U.S. Seizes $25 Million Worth of Aluminum Linked to Chinese Billionaire

[Cebu_4_2]

U.S. Seizes $25 Million Worth of Aluminum Linked to Chinese Billionaire

http://www.wsj.com/articles/u-s-seizes-25-million-worth-of-aluminum-linked-to-chinese-billionaire-1484303409?mod=e2fb

The move is the most potent action yet by federal authorities investigating aluminum shipments to the U.S.

https://si.wsj.net/public/resources/images/BN-RP704_CHINAL_GR_20170112153147.jpg
U.S. customs officials have seized aluminum owned by Perfectus Aluminum. The company was founded by the son of Chinese billionaire Liu Zhongtian. Above, aluminum pallets at a Perfectus warehouse in Fontana, Calif., in 2015. Photo: Mike Rapport

By Scott Patterson
Jan. 13, 2017 5:30 a.m. ET 110 COMMENTS
(http://www.wsj.com/articles/u-s-seizes-25-million-worth-of-aluminum-linked-to-chinese-billionaire-1484303409?mod=e2fb#livefyre-toggle-SB12051942542359674776004582551140167866720)
U.S. customs officials have seized $25 million worth of aluminum linked to a Chinese billionaire accused of stockpiling the metal across the world, according to people familiar with the matter.

The move is the most potent action yet by federal authorities probing whether U.S. companies connected to Chinese aluminum magnate Liu Zhongtian illegally avoided punitive tariffs by routing their metal through other countries.

The Wall Street Journal in October reported that Homeland Security and the Justice Department are investigating (http://www.wsj.com/articles/homeland-security-probes-u-s-aluminum-firms-over-chinese-imports-1477486917) whether the companies committed criminal or civil violations that could include smuggling, conspiracy and wire fraud. Homeland Security agents have questioned former employees of companies associated with Mr. Liu, according to people familiar with the investigation.

The aluminum has become a new flashpoint in American-Chinese trade relations, with U.S. executives complaining that they are being undercut by cheap Chinese metal being sold into the U.S. illegally. A massive stockpile of aluminum that has crisscrossed the world (http://www.wsj.com/articles/giant-aluminum-stockpile-was-shipped-from-mexico-to-vietnam-1480588228) and depressed the price of some aluminum products was part of the scheme, according to people familiar with the companies involved in the shipments of aluminum.

Hundreds of shipping containers of aluminum seized this week by Homeland Security are owned by Perfectus Aluminum Inc., a California company founded by Mr. Liu’s son and now run by one of Mr. Liu’s close business associates, according to corporate records, court documents and people familiar with the company. The aluminum had been detained by U.S. customs authorities since September before this week’s seizure. The metal will be moved from the Port of Long Beach in California to an undisclosed location, a person familiar with the matter said.

Homeland Security is conducting laboratory tests on the aluminum to determine whether the metal is restricted under U.S. law, according to federal court documents. It is unclear how long testing will take.
Related



Read the Court Document (http://online.wsj.com/public/resources/documents/0113aluminum.pdf)


In a federal court petition filed in California, Perfectus has asked a judge to force Homeland Security to lift the order, calling it unlawful and imposed without explanation. The company denies that it failed to pay proper import duties on aluminum it imported from China or that it was involved in improper stockpiling of aluminum.

A spokeswoman for China Zhongwang Holdings (http://quotes.wsj.com/1333.HK) Ltd., a Chinese aluminum giant controlled by Mr. Liu, said neither the company nor Mr. Liu have any connection to Perfectus. Lawyers representing Perfectus in the case declined to comment.

The Commerce Department found in December that China Zhongwang was sending metal into the U.S. via other countries to disguise its origin so the company wouldn’t have to pay punitive tariffs of up to 374%. Those tariffs were imposed in 2010, when the Commerce Department found China Zhongwang was selling metal subsidized by the Chinese government into the U.S. market—a practice called “dumping.”

An aluminum stockpile allegedly amassed by firms owned by people close to Mr. Liu has moved around the world, according to the people familiar with the shipments of the metal. Recently metal had accumulated in Vietnam, shipping records show, where it joined other caches of aluminum to form an even bigger stash representing 14% of global inventory.

