Exclusive: Three employees at Marubeni's grain unit in China detained

Thu Apr 24, 2014 6:46am EDT
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By James Topham and Niu Shuping

TOKYO/BEIJING (Reuters) - Three employees at one of Marubeni Corp's (8002.T: Quote) grain trading unit in China have been detained, Chinese customs said on Thursday, a move prompted by allegations of tax evasion on soybean imports.

The three local staff worked at a Chinese unit of Marubeni's Columbia Grain, Inc, the Japanese trading house and Chinese customs in the port city of Qingdao said.

The detentions could add to recent pressure on soybean prices after a wave of soybean cargo defaults in China, where a combination of poor crushing margins and difficulty getting credit has led to a spike in rejected cargoes.

U.S. soybean futures hit their lowest since April 14 on Thursday, on concerns about defaults by top buyer China, which buys more than 60 percent of global imports. The market has lost 3.5 percent in five straight losing sessions.

The customs authority in Qingdao said the three employees were being detained on suspicion of smuggling. Chinese customs sometimes use smuggling as a broader term for tax evasion.

Industry sources said the allegations could be related to discrepancies on the reported valuation of imported soybean cargoes, which would affect customs duty and value-added tax, since both are levied based on the cargo values.

"People are wondering if the Chinese authorities are now clamping down on the use of soybeans as a form of shadow currency," one German trader said, referring to the practice of using commodities as collateral for loans. "This use of soybeans may have inflated Chinese soybean imports recently despite slack Chinese domestic demand."

Traders said the investigation appeared to be limited to Marubeni and a local importer for now, prompting speculation that it could have been instigated by a tip off from a business rival in part to help cash-strapped buyers delay shipments.   Continued...

A receptionist works in front of the logo of Japanese trading house Marubeni Corp at the company's headquarters in Tokyo May 29, 2012. REUTERS/Yuriko Nakao