20 May 2013

Kiwifruit growers inquiry into Zespri in China continues

2:19 pm on 20 May 2013

The kiwifruit growers' organisation says it expects its independent inquiry into single-desk marketer Zespri's business dealings in China to run for some months yet.

The organisation started its own investigation in March, after Zespri's China subsidiary was found guilty of the underpayment of customs duties on kiwifruit imports and fined more than $950,000.

An employee of the subsidiary was sentenced to five years in prison.

Zespri is expecting appeals against those convictions and sentences to be heard at the end of the month.

A Chinese importer used by Zespri from 2008 to 2010, who admitted charges of criminal smuggling by underpaying customs duties, is also appealing against his 13 year jail sentence.

Zespri maintains it acted legally with the dual invoicing arrangement it was using in China.

But as a result of the prosecutions, it has changed to a fixed price arrangement instead.

Kiwifruit growers' president Neil Trebilco says his organisation is continuing its own inquiry to make sure Zespri's dealings in China are not only legal but ethical, and that Zespri has made changes to ensure this sort of thing cannot happen again.

"We recognise how important China is to us. As a country we cannot afford not to export to China despite the difficulties that we might face in that country."

Dual invoicing 'operates in other markets'

The invoicing system meant an accurate tax invoice was sent by Zespri to China, but a second pro-forma (standard) document was also issued at the same time with the kiwifruit valued at a much lower price.

Zespri says dual invoicing is commonly used in the fruit trade and still operates in its biggest market, Europe, and some other markets including Taiwan.

Mr Trebilco of the kiwifruit growers' organisation says there are practical reasons for using a double invoice system.

He says when fresh fruit is being sold overseas a certain amount of it will not reach the retailer and be sold, because it gets wasted.

Mr Trebilco says in that instance growers would not want to be paying any duty on fruit that gets wasted.

"But there was an invoice at the end of season, for example, which was supposed to make the difference up, and the importer is supposed to have declared that and paid the duty on that revised invoice."

Mr Trebilco says he understands Zespri was told the amount on a pro-forma invoice had been agreed by the importer and Chinese customs.

He says Zespri tried to validate that but was unable to and so took the importer at his word.