An Open-and-Cloves Case
When they won their big victory recently against a couple of smugglers, California garlic producers must have felt like shouting “Eu-reek-a!”
The U.S. Customs Service and the Justice Department also celebrated. The guilty pleas of two men who illegally imported tons of the odoriferous herb from China mark the first time that anyone has been convicted of or has pleaded guilty to illegally avoiding anti-dumping duties.
Even though it’s a hot commodity these days, garlic would hardly seem to be the stuff of cloak and dagger. But this case illustrates well the pressures facing the U.S. government as the food market becomes more global and competitive. California, with hundreds of high-value crops, has much at stake.
The central part of the state, after all, is the fresh garlic capital of America, producing 130 million pounds a year worth $90 million in potential sales. The 13 key producers of the bulbous plant have collectively invested more than $120 million in their fresh-garlic operations, many of them based in Gilroy.
It was not surprising, therefore, that California’s fresh-garlic industry panicked a few years ago when a surge of low-cost imports from China threatened its very existence. Almost overnight, Chinese imports soared, to an astonishing 63.5 million pounds in 1994, from just 3.5 million pounds two years before. And the imports sold for pennies per pound.
Seeking to stave off decimation, the 13-member Fresh Garlic Producers Assn. asked the U.S. government to impose dumping duties against imports from China. The Commerce Department calculated that the imports were being sold in this country at about a quarter of the actual production cost.
The International Trade Commission’s subsequent determination that the dumped imports were causing material injury to the domestic industry prompted Commerce in late 1994 to impose a 376% dumping duty on the Chinese product. That meant that an importer who brought in fresh garlic from China at a customs value of 30 cents a pound would have to post a cash dumping-duty deposit equal to $1.13 a pound. That, in turn, would raise the importer’s costs, including transportation, to about $1.53 a pound, well above the typical U.S. market price (55 to 70 cents a pound for fresh whole garlic).
“Official” imports from China fell after that. But, said Michael J. Coursey, a Washington-based attorney for the California garlic producers, millions of pounds of Chinese garlic continued to enter the United States illegally, much of it passing through the ports of Los Angeles and Long Beach. Traders used a variety of duty-avoidance schemes, including listing the source as another country, such as Taiwan, Vietnam or Thailand.
Early in 1995, however, garlic producers took their case to the U.S. Customs Service, which with the Justice Department launched an investigation. Sure enough, the activities of two Southern California importers failed to pass the smell test, and the two agencies seized, at the Southern California ports, 75 tons of Chinese garlic falsely represented as being from Vietnam.
In late February, Justice announced that importer Utomo “Jimmy” Tani and a colleague, David Wei Dau Yue, had pleaded guilty to charges of conspiring to defraud the United States of more than $9 million in duties by falsely reporting the country of origin and grossly undervaluing their product. Tani faces a maximum sentence of 10 years in prison and a fine of $500,000. Yue could receive five years’ imprisonment and a $250,000 fine. Sentencing is set for May 5.
Consumers, Coursey said, should be relatively unaffected if the flow of cheap imports stops and garlic prices rise by a few pennies. It takes about 120 cloves to equal a pound.
But for individual producers, who were losing millions of pounds of sales, the guilty pleas mean a breath of fresh air. Enjoying the turn of events is Don Christopher, an owner of Christopher Ranch in Gilroy, the nation’s biggest producer of fresh garlic.
“It will probably stop everybody from cheating the government,” he said.
Martha Groves can be reached by e-mail at martha.groves@latimes.com or by fax at (213) 237-7837.
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Stinky Stuff
California produces about 88% of the nation’s garlic crop. Farmers have labored to grow the finicky bulbous plant, a member of the lily family, for thousands of years to meet the high demand for its culinary and a medicinal properties. Some garlic trivia:
* Garlic is the second best-selling herb--behind Echinacea--in U.S. health food stores.
* Garlic growers estimate the U.S. market for fresh garlic is expanding by about 10% a year.
* Each 4-gram garlic clove contains about 5 calories and no fat, sodium or cholesterol.
* From 1975 to 1994, U.S. per-capita consumption of garlic nearly tripled, from 0.6 to 1.6 pounds.
* Garlic inhibits high blood cholesterol, kills infectious organisms, helps enhance memory, studies say.
Source: California Department of Food and Agriculture, California Farm Bureau Federation, wire reports
Researched by JENNIFER OLDHAM / Los Angeles Times
