Open Magazine has an article about a fraud case in which a firm was charged with passing Chinese honey off inaccurately as Indian honey. Why would they do that? The article (link via The Browser) explains:
in 2001, in the wake of a US government investigation that found domestic honey producers being harmed by significant price disparities between Chinese and American honey, the US levied an anti-dumping duty of roughly $1.20 per pound (454 gm) on Chinese honey. This tariff, its imposition implying that this honey was being sold below its real cost of production, was intended to level the playing field for American beekeepers who could not compete with imported honey selling in America at half their cost.
For companies like ALW that were importing tonnes of Chinese honey into the US every year, this was a big business setback. To evade the duty, some of them started getting shipments via third countries, with the honey's point-of-origin relabelled accordingly. After all, no tariff was due on honey from India, Malaysia, Mongolia or Russia.
The operation soon came to be called 'honey laundering'. ALW was one among several firms doing it, but it has been in the spotlight ever since the arrests. According to a 44-count indictment of the firm, over 2004-06, it laundered over 2 million pounds—900 tonnes—of Chinese honey through India, evading nearly $80 million in duties.
Like the "large scale Canada-U.S. cheese smuggling operation" designed to avoid Canada's import duties on cheese, which we wrote about here back in October, the case highlights the way that taxes and barriers to free trade spawn smuggling and crime. There's no excuse for breaking the tax laws or for passing off a product to a customer as something that it is not. But by erecting these trade barriers in the name of protecting domestic industry, the politicians and the trade bureaucrats are setting up a situation so contrary to normal market incentives that there a big temptation to break the law in a way that benefits customers.
by Editor | Dec 7, 2012 at 12:36 pm
Related Topics: China, Taxes
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