Print This Page
How Does China Sneak Antibiotic-Tainted, Farmed
Shrimp into the United States?
(Malaysia and Ecuador Implicated)

"There’s reason to doubt that all that Malaysian shrimp is Malaysian.  Ronnie Tan, vice president of Blue Archipelago, Malaysia’s largest seafood producer, says that depending on the year either three or four shrimp producers—including his own company—operate in the country.  Malaysia produced about 32,000 tons of shrimp in 2015, he says; about 18,000 tons were consumed domestically, and about 12,000 tons went to Singapore.  That would leave little legitimate Malaysian shrimp to go to the rest of the world.  Yet according to USA  Department of Agriculture figures, imports from Malaysia during the past decade have exceeded 20,000 tons a year on average.”

“It’s a mystery that may be explained, at least partially, by examining the business practices of Jun Yang, a Chinese-born entrepreneur based in Texas.  Homeland Security Investigations, a part of USA  Immigrations and Customs Enforcement, first knew him as a honey broker.  The agency arrested him in 2012 (then unarrested him so that he could cooperate with the investigation, then arrested him again) and charged him with making false claims about the honey he was selling.  It was harvested in China but was passed through Malaysia, where it acquired Malaysian certificates of origin.  This illegal transshipping, as the maneuver is called, allowed him to avoid paying almost $38 million in antidumping duties.  The investigators untangled a network of shell companies that seemed designed solely to deceive U.S.  regulators.  In November 2013, Yang was convicted and sentenced to three years in federal prison.”

“The investigators also determined that Yang’s main business wasn’t honey—it was seafood.  His company brokered shrimp for a Houston company called American Fisheries.  At the time of Yang’s first arrest, some of the shipments were still in cold-storage facilities.  The feds required him, as part of his cooperation, to send samples to a laboratory for analysis.  Five shipments tested positive for nitrofurans, a class of antibiotics banned in the USA.  Those tainted shrimp were eventually destroyed.  All the tainted shipments had been labeled as products of Malaysia.”

“Despite Yang’s cooperation with the government in the shrimp investigation, his information wasn’t used to make a case.  But American Fisheries itself may have provided a way to track the apparent transshipping scheme.  In May 2013, American Fisheries sued Yang, saying it had received only $6.1 million of the $12.1 million Yang owed it for 74 shipments of shrimp, weighing as much as 28,000 kilograms (62,000 pounds) each, from June 2011 to January 2012.  That case, still pending in Texas, as well as Yang’s countersuit against American Fisheries, has uncovered a trove of documents that detail how a Shanghai-based company hatched a plan to get its Chinese-farmed shrimp into America.”

“In 2005, about nine months after the USA antidumping tariffs on Chinese shrimp went into effect, a group of seafood executives gathered in a Shanghai conference room.  Many knew one another from when they’d all worked for Shanghai Fisheries, a large company overseen by the government.  The executives agreed to create a venture that would focus primarily on exporting shrimp to the USA, despite the new tariff.  They would finance and control the company from China, but it would be incorporated in Texas.  That was the beginning of American Fisheries.”

“Some of the same executives also controlled a Shanghai Fisheries subsidiary called Guangzhou Lingshan, a seafood packing plant in the Pearl River Delta, and the plant was buying shrimp.  By 2006 the company had purchased 3,000 tons of it from farmers around the town of Da’ao, according to local newspaper reports.”

“Guangzhou Lingshan built a lab inside the complex to test the quality of its shrimp, and the facility was considered one of the best in the region.  Even so, former executives with the company say shrimp tainted with antibiotic traces made it into the company’s stock.  “You know what China was like,” says Lv Wei, who worked for Guangzhou Lingshan in the trade department for nine years before leaving in 2013.  Almost two-thirds of the shrimp that went through the packing facility ended up with American Fisheries, she says.  “‘They all went through Malaysia.” Shanghai Fisheries declined to comment on Guangzhou Lingshan.’”

