Tackling Fraud

In 2002, the Southern Shrimp Alliance was formed to address the massive price declines that were occurring in our industry. Shortly after formation and through the organization’s initial investigation, we found was that shrimp were being imported from various foreign countries to the U.S. at dumped prices and relief from these unfairly-traded imports was available under U.S. law. As everyone knows, SSA was successful in seeking trade remedies and duties were placed on six countries that were found to be dumping shrimp into the U.S. at below “fair value,” harming the domestic industry.


Since 2005 – when duties were placed on the six countries – import prices have stopped plummeting but we are still addressing low prices. As I go out and meet with folks during SSA’s Town Hall meetings, the one question that is always asked is:  Why haven’t our prices increased more?  The answer is neither easy nor simple. There are a number of factors that determine our dockside prices.  Supply and demand for our domestic product certainly causes ups and downs in prices and world market supply and demand can cause price fluctuations.  As SSA continues to work on addressing low prices, we have found that evasion of antidumping duties and FDA Import Alerts have a very real negative impact on our domestic prices.  The evasion of duties and food safety laws are a way of doing business for some unscrupulous importers and this is causing further harm to our industry.  This practice also harms the importers who play by the rules.


Fraud is a daily reality in the seafood market.  Economic fraud comes in many different forms, practiced by many different players in the supply chain, and reflects poorly on everyone in the industry.


Over the last several months, SSA has stepped up efforts to address fraud in the market and our industry by working with many different law enforcement agencies.  As our engagement increases, we learn much more about the specific practical challenges of rooting out various forms of fraud.


U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE), for example, face major obstacles in effectively addressing import fraud.  A report by the U.S. Government Accountability Office (GAO) issued last month noted that over the last five fiscal years, CBP assessed $208 million in civil penalties against importers caught evading trade remedies, while ICE investigations of antidumping and countervailing duty evasion led to 28 criminal arrests, 85 indictments, and 37 criminal convictions.  But as of February 2012, only $5 million of the $208 million (2%) of the penalties assessed by CBP had been collected, a problem the agency blamed, in part, on non-resident importers of record – importers with no physical assets or presence in the United States.


The GAO’s report also observed that the government of China has never granted permission for ICE officials to visit Chinese facilities as part of their investigations.  The report additionally points out that Indonesia has only recently allowed CBP officials to collect samples of shrimp to facilitate the development of country-of-origin tests, while the Malaysian government rescinded permission to visit companies claiming to produce shrimp or honey in their country without explanation.


This is something everyone should know.  We all know what would happen to a U.S. boat if its crew refused to allow federal inspectors to board.  We all know what would happen if a domestic processor refused to allow an inspector to enter the premises.  Those businesses would be shut down.  But it is a different story when a facility in China or Malaysia refuses to allow U.S. officials to investigate claims of fraud.  Our laws, as currently written, do not allow the government to take any action when CBP and ICE officials are turned away.  There are no consequences for noncompliance.


Imagine telling an officer that is giving you a fine that there is no way the government can collect because your business is registered in Vietnam with no assets reachable by the U.S. government.  That is not usually going to be a long conversation and if it is, it will probably be concluded in a jail cell.  But this is what unscrupulous importers do all the time or at least it is what they effectively do when duties or fines or penalties are assessed and they disappear.


Just as remarkable as the existence of these “free trade” loopholes in our laws is CBP’s and ICE’s commitment to enforcing our trade laws notwithstanding these challenges.  Proving fraudulent transshipment under their restraints is difficult.  Yet, CBP and ICE successfully develop cases.


As just one example, earlier this year CBP published two Customs Rulings that described the agency’s determination that Chinese shrimp had been transshipped through Indonesia to evade the payment of antidumping duties.  These rulings reported that in November of 2005, CBP notified King & Prince Seafood that “it was investigating its imports for evasion of the ADD order on frozen warmwater shrimp from China.”  In January of 2006, King & Prince responded by making a “prior disclosure” and producing “information demonstrating that its shrimp supplier, P.T. Ocean Gemindo, had falsely identified Chinese-origin shrimp as having originated in Indonesia.”  The rulings state that in June of 2007, “CBP’s Office of Regulatory Audit issued its results of an audit on the origin of King & Prince’s warmwater shrimp . . . .  The audit concluded that King & Prince falsely declared Chinese-origin shrimp on these entries that were actually subject to . . .” the antidumping duty order.  “The report indicated that the Indonesian-origin shrimp was commingled with Chinese-origin shrimp.”


Thirty-four different entries of shrimp purportedly from Indonesia were implicated, including shrimp that had actually been produced by Fuqing Dongwei Aquatic Products Industry Co., Ltd. and other Chinese exporters.  Those shipments – which took place in 2004 and 2005 – are still the subject of administrative challenges as King & Prince has sought to limit its liability for the false entries.  In other words, even where CBP makes a case proving false statements, the process of collecting duties owed can take a decade or more.


Just because something is hard doesn’t mean it is not worth doing.  But we cannot dismiss the fact that it is hard work, and we need to make sure that CBP, ICE, and everyone else know just how important their efforts are to our industry.  If we cannot and these agencies turn their attention elsewhere, lawlessness is rewarded, bad guys win, and our prices continue to be eroded by fraud in the marketplace.


John Williams

Executive Director

Southern Shrimp Alliance


Read the GAO’s May 2012 Report on the need to improve efforts to detect and deter duty evasion here:


Read the February 2012 Customs Ruling regarding King & Prince’s protest here:


Read the February 2012 Customs Ruling providing internal advice regarding King & Prince’s entries here:


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