Shanghai Court delivers Zespri verdict
In its judgment, reported to Zespri at 5pm NZT today, the court ruled that:
The Zespri Management Consulting Company (ZMCC) was convicted of the crime of smuggling general cargo and was sentenced to a fine of RMB 5 million (approximately NZD$960,000).
The ZMCC employee was found guilty of being an accessory to the crime of smuggling general cargo. The judge said he had played a “minor role” in the offending and was therefore given a “light-sentence according to the law” of five years’ imprisonment.
The court also ruled that “illegal gains” from the crime should be repaid. It appears the court is referring to the amount of money paid by the former importer to ZMCC for marketing services, which were offset against the importer’s fruit account. Under this ruling, the illegal gains could amount to around NZ$10 million.
Zespri pleaded not guilty to the charges at a court appearance on 17 January, on the basis that the legal obligation to meet all customs requirements sat with its former importer and that it had no intent to facilitate or engage in the evasion of customs duties.
The trial and today’s verdict follow a China Customs investigation which 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 RMB 37 million (approximately $NZ7 million), which was the amount of the underpaid customs duties.
Zespri CEO, Lain Jager, said as Zespri had only just received the judgment and needed time to consider it and whether to appeal the decision. In order to reserve the right to appeal, Zespri is limited in what it can say about the verdict.
However, Mr Jager said within the constraints of the legal process, he could make some general observations about the current situation and Zespri’s future in the important market of China.
"Our first concern is for the welfare of our employee. We will continue to work with his lawyer and family to ensure he is provided ongoing support. The employee’s Government is also providing consular support to him."
"Obviously we are very disappointed at the verdict. Zespri sells into around 60 countries globally and is committed to complying with local laws in the jurisdictions in which it performs activities.
"Regardless of today’s verdict or the outcome of any possible appeal, Zespri remains committed to China in the future. We have embarked on a refresh of our China strategy to ensure we are well-positioned to make the most of the future opportunities China presents.
"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.
"To-date the investigation and subsequent trial have not impacted our China sales with 2011 sales increasing by 26.3 percent and market returns by 45.2 percent. We do not anticipate it will have any lasting impact on our 2013 sales.
"Our China business has grown rapidly in 10 years to the point we now sell over 10 million trays in China, equating to sales revenue of over NZD$100 million.
"This growth has been achieved in a complex and rapidly evolving business environment. It is our responsibility to work effectively in this challenging environment, to ensure our import and distribution arrangements are compliant and robust and there have certainly been learnings for Zespri in this regards.
"The immediate challenge for Zespri, regardless of any possible appeal process, is to move forward positively in China.
"In doing this our priority is to ensure that our relationships with our partners – importers, distributors, customers and Government officials alike – are based on solid and transparent principles of best-practice.
"The Zespri brand and our relationship with China are simply too valuable to compromise," Mr Jager said.
As the case is still before the courts, Zespri spokespeople will not be available for interview. However, as this is a complex case, a background information paper outlining the actions and events which took place prior to the trial was made available following the January trial. This is still available on request:
For more information:
Dave Courtney
Zespri
Tel: +61 (0)7 572 7771
david.courtney@zespri.com