A subsidiary of New Zealand kiwifruit marketer Zespri pleaded not guilty to criminal smuggling charges in a Shanghai court yesterday (Jan. 17).

The charges were brought against China-based Zespri Management Consulting Corporation (ZMCC) on Dec. 26, 2012, relating to the alleged under-declaration of customs duties by independent importers.

A Zespri release said a judgment was expected in the next two to three months.

"A Zespri employee who is not a New Zealand citizen also pleaded not guilty in court yesterday to the same charges. Zespri continues to offer support to him and his family, and his government is offering consular assistance," the release said.

The release said the China Customs investigation began in 2011 with former importer Liu Xiongjie later pleading guilty to criminal smuggling in May 2012.

A Zespri background paper said Liu had argued his transactions with Zespri were on consignment and therefore the benefit from under-declaration went to the multinational. However, the court rejected these arguments and found the arrangement with Zespri was a buy-sell transaction.

The release said Liu was appealing his 13-year sentence, and he has repaid CNY37 million (US$5.95 million), which was the amount of underpaid customs duties.

The paper explains that Zespri had given pro-forma invoices to importers in China, and has relied on representations made by those importers, that prices had been agreed upon by China Customs.

"Zespri never had intent to facilitate or engage in  under-declaration of customs duties and it appears clear now that Mr Liu did under-declare customs duty and misled Zespri as to the existence of a deemed value for import purposes," the paper said.

"As a multi-national, Zespri does business around the world and have never had an issue such as this. We know that access to all countries relies on our integrity.

"Accordingly, we have been both surprised and disturbed that we have been let down in China and that our processes which ensure the entire supply chain meets the local requirements have been compromised."

The release highlighted Zespri has cooperated with China Customs throughout the investigation, and there is no evidence the multinational or New Zealand kiwifruit growers have benefited from customs under-declaration.

"China is a valuable market for New Zealand kiwifruit and Zespri remains committed to its China business. This case is not expected to impact on Zespri’s sales in China in the 2013 season."

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