Five persons and two domestic honey-processing companies were charged Wednesday in a federal probe targeting a multimillion dollar smuggling operation bringing Chinese-origin honey into the United States.
The U.S. Immigration and Customs Enforcement-led investigation — known as "Project Honeygate" — uncovered what ICE said was the misdeclaration of Chinese-origin honey as other commodities as it was imported into the United States and shipped through other countries to evade anti-dumping duties.
Altogether, the seven defendants are accused of evading duties totaling more than $180 million.
"These businesses intentionally deprived the U.S. government of millions of dollars in unpaid duties," said ICE Deputy Director Daniel Ragsdale. "Schemes like this result in legitimate importers and the domestic honey-producing industry enduring years of unprofitable operations, with some even being put out of business. We will continue to enforce criminal violations of anti-dumping laws in all industries so American and foreign businesses all play by the same rules."
The new charges represent the second phase of an ICE investigation that began in June 2011 when an undercover agent assumed the role of the director of procurement at Honey Holding I Ltd., which by then was cooperating with the investigation. Honey Holding, doing business as Honey Solutions of Baytown, Texas, and Groeb Farms Inc., of Onsted, Mich. — two of the nation's largest honey suppliers — have both entered into deferred prosecution agreements with the government.
Honey Holding agreed to pay $1 million and Groeb Farms agreed to pay $2 million in fines. Both companies have also agreed to implement corporate compliance programs as part of their respective agreements.
Also charged were three honey brokers, the former director of sales for Honey Holding, and the president of Premium Food Sales Inc., a broker and distributor of raw and processed honey in Bradford, Ontario.
In December 2001, the Commerce Department determined that Chinese-origin honey was being sold in the United States at less than fair market value, and imposed anti-dumping duties. The duties were as high as 221 percent of the declared value, and later were assessed against the entered net weight, currently at $2.63 per net kilogram, in addition to a honey assessment fee of one cent per pound of all honey.
In 2008, federal authorities began investigating allegations involving circumventing anti-dumping duties through illegal imports, including transshipment and mislabeling on the supply side of the honey industry. The investigation resulted in charges against 14 persons, including executives of Alfred L. Wolff GmbH and several affiliated companies of the German food conglomerate. They were charged with allegedly evading approximately $80 million in anti-dumping duties on Chinese-origin honey. Authorities seized and forfeited more than 3,000 drums of honey that illegally entered the United States.
The second phase of the investigation involves allegations of illegal buying, processing and trading of honey that illegally entered the United States on the demand side of the industry. Some of that honey was adulterated with antibiotics not approved by the Food and Drug Administration (FDA). None of the charges allege any instances of illness or other public health consequences attributed to consumption of the honey. The investigation is continuing.
"Trade fraud can have significant implications for the U.S. economy and consumers," said U.S. Customs and Border Protection (CBP) Chief Operating Officer Thomas S. Winkowski. "These products take jobs away from American workers and frequently violate U.S. health and safety standards, potentially endangering the public. CBP is committed to fighting these fraudulent actors alongside our government partners."
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