Zespri subsidiary guilty of smuggling

Zespri's China-based subsidiary has been fined $960,000 for smuggling.

The subsidiary company of the kiwifruit exporter, Zespri Management Consulting Corporation, was found guilty of smuggling in a Chinese court on Friday night and one of its employees was also found guilty as an accessory.

The corporation was ordered to pay a fine of $960,000 for the under-declaration of customs duties.

Additional to that figure, the court ruled "illegal gains" should be repaid, but didn't say how much or who had to pay it. The figure could potentially reach $10 million.

The charges stem from between 2008 and 2010, when the corporation was an independent importer. The employee was sentenced to five years in prison - a period considered a "light sentence" by the judge due to his minor offending.

Zespri pleaded not guilty to the charges on January 17, with the argument the customs requirements were the obligation of the former importer and Zespri had no intent to evade customs duties.

Zespri chief executive Lain Jager said the Tauranga-based company needed time to consider it and whether to appeal the decision. He said in order to reserve the right to appeal, Zespri was limited in what it could say about the verdict.

"Our first concern is for the welfare of our employee."

Mr Jager said he was disappointed by the verdict as Zespri was committed to complying with local laws in all countries it exported to.

He said Zespri remained committed to exporting to China.

"It is important to note that the verdict relates to historical export and import practices from 2008 to 2010 and Zespri has successfully operated new export practices and worked with new import partners over the 2011 and 2012 seasons. The immediate challenge for Zespri, regardless of any possible appeal process, is to move forward positively in China. The Zespri brand and our relationship with China are simply too valuable to compromise."

New Zealand Kiwifruit Growers Incorporated spokesman Mike Chapman said the incorporation had established an independent inquiry into the circumstances that gave rise to the Chinese prosecutions and the effects these prosecutions would have on Zespri brand and its trade with China.

He said the inquiry began its work in early March and was expected to report in late April at the earliest.

Mr Chapman said growers needed full confidence in Zespri's activities.

"Our inquiries indicate that our continued exports to China have not been affected to date.

"We also want assurances that they will not be affected by this decision going forward. We will closely monitor the progression of the 2013 sales season to gain confidence that sales are going as planned."

The trial and Friday's verdict follow a China customs investigation that began in 2011.

As a result of the investigation, Zespri's former Shanghai-based independent importer, Liu Xiongjie, pleaded guilty to charges of criminal smuggling in May 2012. In hearing his case, the court rejected his mitigating defence that he was not responsible for meeting customs obligations on the importation of New Zealand kiwifruit.

Mr Liu is appealing the 13-year sentence he received. He has repaid about $7 million, which was the amount of the underpaid customs duties.