The Wall Street Journal is reporting that the U.S. Commerce Department is investigating whether thousands of tons of aluminum at a factory in a Philadelphia suburb are part of an alleged scheme by a Chinese billionaire to evade tariffs.
The company, Aluminum Shapes of Delair, New Jersey is allegedly part of a tariff evasion scheme that works by disguising metal as shipping pallets that are then re-melted for other uses.
China Zhongwang Holdings Ltd. is one of the world’s largest producers of aluminum, and has recently contended with allegations that its owners were trying to evade U.S. tariffs by re-routing its steel through Mexico. Investigators believe that Aluminum Shapes might be another route for this evasion.
Aluminum Shapes apparently has purchased a significant number of aluminum pallets – millions of dollars’ worth, in fact. And as you could maybe guess, the market for aluminum pallets is extremely niche. Oh, and here’s the other thing: the pallets at Aluminum Shapes are also several times heavier than similar ones on the market— estimated by a former employee to weigh between 150 and 250 lbs, which would make them pretty impractical for shipping.
This same former employee also says that some of the pallets were melted down by Aluminum Shapes to be used as raw material for other products in its plant, which makes things like construction beams, helicopter-pad components and boat flooring. If this is, in fact, true then Aluminum Shapes is definitely on the wrong side of a law that’s designed to prevent countries, like China in this instance, from dumping excess material and driving the price of it way down, which impacts American producers big time.
Liu Zhongtian, chairman of China Zhongwang Holding Ltd. said that he has no business interest in Aluminum Shapes. And maybe that’s true, but he most definitely does have a personal one:
In late 2014, Peng Cheng and Global Aluminum, owner of Aluminum Shapes, were merged into a California company called Perfectus Aluminum. California corporate records list Mr. Liu’s son as president and secretary of Peng Cheng, Global and Perfectus.