Importer's defence points finger at Zespri

Zespri won't comment until its own appeal is heard. Photo / APN

Zespri stood to gain more than its China importer by understating the value of kiwifruit for customs duty purposes, a Shanghai court has heard.

Zespri's former importer in China, Liu Xiongsie, has appealed a 13-year prison sentence and $7 million fine in relation to an import duty avoidance scam for which Zespri's China subsidiary, Zespri Management Consulting Corporation, was later found guilty as an accessory. China Customs is seeking $10 million in reimbursement from the Mt Maunganui-based exporter, whose own appeal has yet to be heard.

The scam centred on the issuing of pro-forma invoices by Zespri for tax and customs purposes, significantly understating the value of shipments into China. The company later invoiced the importer for the final sales value and was paid in full.

But lawyers acting for Liu have told the Shanghai People's Higher Court that his company, Shanghai Neuhof Trade Ltd, enjoyed no direct benefit by having the amount of tax reduced. They claim the original court mistook the importing arrangement between Neuhof and Zespri to be a "buy-sell" transaction whereas the true relationship was that of an agent receiving a commission on sales volume. That meant Neuhof would benefit only if the declared price was higher; it had no motivation to lower the price.

Prosecutors should have regarded the case as several corporations engaged in joint smuggling and Liu should be seen as a nominal player, Liu's legal team told the hearing.

All documentation including sales invoices, packing lists, and bills of lading were supplied by Zespri which should be identified as the prime culprit, they said, while Liu had quickly repaid the $7 million in duties owing and the sentence and fine were too harsh.

Zespri spokesman Dave Courtney says the company won't comment until its own appeal is heard. He referred the Herald to an earlier backgrounder on the case where it told growers that it relied on representations made by the importer that a deemed value arrangement was acceptable to China Customs. It had also attempted to verify that such agreements could exist but may not be committed to in writing.

In Liu's first hearing, the court rejected his argument that the relationship was effectively that of an agent receiving commission and found he was the principal offender responsible for customs compliance.

The appeal court reserved its decision.