Know Your Supplier: Is Your Peeled and Deveined Shrimp from Malaysia?

The U.S. Food and Drug Administration (“FDA”) recently released information regarding refusals of imported seafood in July 2014.  In total, 125 entry lines of seafood products were refused last month.  For the second month in a row, a significant portion of the total entry lines refused was for shipments of shrimp contaminated with banned veterinary drugs.  In June, 25 of the 126 entry lines refused were for shrimp tainted with banned antibiotics.  Last month, 23 of the 125 entry lines refused were for shrimp tainted with antibiotics.

Refusals of contaminated shrimp from Vietnam continued in July, with four entry lines refused from three different Vietnamese shippers:  Quoc Viet Seaproducts Processing Trading & Imp-Exp Co., Ltd.; Hoang Phuong Seafood Factory;and Nhatrang Seaproduct Company.  There were also two entry lines of shrimp refused from Zhanjiang Guolian Aquatic Products Co., Ltd., the first company to be exempted from the FDA’s import alert on farmed Chinese shrimp, dace, eel, catfish and basa (Import Alert 16-131) back in 2007.

However, the bulk of the refusals, accounting for seventeen entry lines in total, were attributed to shrimp from the Malaysian exporter Sea Master Trading Co. Sdn. Bhd.  Sea Master Trading has been on the FDA’s Import Alert for seafood contaminated with nitrofurans since September of last year.  The company – a subsidiary of the Malaysian conglomerate the Texchem Group – primarily ships peeled and deveined shrimp to the U.S. market along with another subsidiary of the Texchem Group, Ocean Pioneer Food Sdn. Bhd.

Over the years, Sea Master Trading and Ocean Pioneer have supplied the U.S. market with significant quantities of peeled and deveined shrimp.  How this shrimp has gotten into the U.S. market is an interesting story.

 

Last year, as part of the U.S. government’s crackdown on honey fraud, a man named Jun Yang pled guilty for his part in various schemes to circumvent antidumping duties imposed on Chinese honey.  In the U.S. Attorney’s court filings regarding Mr. Yang’s potential sentencing, the government observed that:

 

As part of the fraudulent practice, YANG ordered honey from Chinese honey suppliers, including “Chinese Transshipper A,” knowing that the Chinese honey suppliers would send Chinese-origin honey to countries of intermediate destination, including Malaysia and India, where the honey was mislabeled as to country of origin before the honey passed through a United States customhouse as non-Chinese-origin honey. YANG and National Commodities also (a) caused the formation of at least three companies, including CCM Foods, Inc.; Kota Imports, Inc.; and Madu Jaya Inc.; and used at least one other company, Wintex Group, Inc. (collectively the “companies”), to import and enter honey supplied by Chinese Transshipper A knowing that all or some of the honey was Chinese in origin; (b) benefitted from the companies filing CBP entry forms 3461 and 7501 that falsely and fraudulently declared all the honey as originating from Malaysia and India; (c) purchased honey imported by the companies despite knowing that some or all the honey was Chinese in origin, but declared at the time of importation and entry as entirely originating from Malaysia and India; and (d) wire transferred funds to the companies as payment for the purchase of honey that fraudulently entered the United States.

Many of the bills of lading accompanying Sea Master Trading and Ocean Pioneer’s shipments of peeled and deveined shrimp to this market identified two Texas-based companies as consignees:  Priority Seafood Company and YZ Marine Inc.  Priority Seafood is registered at the same address as Madu Jaya Inc. (11152 Westheimer Rd. #199, Houston, TX 77042-3208), while YZ Marine is registered at the same address as Kota Imports (5905 Sovereign Dr., #M-053, Houston, TX 77036-2309).

While Mr. Yang was being sentenced in a Northern District of Illinois court, a company called American Fisheries Inc. filed an emergency motion with the court seeking to prevent Mr. Yang from paying the government nearly $2.9 million in restitution and fines.  American Fisheries claimed that between June 2011 and January 2012, it had “sold and delivered to National Honey, Inc. seventy-four (74) containers of frozen Malaysian shrimp . . . .”  American Fisheries included an exhibit detailing these sales and including container numbers that correspond to shipments of shrimp ostensibly from Ocean Pioneer to Priority Seafood or YZ Marine.  American Fisheries further alleged that while the total value of shrimp “sold and delivered to National Honey, Inc. was $12,115,075.08,” American Fisheries had only been paid only $6,109,116.70 for that shrimp.

