Chinese Billionaire Accused of Evading U.S. Aluminum Tariffs

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(Aug 1): Chinese billionaire Zhongtian Liu was charged by the U.S. with evading $1.8 billion in American “anti-dumping” tariffs on aluminum, prosecutors said.

Liu, the former president and chairman of China Zhongwang Holdings Ltd., Asia’s largest aluminum extrusion company, lied to U.S. customs agents to avoid duties imposed in 2011 on certain types of extruded aluminum imported into the U.S. from China, according to a statement issued Wednesday by U.S. Attorney Nicola Hanna in Los Angeles after a grand jury indictment was unsealed.

“This indictment outlines the unscrupulous and anti-competitive practices of a corrupt businessman,” prosecutors said in the statement.

Liu, 55, is believed to be in China, said Thom Mrozek, a spokesman for the U.S. attorney.

The aluminum extrusions were disguised when they were shipped to the U.S. as pallets to qualify them as finished goods and avoid customs duties of as much as 400%, according to the prosecutors. The company and Liu are accused of orchestrating bogus sales of the 2.2 million imported pallets which were actually stockpiled in Southern California because there was no demand for them.

Liu and the company would direct that aluminum melting facilities be built and acquired to reconfigure the pallets into a form with commercial value, according to the indictment.
Money Laundering

Prosecutors also allege Liu was behind a “massive” money-laundering scheme. One of his associates was charged with evading income taxes on more than $9 million he received in 2015. He took a plea deal in exchange for cooperation with federal investigators, prosecutors said.

Hundreds of millions of dollars were allegedly funneled through shell companies, which were then directed to aluminum companies in the U.S. that Liu ran, according to the indictment.

Zhongwang, controlled by Liu, has run into other regulatory issues in the U.S. In 2016, the Commerce Department found that Zhongwang withheld information during its investigation of the company’s aluminum shipments and impeded proceedings. Zhongwang President Lu Changqing said then that his firm didn’t participate in the inquiry because it stopped making the products cited in early 2015.

The Commerce Department findings came just as Liu was seeking to buy Cleveland-based aluminum parts maker Aleris Corp. in what could have been China’s biggest-ever purchase of an overseas metals processor. The deal was terminated a year later, after it failed to get approval from U.S. regulators.
Trump Administration

The case pre-dates the Trump administration’s introduction of steel and aluminum tariffs last year. But it illustrates the problem those tariffs were meant to address.

The Trump administration introduced its global tariffs in large part because U.S. producers argued they were unable to compete with a flood of Chinese aluminum and steel onto international markets. Beyond producing a mountain of steel and aluminum, Chinese companies, they said, were consistently finding ways to evade U.S. anti-dumping tariffs of as much as 400 percent and other efforts to address the economic threat.

Canada and Mexico agreed earlier this year to do more to block the trans-shipment of Chinese metals destined for the U.S. as part of a deal with the Trump administration to remove the tariffs. But they are still in place on steel from other major U.S. allies including the European Union and Japan.

Meanwhile, Trump’s trade war with China and the tariffs he has imposed on some $250 billion in imports has led to new efforts by Chinese, U.S. and other companies to find a way around those import taxes, mostly by relocating production.

Representatives of Zhongwang didn’t immediately respond to a request for comment, made before regular business hours in China. - Bloomberg