Saturday, April 5, 2014

Crackdown on Smuggling Agricultural Products

At the beginning of 2014, China's Customs authority launched a "Green Wind" campaign to crack down on smuggling of agricultural products. The campaign covers ports all over the country and products as diverse as rice, wheat, soybeans, peanuts, edible oils, sugar, cotton, starch, and meats. The campaign was described as part of a broader effort to curb the "momentum of large-scale smuggling" over the last several years.

According to the article, the campaign has several motivations: to prevent loss of customs and tax revenue, prevent food sanitation and safety problems, and to maintain national food security. The concern is that smuggled products with low prices will depress Chinese prices and harm Chinese producers. The smuggling crackdown is described as a food security "firewall."

A coordinated effort by authorities in three ports--Shandong Province's Qingdao and Rizhao and in Guangxi--intercepted 130,000 metric tons of smuggled peanuts and sesame. The article described this as "equal to the output of a major-producing county." The peanuts reportedly came from India and had aflatoxin levels far in excess of the allowable tolerance.

To show the increased degree of smuggling, the article reports that the volume of smuggled sugar intercepted by authorities rose from 761 metric tons during 2011 to 9,665 tons in 2012 and 14,000 tons in 2013.

This blog has previously described the smuggling chain for poultry and a crackdown on rice smuggling last year.

A 2012 article on rampant sugar smuggling in southwest China described it as "a colony of ants moving house." The Guangdong Sugar Industry Association estimated that smuggling totaled 1 million metric tons of sugar that year--about 7% of national consumption.

A document calling for a smuggling crackdown in Hainan estimated that 90% of imported meat sold in the province is smuggled. A Hainan crackdown in 2013 intercepted 6.2 metric tons of frozen chicken feet, chicken wings, pork bellies. In another incident, they found 1200 frozen pangolin carcasses (a protected species) and 80 live sea turtles.

In October 2013, authorities seized 790 metric tons of smuggled cotton discovered in a warehouse in Dezhou, Shandong Province.

Two reporters in Wuhan observed boxes of smuggled beef were common in a city's wholesale market. The reporters were told that smuggled beef mainly goes to company cafeterias and small restaurants; because it's cheaper, it's very competitive in the market. [It's unclear how they determined the beef was smuggled--beef can be legally imported from some countries.] They also reported that a shipment contained some very cheap Indian beef mixed with beef from Uruguay and Australia.

A wholesaler in Kunming told a reporter that smuggled sugar comes into the country from Vietnam and then to markets in Yunnan. She said the smuggled sugar is bought by restaurants, small workshops and a few food and pharmaceutical companies.

High Chinese prices are the driver of the smuggling surge. The sugar article said the main motivator was a 1000-yuan price difference between Chinese prices and the price of smuggled sugar. The Hubei article said the price of smuggled beef was just over half the price of domestic beef.

During 2012, smuggled sugar was said to be putting downward pressure on high Chinese sugar prices. The price in consuming regions is normally higher than in producing regions--but that price-pattern was reversed because cheaper smuggled sugar depressed prices in consuming regions.

The Wuhan beef story reported that supermarkets were selling Chinese beef for 40-to-50 yuan per 500g [although it was from China, it was shipped across the country from Horqin, Inner Mongolia]. A farmer said he sold beef at 35 yuan and calculated his cost at 30 yuan per jin, but he heard some people had been selling beef at 20 yuan and wondered how they could sell it so cheap. The reporter found the cheap beef was imported [not necessarily smuggled]. The operator of a slaughterhouse blames plunging volume and losses on smuggled beef. He claims he knows beef traders who have switched to dealing in smuggled meat, and some of the imported meat has horse meat mixed in [just like Europe!].

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