Between 2011 and 2014, two aluminium companies and four warehouse companies conspired to import huge quantities of aluminum into the United States from China but disguise them as shipping pallets in order to avoid paying the proper customs duties.
Authorities estimate that together they smuggled in a total of 2.2 million “pallets” worth of spot-welded aluminum during this period.
What links the six companies together is that they all have ties to China Zhongwang Holdings Ltd.—one of Asia’s largest manufacturers of aluminum extrusions—and its former president, Chinese billionaire Zhongtian Liu.
Extrusion is the process by which a material is rammed through a die with great force; it thus comes out the other side in the same shape as the die’s edge. The deformation is akin to toothpaste being squeezed out of a tube.
Aluminum is a highly-valued metal, which is why the countervailing duties on it are 374.15% when shipped into the U.S. from China in its raw material form, according to the 2019 indictment against the defendants.
Countervailing duties, also known as anti-subsidy duties, are customs fees levied against the exporter of a certain commodity in order to protect the importing country’s domestic producers.
Finished aluminum products, however, are not subject to the same duties, which is why the conspirators in China spot-welded huge quantities of the metal into 2.2 million pallets for shipping.
Investigators determined that China Zhongwang Holdings and Liu lied to U.S. Customs when they said that there was a market for aluminum pallets in the United States.
However, no such customers existed and none of the 2.2 million pallets were ever sold.
Once imported through the ports of Los Angeles and Long Beach, the pallets were instead stockpiled inside of the four warehouse companies, all of which were purchased at Liu’s direction, according to the U.S Department of Justice.
The role of the other two companies, Perfectus Aluminum Inc. and its subsidiary, was to oversee the shipments and coordinate with the warehouses for proper storage.
The next step in the scheme was to falsify the sale of the aluminum to independent third parties in order to fraudulently inflate China Zhongwang Holding’s value.
In reality, the aluminum continued to be stockpiled in more than 2 million square feet of warehouse space.
Eventually, however, something had to be done with the metal. Liu and China Zhongwang Holdings thus constructed melting facilities that reforged the aluminum into a template that held commercial value.
Perfectus Aluminum facilitated this process by laundering the proceeds of the false purchases—estimated to be in the hundreds of millions of dollars—money that eventually found its way back to China Zhongwang.
Ultimately, the six California-based companies were found guilty in August 2021 of wire fraud and passing fraudulent papers through a customhouse. Perfectus Aluminum was also found guilty of money laundering.
In addition to the $1.83 billion penalty, the courts ordered on Mar. 24 the seizure of the remaining aluminum, estimated to be worth roughly $70 million.
Meanwhile, Liu, along with two of his co-conspirators and China Zhongwang Holdings, have yet to appear before a U.S. court to face the criminal charges brought against them in 2019.
No extradition treaty exists between the United States and China.