Perfectus said in its petition that it had imported the seized aluminum from China from 2012 to 2014 but is now trying to export it to Vietnam after its plan to sell or lease the products failed. Most of the seized aluminum is in the form of pallets, which are made of shaped products welded together and are typically used for transporting heavy cargo.
Read More



Aluminum Billionaire Planning Escape From China (http://www.wsj.com/articles/aluminum-billionaire-planning-escape-from-china-lawyer-1482953518) (Dec. 28, 2016)
Aluminum Stockpile Was Shipped From Mexico to Vietnam (http://www.wsj.com/articles/giant-aluminum-stockpile-was-shipped-from-mexico-to-vietnam-1480588228) (Dec. 1, 2016)
U.S. Says Aluminum Exports From Chinese Firm Evaded Restrictions (http://www.wsj.com/articles/u-s-commerce-department-issues-preliminary-ruling-on-aluminum-dumping-investigation-1478608869) (Nov. 8, 2016)
Senators Ask Treasury to Block Zhongwang Takeover of Aleris (http://www.wsj.com/articles/a-dozen-u-s-senators-ask-treasury-to-block-zhongwang-takeover-of-aleris-1478109925) (Nov. 2, 2016)
Senators Call for U.S. Action on Chinese Aluminum Subsidies (http://www.wsj.com/articles/senators-call-for-u-s-action-on-chinese-aluminum-subsidies-1477599107) (Oct. 28, 2016)
Homeland Security Probes U.S. Aluminum Firms Over Chinese Imports (http://www.wsj.com/articles/homeland-security-probes-u-s-aluminum-firms-over-chinese-imports-1477486917) (Oct. 26, 2016)
N.J. Factory Linked to Chinese Aluminum Probe (http://www.wsj.com/articles/new-jersey-factory-linked-to-chinese-aluminum-probe-1473963640) (Sept. 15, 2016)
Chinese Billionaire Linked to Giant Aluminum Stockpile in Mexican Desert (http://www.wsj.com/articles/chinese-billionaire-linked-to-giant-aluminum-stockpile-in-mexican-desert-1473356054) (Sept. 9, 2016)


Perfectus was founded in 2014 by Mr. Liu’s son, Liu Zuopeng. The company is now run by Jacky Cheung, who runs several companies with connections to Mr. Liu. Mr. Cheung owns Aluminicaste, a Mexican company that was the subject of a September article by the Journal that detailed connections between the giant stockpile in Mexico and Mr. Liu (http://www.wsj.com/articles/chinese-billionaire-linked-to-giant-aluminum-stockpile-in-mexican-desert-1473356054). Mr. Cheung is also the owner of Global Vietnam Aluminum, which has overseen the creation of a 1.7-million-ton stockpile of aluminum extrusions—shaped products such as panels and piping—worth $5 billion in recent years.

Attempts to reach Liu Zuopeng and Mr. Cheung were unsuccessful.

The court records don’t state which company manufactured the aluminum. Shipping records show that a company called Peng Cheng—which later became part of Perfectus in a merger—imported metal from an affiliate of China Zhongwang in 2013 and 2014, according to Panjiva, which tracks shipping records.

Homeland Security had detained another 164 containers of Perfectus’s aluminum, but those containers were released in November following an inspection, according to the company’s petition. The company said Homeland Security hadn’t explained why it released those shipments but continued to detain an additional 552 containers, which Perfectus said hold the same type of aluminum.

China Zhongwang has said the pallets it exported to the U.S. are made of a type of aluminum that isn’t covered by Commerce’s 2010 ruling, which it didn’t contest.

[Glass]

strange story. who would have thought aluminium could contain enough profit that you could ship it several times through various bonded destinations and still end up in the black. The tarrifs do seem pretty stiff. 3.47 times value of the original goods.

I wonder if the "testing" is really just quality/purity analysis. Perhaps only the really high quality stuff will be confiscated... and who knows, it might need to be sold to recoup the costs.... a bit like smuggled ivory gets checked for quality and only the rubbish gets burned "at the stake" while the rest finds it's way to market.

[Cebu_4_2]

strange story. who would have thought aluminium could contain enough profit that you could ship it several times through various bonded destinations and still end up in the black. The tarrifs do seem pretty stiff. 3.47 times value of the original goods.

I wonder if the "testing" is really just quality/purity analysis. Perhaps only the really high quality stuff will be confiscated... and who knows, it might need to be sold to recoup the costs.... a bit like smuggled ivory gets checked for quality and only the rubbish gets burned "at the stake" while the rest finds it's way to market.

Look UP! DUMPED ON THE WORLD DAILY. Who knows how many tons a day are dumped in the US alone.

[palani]

Who knows how many tons a day are dumped in the US alone.

Seems fair. We ship NY garbage to China and get aluminum in exchange.

This flow has been going on for quite some time. I recall hearing of a Japanese zero downed during WWI (phase deuce) which was found to be constructed of recycled U.S. garbage.

[Glass]

I remember a story about how these "bonded" ware house operations were moving stockpiled material from one bonded ware house to another. Then charging a moving fee. Then moving it back again. Basically shuffling goods around to generate transactions and hence charging fees for activity.

