Six companies with operations in California linked to China Zhongwang Holdings and its former chairman have been ordered to pay $1.83 billion in restitution for participating in a tariff evasion scheme involving aluminum extrusion imports from China, according to the US Justice Department.
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The companies were charged with "participating in a conspiracy to defraud the US through a scheme in which huge amounts of aluminum, disguised as 'pallets' to avoid $1.8 billion in customs duties, were exported to the US and were 'sold' to fraudulently inflate a China-based company's revenues and deceive investors worldwide," the department's US Attorney's Office said in a statement late April 11.
The companies subject to the restitution are Perfectus Aluminium, Perfectus Aluminium Acquisitions, Scuderia Development, 1001 Doubleday, Von Karman and 10681 Production Avenue. In addition to the fine, the entities were also sentenced to five years of probation, the maximum penalty permitted by law.
The sentence was issued by US District Judge R. Gary Klausner in the Central District of California court.
Welded into pallets
In the duty evasion scheme, China Zhongwang, Asia's largest manufacturer of aluminum extrusions, spot-welded aluminum extrusions into aluminum pallets for export to the US. Chinese aluminum extrusions have been subject to US antidumping and countervailing duties since 2011, but aluminum pallets are not subject to such tariffs.
The pallets were sold to North American aluminum businesses and warehouses linked to China Zhongwang's now former chairman, Zhongtian Liu.
"There were no customers for the 2.2 million pallets imported by the Liu-controlled companies between 2011 and 2014, and no pallets were ever sold," the Justice Department said. "The vast majority of the pallets were imported through the ports of Los Angeles and Long Beach and then stockpiled at four large warehouses in Southern California, all of which were purchased at Liu's direction."
'No actual demand' for pallets
The aluminum sales falsely inflated China Zhongwang's value, and the company's annual reports falsely claimed that there was a robust demand for the aluminum pallets in the US, according to the department.
"Since there was no actual demand for the pallets, Liu and China Zhongwang arranged for aluminum melting facilities to be built and acquired, which were to be used to reconfigure the aluminum imported as pallets into a form with commercial value," the Justice Department added.
A representative for China Zhongwang was not immediately available for comment April 12.
The six companies were previously found guilty in 2021 by a US federal jury for participating in the duty evasion scheme.