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Toh Han Shih

Merchandise are being recalled off US store shelves as authorities take a harder line on illegal imports

The United States has  stepped up its crackdown on illegal Chinese goods entering the country, and as a major conduit for mainland trade with  America, Hong Kong must brace itself for more hardline action, according to experts.

The increased enforcement had already made itself felt in Hong Kong,  said  Andrew Schroth of  US law firm Grunfeld Desiderio, which has handled hundreds of seizures of Chinese textiles in the past six months.

'Entire shipments have been seized and garment factories closed in Hong Kong,' he said.

US customs had started investigating and, in some cases, recalling merchandise that had cleared customs, up to six months retroactively, Mr Schroth said.

'Although permitted under US law, this is the first time we're seeing this enacted. There have been cases of goods from Hong Kong clearing US customs and reaching US stores only to be recalled due to quota violations.'

Neeraj Sawhney, a director at Hong Kong trading firm Topnet International,  agreed that enforcement had reached new levels.

'The crackdown has been much heavier in the past six months. The number of detentions of illegal shipments has been more than before,' Mr Sawhney said.

At any given time, some US ports would hold 100 to 200 containers, mostly carrying  Chinese textiles, furniture and electronic  goods, for a few days, he said.

US customs had also been auctioning some of the confiscated goods, provided the products do not enter the US, he added.

So far this year, US customs have seized more than US$20 million worth of textiles,  mostly from China, shipped in violation of US quotas.

However, anecdotal evidence suggests the amount of Chinese goods illegally entering the US is much larger than the officially announced seizures.

One example is the imposition of US anti-dumping duties on shrimps from China and Vietnam in 2004. Seafood exports from Cambodia to the US skyrocketed 38 times from 177,000 tonnes in 2003 to 6.7 million tonnes in 2004.

Seafood.com, a US seafood website, said: 'It is very doubtful that all of this was locally produced. Shrimp from Vietnam or China is routed deliberately through third countries to avoid paying the duty required by US customs.'

Mr Schroth agreed with this assessment and said it was enforcement failures that appeared to be driving the new 'get tough' regime.

'The US government has been putting in place a very aggressive enforcement infrastructure over the past year. China appears to be the main target of most of the new enforcement actions,' he said.

US government agencies established over the past 12 months include the China Enforcement Task Force under the US Trade Representative, the Commercial Fraud and Intellectual Property Rights Unit and the China Anti-dumping Compliance Group.

Earlier this year, the US passed the Stop Counterfeiting in Manufactured Goods Act which increased penalties for counterfeiters.

In March, US Senators Chuck Grassley and Max Baucus proposed the US Trade Enhancement Act of 2006. Provisions include closing a loophole in US law that allegedly permitted shippers to evade anti-dumping  duties.

'The issue is political and economic. It's about the convergence of the substantial trade imbalance between the US and China, US government perceptions of Chinese currency manipulation, violations of intellectual property rights and circumvention of anti-dumping laws. These have become political issues in the US,' Mr Schroth said.

Meanwhile, anti-terrorism measures have entered the picture.

'Some of the resources set up to counter terrorism after September 11  have been restructured to counter economic crime, from searching for weapons of mass destruction to searching for Chinese garments of market disruption,' Mr Schroth said.

Hong Kong was likely to witness more inspections of garment factories by US officials, more intelligence gathering and increased co-operation between US and local authorities,  he said.



HK warned as China goods face clamp