“No paperwork connected to those 2011 and 2012 shipments of Malaysian-labeled shrimp indicated they might have originated in China.  The certificates of origin were signed by officials at the Penang Malay Chamber of Commerce.  On a day in August, a man named Mohd Noordin Ismail sits at a desk in the reception room of the chamber’s offices in the seaside district of George Town.  Bespectacled and wearing chunky gold rings on his fingers, Mohd Noordin has a foot-high stack of documents teetering in front of him.  He says he’s worked at the chamber of commerce for 40 years, and his duties include signing certificates of origin for products produced in Malaysia and then exported.  The certification process, as he describes it, is built on trust.  He’s presented with documents provided by exporters, and he rubber-stamps the certificates under the assumption that the documents are genuine and correct.  He doesn’t verify their authenticity.”

“‘We cannot trace if the shrimp is coming from Thailand or from China or from other countries,” Mohd Noordin says.  “We cannot trace.’”

“The documents that bear his signature indicate the shrimp sent to American Fisheries was farmed at two Malaysian aquaculture facilities, Chai Kee Aquatic and Aiman Aquatic.  But none of the addresses listed on those forms correspond to an aquaculture facility or to a place where shrimp could have been raised.  On two separate import documents, the same address is listed as the harvesting site for both Chai Kee and Aiman Aquatic.  That address corresponds to a long block of gated residential compounds.  No ponds are visible on any of the properties.  A woman who answers the door at one of the houses says her son was in the seafood business, but she says no aquaculture facilities could be found on her property or elsewhere in the neighborhood.  Another address listed on the documents for Chai Kee doesn’t appear on Google Maps, and neither the local police nor officials at the post office can locate the street named on the forms.”

“Mohd Noordin says it’s possible the certificates of origin and his signature could have been forgeries and that the forms never passed his desk.  Malaysia’s shrimp industry is relatively small, but he says he’d never heard of either Chai Kee or Aiman.  Since 2008, when the European Union temporarily banned imports from the country after several shipments tested positive for antibiotic residues and heavy metal content, only a few companies legitimately export shrimp to America, according to Mohd Noordin and others in the industry.  Tan of Blue Archipelago says that while he has no direct evidence of transshipping activities, it’s commonly speculated by seafood producers in Malaysia that Chinese producers use Malaysian companies—both legitimate producers and shell companies that exist only on paper—to sneak their shrimp into the USA.”

“The American Fisheries court documents suggest the company and its various distributors carefully monitored the status of the shrimp shipments it brought into the U.S.  and communicated via e-mail and telephone.  Once the shrimp was on a ship bound for America, ownership of the shipment was transferred to a U.S.-registered company called YZ Marine.  On paper, the company doesn’t seem connected to American Fisheries and its executives in Shanghai.  But the court documents show that Feng Shao, president of American Fisheries, had access to YZ Marine’s bank account and wrote a number of checks on it.”

“Lawyers for American Fisheries didn’t respond to interview requests for this story, but in court documents related to the Yang suit they’ve denied the company illegally transshipped goods via Malaysia.  They’ve acknowledged, however, that the company was fully financed and staffed via China and that its employees worked in Texas on three-month rotations because they lacked long-term USA work visas.  Court records also show that when one shipment of Malaysian-labeled shrimp arrived in the U.S.  at a lighter weight than anticipated, a member of the American Fisheries staff checked with Guangzhou Lingshan—the facility in the Pearl River Delta—to ask if there had been a packing mistake.”

“The groups lobbying hardest for intensified scrutiny of imported shrimp and fish are, unsurprisingly, the American producers of seafood.  The Southern Shrimp Alliance, a trade organization of USA shrimp producers, says the USA market is awash in fraudulently labeled and unsafe seafood.  “What we have learned is that there are well-developed channels for getting massive amounts of food and other consumer goods into this market while evading USA laws,” says John Williams, the organization’s executive director.”

