23 May 2013

Zespri admits gaps in monitoring China exports

8:06 am on 23 May 2013

Kiwifruit marketer Zespri has admitted to its growers that it failed to adequately investigate the a dual invoicing process despite its own staff raising red flags about the practice.

In a letter to growers this week, chairman Peter McBride says Zespri employees had raised concerns about the system it was using and that, in hindsight, it wasn't rigourous enough in checking that it was in order.

Mr McBride acknowledges that Zespri's compliance systems need to be strengthened.

Under the system two invoices were issued. The first priced the fruit at a deemed import value, which Zespri says its Chinese agent said had been agreed to by Customs in China. The second reflected the actual value of the fruit when it was sold in China.

Zespri's critics say it was deliberately underestimating the price of the fruit it was sending, in order to avoid paying customs duties.

The exporter'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. Both these convictions and sentences are being appealed.

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 says it is also waiting on the outcome of an official Chinese investigation into another importer that it dealt with.

Mr McBride says claims that Zespri knew about fraud taking place or was benefiting from it are untrue, and so too are what he calls the sensationalist claims that it was receiving suitcases of cash from its agents as payoffs relating to the fraud.

He says Zespri was led to believe by its importer that an agreement with Chinese customs on dual invoices existed and that the appropriate duties were being paid.

Mr McBride says Zespri has also become aware of a quiet campaign being run in Wellington by anonymous sources who are using this case to try to end its monopoly and restructure the industry.

Growers to conduct investigation

The New Zealand Kiwifruit Growers Association says Zespri was remiss in not properly investigating concerns from its own staff about its invoicing system in China, but is not corrupt.

President Neil Trebilco says the association is conducting its own investigation.

"It's fair to say that, in hindsight, Zespri would say they haven't handled this as well as they might have.

"They haven't been as vigourous as they might in terms of getting the answers that they needed and if they didn't get the appropriate answers then to make the necessary redress. I think they would have to say they were too slow."

Mr Trebilco says the association's will take several months.