BEIJING – Three employees at one of Marubeni Corp.’s grain trading units in China have been detained by authorities, the trading house said Thursday, a move sources said was prompted by allegations it evaded taxes on soybean imports.
The employees worked at a Chinese unit of Marubeni’s Columbia Grain Inc., a spokesman at the trading company said. He added he did not know why they had been detained. He also said he did not know the nationalities of the employees.
The detentions may signal further complications in strained relations between Japan and China. Mitsui O.S.K. Lines Ltd. has paid about ¥4 billion to Chinese claimants, stemming from a wartime claim after the seizure of one of its ships by a court in Shanghai, according to media reports.
The seizure of a Mitsui bulk carrier set off alarm bells in Japan, and Chief Cabinet Secretary Yoshihide Suga warned earlier this week it may damage Japanese business in China.
The probe into Marubeni’s China unit comes nearly a year after investigators raided GlaxoSmithKline’s offices in China and detained four senior executives on suspicion of bribery and tax fraud.
It also comes amid escalating tensions between China and Japan over the Senkaku Islands, the chain of uninhabited islets that both countries and Taiwan claim, after Japan bought them from their private owners in 2012. Japanese firms are switching investment from China to Southeast Asia amid the tensions.
One of the Marubeni staff being held is Zhang Wenjing, a trading executive with Columbia Grain, following tipoffs that the company was evading taxes for soybean shipments sold to a crusher in the province, two trade sources said.
“Zhang was investigated by customs authorities. The customs received a tipoff that the company was suspected of evading taxes and smuggling by using provisional prices,” said one trade source, who has close dealings with the company.
Another industry source said Zhang and her colleagues were held by customs authorities in the city of Qingdao in Shandong province. He could not identify Zhang’s colleagues.
One official at Columbia’s Shenzhen office said Zhang was not available and declined comment when asked if Zhang was detained.
The Columbia office in Dalian said none of its traders were detained and said Zhang could still be contacted. However, Zhang did not answer phone calls made to her mobile phone Wednesday.
Sources said the allegations of tax evasion were related to discrepancies on the reported valuation of imported soybean cargoes, which would affect customs duty and value-added tax (VAT) since both are levied based on the cargo values.
Such discrepancies are a common occurrence in commodity trade, including soybeans, as sellers typically offer Chinese buyers a delayed pricing mechanism that allows importers to place orders based on a preliminary price.
This provisional pricing would be used to calculate cargo value when making customs declarations.
Buyers are then able to fix prices based on futures prices on the Chicago Board of Trade when cargoes arrive in China or as late as a month after their arrival. This final price would be the actual valuation of the cargo.
Since U.S. soy prices have risen by more than 12 percent so far in the year, both parties may have underreported the actual value of the cargo, said the trade source.
China’s customs authority is familiar with the practice of delayed pricing in commodities trade and has provisions in place allowing companies to adjust the declared cargo value, industry sources said.
“Delayed pricing has been widely used in the industry, we don’t know how serious customs authorities will be in handling the case this time,” said the source.