Six Southern California companies convicted for evading payment of $1.8 billion in duties on imported Chinese aluminium

On 23^rd August 2021, a federal jury found six corporate entities guilty of participating in a wide-ranging conspiracy to defraud the United States via a wire-and-customs fraud scheme in which huge amounts of aluminium – disguised as “pallets” to avoid $1.8 billion in customs duties – were exported to the United States and were “sold” to fraudulently inflate a China-based company’s revenues and deceive investors worldwide.

After several years of investigations, scope challenges, circumvention cases, and now the criminal case orchestrated by the U.S. Department of Justice.

The jury found the following two aluminium businesses and four warehousing companies, all of which were related to one another – guilty of one count of conspiracy, nine counts of wire fraud and seven counts of passing false and fraudulent papers through a customhouse:

• Perfectus Aluminium Inc., an Ontario-based business;
• Perfectus Aluminium Acquisitions LLC, a subsidiary of Perfectus Aluminium formed in 2014 to oversee several companies that received aluminium pallets shipped to the United States after duties were imposed on Chinese aluminium in 2011;
• Scuderia Development LLC, which owns a warehouse in Riverside;
• 1001 Doubleday LLC, which owns a warehouse in Ontario;
• Von Karman – Main Street LLC, which owns a warehouse in Irvine;
• 10681 Production Avenue LLC, which owns a warehouse in Fontana.

The two Perfectus companies also were found guilty of seven additional counts of international promotional money laundering.

According to evidence presented at the nine-day trial, China Zhongwang Holdings Ltd., Asia’s largest manufacturer of aluminium extrusions, Zhongtian Liu, the company’s former President and Chairman, several individual defendants and the corporate defendants found guilty lied to U.S. Customs and Border Protection to avoid paying the United States $1.8 billion in anti-dumping and countervailing duties (AD/CVD) that were imposed in 2011 on certain types of extruded aluminium imported into the United States from China.

The Justice Department said: “Liu orchestrated bogus sales of the aluminium to inflate China Zhongwang’s value. Since there was no market for pallets, Liu and Zhongwang arranged for aluminium melting facilities to be built and acquired, which were to be used to reconfigure the aluminium into a form with commercial value.”

Jeff Henderson, President of the Aluminum Extruders Council (AEC), said: “The Aluminum Extruders Council applauds the Department of Commerce for their work in this matter, Customs and Border Protection for their diligence in uncovering the aluminium, and the Department of Justice for their prosecution in this case.  This should be a warning sign to others intending to violate our trade orders.  You will be discovered and prosecuted.”

 The aluminium sold to United States-based companies controlled by Liu was simply aluminium extrusions that were spot-welded together to make them appear to be functional pallets. There were no customers for the 2.2 million pallets imported by the Liu-controlled companies between 2011 and 2014, and no pallets were ever sold.