One Billion Customers - James McGregor [58]
Chinese prosecutors say that most of Yuanhua’s six hundred or so employees were engaged in shipping and smuggling. The company purchased the goods overseas, with the oil, cigarettes, and automobiles coming mostly from the ports of Singapore and Hong Kong. When vessels carrying the contraband approached Xiamen harbor, Yuanhua sent small boats out with fake cargo manifests to exchange for the real cargo manifests. Ship captains received an envelope of cash. Upon reaching port, the goods went one of two routes. For some, duties were paid based on the low-duty items listed on the fake cargo manifests. Others were marked for transshipment to other countries, thus entering China duty free. Those items were sent to bonded storage areas that Lai and his partners in the government and military controlled.
The containers on which duty had been paid were moved into the company’s distribution network. Containers that were destined to be transshipped were unloaded at night. The cigarettes or other contraband were loaded into empty containers that had already passed customs inspection. The original containers, now empty, were resealed and exported after having new customs seals affixed. The cigarettes were taken to other warehouses for repackaging, often in shoe boxes. Since Fujian is the sports shoe manufacturing capital of the world, it wasn’t difficult to use established shoe shipment channels to distribute the cigarettes around the country.
The car smuggling network was more complicated. Auto sales companies in Fujian and elsewhere would take orders for imported vehicles, which were then compiled in Hong Kong. Lai’s Hong Kong associates would order the vehicles from Japan and Germany. Some were shipped directly to Xiamen. Others were first shipped to Singapore, marked for transshipment, and later forwarded to Xiamen. Again, the cargo manifests were changed as they steamed into the port of Xiamen. Bringing cars into Xiamen was especially risky because the port wasn’t designated by the government to handle autos. What’s more, owners of cars in China require detailed origin papers to obtain license plates. But that didn’t pose any particular problems for the smugglers because many of the purchasers were government officials and military officers. Chinese police have documents called “confiscation certificates” that are issued for smuggled autos that they capture. The certificates allow the police to sell the cars into the market. The smugglers established a network to purchase confiscation certificates from the police for about $12,000 each, about 25 percent of the customs duty that would have been due. Chinese prosecutors say that they were able to trace the smuggling of 3,588 vehicles to Lai and his associates. They put the value of the vehicles at $190 million, and lost customs duties at about $110 million.
Refined oil from Singapore and Australia was smuggled using two methods. Sometimes the oil was offloaded, under the watchful and complicit eyes of the Chinese military, from small tankers onto local cargo vessels retrofitted with oil tanks. These small ships would scatter along the coast of Fujian and Guangdong provinces. Other times the oil would simply pass through customs without leaving any paperwork trail and end up in government-owned oil storage tanks. It was then sold to municipal and provincial oil companies and moved into normal government supply channels. Investigators were frustrated for months in their attempts to track the oil smuggling. They could find no unusual documents in the customs files. They finally figured out the smuggling volumes by comparing the records of the Xiamen oil storage facilities with the officially recorded volume of oil imports. They found that an astounding four million tons of oil had been smuggled into Xiamen in