“Arguments of that nature didn’t stop the USA catfish industry from successfully pushing for more oversight on imports, a move that could provide a model for shrimp companies.  For years the catfish industry argued that the FDA’s testing protocol, which analyzes only 1 percent to 2 percent of incoming seafood, didn’t adequately protect consumers.  With the help of allies in Congress, catfish farmers got the USDA to take over import inspections from the FDA.  The USDA’s Food Safety and Inspection Service, which will inspect all catfish imports by September 2017, began conducting preliminary, noncomprehensive inspections this spring, and proponents are thrilled by a slew of recent enforcement actions.”

“In April the FDA issued an import alert that said its district offices could detain and test all imports of shrimp and prawns from Peninsular Malaysia, a region that includes Penang.  Malaysia’s Ministry of Health responded by announcing that it would tighten controls at processing plants and assume the authority to issue certificates of origin from chambers of commerce.  In the past year, the USA has started at least two investigations involving Chinese shrimp producers suspected of shipping their seafood through Malaysia, according to a USA  Immigration and Customs Enforcement official who is familiar with the investigations.  Both probes are ongoing.”

“The FDA alert has virtually halted Malaysian shrimp imports.  But that doesn’t mean tainted Chinese shrimp aren’t making it into the USA.  Industry and trade experts say many companies transship Chinese shrimp by following the American Fisheries model, each of them creating disposable import companies that can simply fold, or reincorporate under another name, at the first sign of regulatory scrutiny.  Over the years, when Malaysian shrimp exporters were added to the FDA’s “red list”—meaning their shipments would have to be stopped at USA ports—the companies didn’t try to clear their names, as companies from other countries did, says Nathan Rickard, an attorney specializing in international trade whose clients include the Southern Shrimp Alliance.  They just incorporated new entities with new names to do the same work.”

“It appears now that dirty shrimp is being routed through different countries.  One that might be taking Malaysia’s place as an international transshipping hub is Ecuador, domestic shrimp producers say.”

“‘The import alert was a huge step forward to prevent contaminated shrimp from getting to USA consumers, but we have also seen significant shifts in trade patterns indicating new routes and methods for getting bad shrimp into the USA market,” says Williams, of the Southern Shrimp Alliance.  “As long as there are distributors, retailers, and restaurants not know and do not care where their shrimp is coming from, we expect to see shrimp-trade fraud.’”

“A recent case illustrates the domestic producers’ concerns.  Ocean Rancho, a company based in Rancho Cucamonga, Calif., has imported Malaysian shrimp.  The company was formed by a man named Kai Hua Tan, an employee of a shrimp-farming company in mainland China called Zhanjiang Newpro Foods.  Tan also has links to Tasty Goody Chinese Fast Food, a chain of 11 restaurants in California.  In November 2014 the U.S.  Department of Commerce said it had obtained documents showing that Zhanjiang Newpro had evaded tariffs using a transshipping scheme.  When the company refused to answer questions about its operations during a review, the department imposed antidumping penalties.  Ocean Rancho declared bankruptcy and dissolved, citing about $1.6 million in duties owed to U.S.  Customs and Border Protection.  (Tan didn’t respond to voicemails left at his listed phone number, or to phone calls and e-mails to Tasty Goody.)”

“Around the same time, a new company, Mita Group, formed.  It has the same address and phone number Ocean Rancho used on shipping documents.  No one answering the phone there would speak with a reporter.  Last year, Mita Group imported at least 700,000 pounds of shrimp—from Ecuador.”

Source: Bloomberg Businessweek.   How Antibiotic-Tainted Seafood from China Ends Up on Your Table: You Might Want to Pass on the Shrimp Cocktail.   Jason Gale, Lydia Mulvany and Monte Ree (with With Wenxin Fan and Pooi Koon Chong).  December 15, 2016.

Print This Page