I think one type of material was aluminium but I could be mistaken.

It sounded a lot like financial markets where fund management and brokerage houses did revolving transactions amongst themselves so they could create trading activity and charge end customers fees for this activity.

I think this is a slightly different scenario but it might not be... relates to liquor and liquor packaging. Also relates to those Inland FreeTrade Zones as part of the NAFTA superhighway and inland waterways technicalities others have exposed here on GSUS.. someone just recently posted a great explanation of inland zone which I still can't find.


Business Guide to Tax Evasion -- relax...it's perfectly legal!
Companies can avoid import duties and other fees by shipping through and manufacturing in a Foreign Trade Zone.

Goods that offer value to American manufacturers can be found the world over. But importing and distributing them, or using them to manufacture products, incurs a myriad of trade-related costs—from taxes to administrative fees imposed by U.S. Customs & Border Protection (CBP).
How can global companies realize the benefits of importing goods without carrying the financial burden associated with foreign trade? By bringing goods into the country without bringing them into the country.
If that sounds like exploiting a legal technicality, that's the idea. The technicality is known as a foreign trade zone (FTZ), and using it to avoid paying duties and fees is exactly what was intended when FTZs were created in the 1930s.
*********

*********
BIG MONEY

The National Association of Foreign Trade Zones reports receipts into FTZs totaled $495 billion in 2006—the last year in which complete records are available, according to Will Berry, the group's executive director. That represented an increase of approximately $100 billion compared to 2005.
"That's big money," Berry says. "Some of the growth can be attributed to oil prices, but there is also growth in non-oil products. Many states don't have oil refineries, yet FTZ trade volumes still show growth."

Jobs associated with FTZs also grew from approximately 25,000 to 30,000 between 2005 and 2006, Berry notes.

While the recent economic downturn may stunt global trade activity, it may also serve as an opportunity for FTZs, which offer a variety of cost-saving strategies and value-added services
"Foreign trade zones offer logistics efficiencies not found in other import processes," Berry says. "Goods move through FTZs quickly, thanks to special procedures."

"We import our value-added packaging, which could include elaborate glasses or cartons, through the FTZs," notes David Throckmorton, Penrod- Ricard USA's director of logistics.
FTZ rules allow Penrod-Ricard to import the packaging with the product to avoid paying separate excise taxes.

"We bring the spirits and packaging into the Baltimore FTZ, and when we pull them out of the foreign trade zone, we're responsible for only one excise tax," says Throckmorton. "We avoid paying the duty fees, which can be significant, on the glassware."

This technique is legal provided the packaging is involved in the consumption of the product. That's why a glass qualifies, for example, but a wooden crate does not.

During a typical holiday season, use of an FTZ saves Penrod-Ricard between $100,000 and $250,000 in excise taxes, Throckmorton estimates.
Penrod-Ricard uses the Oakland FTZ for duty-free export activities. By sending goods bound for global destinations through the FTZ, the company avoids excise taxes that could amount to nearly $30 per case or $1.50 per glass.

To take advantage of that aspect of trade law, many manufacturers set up specific operations in FTZ sub-zones, and produce their goods on-site. An FTZ sub-zone can be situated anywhere the designation is approved.
The KOM FTZ was originally established with a primary sub-zone occupied by now-defunct Bosch Automation. Bosch was located approximately 12 miles from the KOM FTZ in downtown Grand Rapids, but as long as goods traveled back and forth between the two locations in bonded transport approved for FTZ-related use, they had still not yet entered the country as far as the law was concerned, according to Zevalkink.

Avoiding duties by manufacturing on-site is the most common benefit for FTZ users, notes Linda Hothem, former owner of and current advisor to Oakland, Calif.-based Pacific American Services, which operates an FTZ out of the Port of Oakland.

"Manufacturers pay a lower duty rate on the finished product than on the parts combined," Hothem says. "That comprises the bulk of the savings."

"Take a company that imports fabric from China, then ships finished garments to Europe or South America through a U.S.-based FTZ," Manack says. "According to FTZ rules the goods never entered the United States, so the importer does not have to pay the duty."



Inbound Logistics article (http://www.inboundlogistics.com/cms/article/business-guide-to-tax-evasion---relaxits-perfectly-legal/).

Perhaps the aluminium... which was in the form of pallets ... .not pellets or ingots was being shipped in as a manufactured item and being shipped somewhere for processing into another form. .... despite being pallets

[cheka.]

Look UP! DUMPED ON THE WORLD DAILY. Who knows how many tons a day are dumped in the US alone.

look at the pic - looks like a trail in the background