationery (Shenzen) Co. (the Watanabe Group).
United States Attorney Sally Quillian Yates said, "Three large Chinese paper manufacturers are charged with conspiring with companies in Taiwan and Gwinnett County to avoid duties imposed by the Commerce Department to protect competition in the U.S. and global paper market. They are accused of avoiding over 20 million dollars in antidumping duties by shipping stationery made in China through Taiwan, bribing Taiwanese customs officials, and exporting the goods from there into the United States, falsely relabeled 'Made in Taiwan.' Now the defendant companies and their leaders face conspiracy and fraudulent importation charges for their bribery and transshipment scheme."
In 2006, International Trade Administration found AD rates of 76.7 to 258.21 percent for Chinese exporters of certain lined paper products from China. Among the products covered in the investigation were composition notebooks, spiral notebooks, filler paper, and other popular office and school stationery. Among the companies investigated were the three companies comprising the Watanabe Group, a closely related conglomerate of paper manufacturers located in China and controlled by defendant Zuoru He, ICE said. The Group was assigned a 76.7 percent AD rate as a result of the investigation.
After imposition of the AD duties, Apego, Fromus and the Watanabe Group launched a scheme to avoid the duties by transshipping large shipments of paper from China through Taiwan to office supply chains and other large retailers in the U.S., ICE alleged. At the beginning of the scheme, Apego and Fromus mainly hired temporary workers in Taiwan to put "Made in Taiwan" labels on container-loads of paper made in China for a nationwide U.S. retailer. In 2007, as Apego found more such customers and large, lucrative back-to-school orders soared, the conspirators increased their reliance on bribery at Taiwanese ports, it said. By paying bribes, they were able to have the Watanabe Group put more "Made in Taiwan" labels on the containers, boxes and notebooks at their factories in China. This illegal practice saved time and money, ICE said.
The Taiwan transshipment scheme began to unravel in the summer of 2007 after U.S. container security officers based in a Taiwanese port noticed shipments of U.S.-bound stationery with suspicious documentation and alerted other customs officials in both the U.S. and Taiwan, ICE said. The full extent of the conspiracy was discovered after Apego fired Gung's executive assistant, who then delivered a copy of the hard drive from her company laptop to the Department of Homeland Security. According to ICE, the amount of customs duties avoided has been estimated at over $20 million.
The maximum penalty for the conspiracy charge is five years in prison, a $1 million fine for a corporation, a $250,000 fine for an individual, and three years of supervised release. The maximum penalty for the fraudulent importation charges is two years in prison, a $1 million fine for a corporation, a $250,000 fine for an individual, and one year of supervised release for each count.