23 Firms Raided in U.S. Probe of Chinese Imports


Federal customs agents have launched an unprecedented series of searches at 23 companies that import goods from China as part of a broad investigation to determine whether the Chinese government may be engaging in commercial fraud in its trade dealings in this country.

Many of the searches were carried out Thursday at the offices of Chinese companies in New York City’s World Trade Center and Garment District. Carrying search warrants, the customs officials quizzed scores of employees of the Chinese firms, searched through desks and files and carted off business documents, according to employees of the firms.

U.S. government and textile industry sources said that one focus of the federal investigation involves allegations that Chinese-controlled companies have falsely labeled clothes from China to create the appearance that they were made in other jurisdictions, such as Hong Kong, Taiwan, Macao, Mozambique or even Lebanon.

Although most of the raids were in New York, customs agents in Los Angeles were dispatched to search one Chinese company, Caltex Enterprises Inc. in Alhambra. And other customs agents searched two homes of Chinese trading officials in the New Jersey suburbs of New York.


“They searched every office from the president on down to the secretary. They took a whole bunch of financial records and the phone bills, and they looked through the computers,” said Alison Alten, an American employee of the China United Trading Corp., which is affiliated with China’s Ministry of Foreign Economic Relations and Trade.

“An agent took me aside, maybe because I’m Caucasian,” said Alten, who works in the firm’s office in the World Trade Center. “He told me: ‘We have reason to believe that criminal activity has occurred here. It’s of a business nature.’ ”

The searches are the latest sign of a hardening attitude by the Bush Administration in its trade dealings with China. Late last month, a senior U.S. trade official warned that the United States could impose trade sanctions against China by the end of this month if it does not take new steps to ease what the United States considers unfair trade practices and violations of intellectual property rights.

The Chinese Embassy in Washington had no official comment, but U.S. sources said that Chinese government officials were outraged by the searches. Chinese Ambassador Zhu Qichen was said to be preparing to visit the State Department to lodge a protest.


After Chinese officials began to complain about the sweeping raids, the U.S. Customs Service confirmed in a brief press release Friday that it had executed search warrants on 23 corporations, which it named. The Customs Service said the searches “relate to an ongoing investigation being directed by the commercial fraud division of the Department of Treasury, U.S. Customs . . . and the United States Attorney’s office (in New York).”

Chinese exports to this country have been increasing so quickly that the U.S. trade deficit with China this year will be the second largest in the world behind the American deficit with Japan. By official figures, China is the leading exporter of garments and apparel into this country, with Taiwan in second place.

U.S. officials and representatives of the American textile industry have said these figures may actually understate by billions of dollars the quantity of Chinese-made clothes being sold in this country. In order to circumvent textile quotas, they say, China has been shipping goods to the United States with labels that say they were made elsewhere.

“It’s massive in scope,” Charles Bremer, director of international trade for the American Textile Manufacturers Institute, said of the alleged false labeling of goods from China. “While the customs officials have done a commendable job in pursuing this, what they have done so far is only the tip of the iceberg.”


Officials of the U.S. Customs Service said last summer that they would be seeking criminal indictments of companies that sought to import falsely labeled clothing from China into the United States. U.S. customs officials and the U.S. attorney’s office refused to say Friday whether that criminal investigation was the basis for this week’s searches.

At China United Trading Corp., which Alten said serves as China’s unofficial commercial consulate to coordinate Chinese trade relations in this country, customs agents were waiting when employees arrived for work at 9 a.m. Thursday. They ushered about 50 people into an office conference room and then began their search, which lasted until after 8 p.m. Thursday night.

At another firm, Fabyarn Trading Co., in New York’s Garment District near Times Square, an employee who asked that his name not be used said federal agents had taken away reams of documents from the company’s fifth-floor offices.

“We hope they release the documents,” the employee said. “We don’t think there are any problems.” He said Fabyarn’s textile business had been disrupted by the search and that the firm was trying to contact buyers in order to continue its operations.


Caltex Enterprises Inc., the Alhambra firm, is a Chinese government agency that serves as a liaison between U.S. clothing importers and China’s textile export industry.

Jonathan Wang, president of the company, said that about 12 people identifying themselves as U.S. Customs Service agents spent four hours in his office Thursday and confiscated a computer and all the company’s business files, including bank statements, customer lists and contracts.

No one was in the office when the investigators arrived, so “they asked the building manager to open the door,” Wang said. “They threatened him that they would break in if he didn’t. Two of them had weapons.”

Customs agents told an employee they were looking for “evidence” but would not elaborate, Wang said, adding that he plans to complain about the incident to the Chinese consulate in Los Angeles.


Caltex is one of four Chinese-controlled textile import agencies in the U.S. The other three are in New York, Wang said.

Staff writers David Treadwell in New York and Irene Chang in Los Angeles contributed to this report.