In March, American Fisheries made another filing with the court that included excerpts from Mr. Yang’s sentencing hearing.  The excerpts indicated that the Assistant U.S. Attorney had concerns regarding the shrimp sold by American Fisheries to National Honey:

 

MR. BOUTROS: Your Honor, without getting into any details, whether American Fisheries itself is engaged in transshipping remains to be determined.  Certainly, you have read the sentencing memorandum filed by the defense that the defendant provided cooperation relating to seafood and fish, where that cooperation, as you know, your Honor, from the memorandum, names were not identified, people were not mentioned — that was not a coincidence.  Where that investigation goes is subject to be determined.

Also, your Honor, I should point out that there is no judgment in the American Fisheries case. There is no indication that, in fact, Mr. Yang does, in fact, owe American Fisheries any money. I should point out that it is part of his cooperation, which I was certainly going to go into, as part of the SK1.1 motion. Jun Yang identified a variety of people that he believed to be engaged in seafood, shrimp, crawfish, and other seafood transshipments. There was an excessive amount of shrimp, millions of pounds worth.

THE COURT: Are there antidumping provisions as regards fish as well as honey?

MR. BOUTROS: Certainly the shrimp, your Honor, I believe, is the lion’s share of what is at issue here.  Yes, there is. And, as part of that cooperation, there were millions of pounds of shrimp in warehouses across the country. Mr. Yang, in order for him to be able to sell that shrimp that we acquired, and he agreed that the shrimp was going to be tested for antibiotics, which are prohibited, particularly under CAP, for nitrofurons.  Many of the containers that were tested, tested or targeted for these prohibited antibiotics. As a result, it would have been a Federal felony for Mr. Yang or for counsel’s client to then turn around and take . . .[excerpt ended].

 

 

In fact, at least some of the shrimp held by Mr. Yang appears to have been contaminated with antibiotics and made it into the U.S. market without FDA detection.  In a filing made by attorneys for Mr. Yang with the court, the defendant discussed the results of the testing of shrimp held in inventory in warehouses across the country:

 

Further, Mr. Yang agreed to hold his inventory of over 618,000 pounds of shrimp in warehouses across the country pending the government’s investigation, and incurred tens of thousands of dollars in warehouse charges to do so. He then agreed to have his entire shrimp inventory tested for the presence of antibiotics, a process which cost him nearly $20,000. When a small percentage of the samples tested positive for antibiotics, Mr. Yang consented to the destruction of over $200,000 worth of shrimp. He even paid $3400 to destroy his own shrimp.

As implied in the courtroom drama, there will likely be more to come.  But in the meantime peeled and deveined shrimp shipped by the Texchem Group, either through Ocean Pioneer or through Sea Master Trading, continues to enter the U.S. market.  And, as evidenced by the FDA’s recent reporting of refusals, this shrimp continues to be contaminated with banned antibiotics.

The Texchem Group’s shipments are not unique.  A large portion of peeled and deveined shrimp imports from Malaysia enter the United States under interesting circumstances.  To their credit, many U.S. importers and distributors appear to have stopped sourcing Malaysian shrimp.  Indeed, Malaysian shrimp import volumes have been substantially declining since 2011.  But there are still large quantities of low-priced, peeled and deveined shrimp of dubious origins entering this market and ending up on consumers’ plates.  This shouldn’t be something that requires federal government action.  Seafood purchasers and distributors should know better.  They should know their suppliers.

 

Read American Fisheries Inc.’s Emergency Motion:

https://www.shrimpalliance.com/wp-content/uploads/2014/08/American-Fisheries-Inc.pdf

 

Read American Fisheries Inc.’s Response to Motion to Quash Subpoenas:

https://www.shrimpalliance.com/wp-content/uploads/2014/08/American-Fisheries-Response-to-Motion-to-Quash-Substantive.pdf

 

Read Defendant Jun Yang’s Position Paper as to Sentencing:

https://www.shrimpalliance.com/wp-content/uploads/2014/08/Jun-Yang-Position-Paper.pdf

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