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A Shanghai Court has upheld the findings against Zespri's China-based subsidiary and one of the subsidiary's employees, relating to the under-declaration of customs duties on imports into Shanghai of New Zealand kiwifruit between 2008 and 2010.
On appeal, Zespri had provided evidence showing its importers provided shipment reconciliations to Zespri showing that they had deducted the full duty owing on the final settlement price.
The reconciliations demonstrated Zespri received no benefit from the duty evasion and were introduced as evidence that, in issuing documents in New Zealand, Zespri had no intent to facilitate the under-declaration of customs duty, the company says in a statement.
The court said the reconciliations provided by the importer were "not relevant to whether both Zespri's Chinese subsidiary and [Zespri's employee] had the intention and objective act of smuggling."
As a result, the fine of $960,000 issued against Zespri's subsidiary has been upheld, as has the five-year jail sentence previously imposed on its employee.
The court's original ruling that "illegal gains" could be subject to reparation was also unchanged. The illegal gains appeared to relate to the amount of money paid by the former importer to ZMCC for marketing services, which were offset against the importer's fruit account.
"Our biggest concern remains for the welfare of our employee and we will continue to work with his family and legal representation to explore how we can support him personally and legally going forward," Zespri chief executive Lain Jager says.
"While we are disappointed, Zespri accepts the court's decision and acknowledges Zespri's monitoring of its import arrangements into China between 2008 and 2010 failed to ensure that its import partners were compliant with local customs laws and regulations.
"Since the arrest of the importer, we have embarked on a significant overhaul of our China operations to minimise the risk of this happening again. That process continues, but we are working closely with China Customs and other parties to ensure our operations are compliant."
Jager says it is critical the company learns from this experience and moves forward with respect to its operations and relationships in China.
"Based on the face-to-face meetings our chairman and senior Zespri executives have had in China this year with senior China Customs officials and other central and local government agencies, it is clear that Zespri's business and brand have not been damaged by this matter.
"These meetings - combined with the fact demand for our product far outstrips supply in China - gives me confidence that the Zespri brand in China remains strong and our future there is very bright.
"China features heavily in the future development of this industry. A key focus for the company is putting in place a long-term, sustainable strategy to guide Zespri's future growth in China."
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