U.S. Dept. of State - IIP: The United States and China

Text: U.S. Customs Service Release on Groundbreaking Prison Labor Case
(First such criminal conviction of a Chinese company)
The U.S. Customs Service announced in a February 28 press release that an investigation into the illegal importation of office binder clips assembled by prison labor in China had ended with the first criminal conviction of a Chinese company in a prison labor case.
According to the release, the parties involved will be subjected to more than US$550,000 in fines. Furthermore, the binder factory in Nanjing that subcontracted the assembly work to a nearby prison -- believed to have been the largest binder clip factory in the world ¡¦ has been shut down.
Products made from prison or forced labor are prohibited from importation and knowingly importing prison-made goods is a federal crime in the United States. The laws prohibiting such imports are designed to prevent support of human right abuses as well as to protect U.S. business and laborers from unfair foreign competition.
Following is the text of the press release:
(begin text)
February 28, 2001
U.S. Customs Shuts Down Chinese Company for Prison-Made Goods

New York, N.Y. -- A complex and painstaking investigation into the illegal importation of products assembled by prisoner labor in China culminated today in guilty pleas in U.S. District Court in Trenton. This is the first time that there has been a criminal conviction of a Chinese company in a prison labor case.
The products, common binder clips used in offices across America and around the world, were exported to the United States in violation of federal law by Allied International Manufacturing Stationery Co. Ltd. (AIMCO), located in Nanjing, China, to its sister company Officemate International Corporation (OIC) of Edison, N.J., and its customers. Both companies are owned and controlled by Peter Chen, his wife and brother-in-law. The Chens reside in West Windsor, N.J. The handles and bodies of the binder clips were manufactured separately at AIMCO's Nanjing factory and then assembled by hand by female inmates at nearby Nanjing Detention Center.
Prison labor products destroyed.
Binder clips produced by prison labor.
Products made from prison or forced labor are prohibited from importation and knowingly importing prison-made goods is a federal crime. The laws prohibiting such imports are designed to prevent support of human right abuses as well as to protect U.S. business and laborers from unfair foreign competition.
AIMCO pleaded guilty today to transporting the prohibited binder clips to the United States and was fined $50,000. Peter Chen, 56, pleaded guilty to tax evasion and is expected to be sentenced at a later date. He also faces payments of back taxes, interest, penalties and criminal and civil fines. Officemate paid the Customs Service $500,000 in settlement of any potential civil charges from its importation for the prison-assembled clips.
"The largest factory of its kind was put out of business in this case," said John C. Varrone, Assistant Commissioner of Investigations for the U.S. Customs Service. "We take these cases seriously. As difficult as they are to document, we are prepared to take them on."
The investigation documented that between August 1995 and June 1997, 134 million of the prison-assembled binder clips entered the U.S. in 140 truck-sized containers at various American ports. When the Customs Service was alerted to these activities in May 1997, it intercepted all further shipments.
The probe led to the forfeiture and destruction of approximately 24 million binder clips that arrived in nine 40-foot containers to the ports of Newark, Chicago, Savannah and Los Angeles. Customs was able to document that about 11 million of the total were assembled by prisoners. The clips in the balance of the shipments were assembled at AIMCO's factory. However, Customs was able to seize and destroy them, as well, because they had been commingled with the prison-assembled clips to facilitate their illegal importation. In all, the seized clips destroyed by the Customs Service had a retail value of about $2 million.
As a result of these seizures, the factory in Nanjing that subcontracted the assembly work to the nearby prison was closed. This factory is believed to have been the largest binder clip factory in the world. The investigation also thwarted a scheme by Peter Chen to avoid U.S. taxes and funnel over $480,000 in profits from AIMCO to Hong Kong.
"One can only imagine the conditions under which a prisoner would be forced to turn out thousands of binder clips," Robert J. Cleary, U.S. Attorney, District of New Jersey said. The arrangement was a boon to Chen and his companies, but it came at a high cost to the prisoners and to business competitors who operated legitimately.
The Customs Service opened its investigation after Peter Levy, president of Labelon/Noesting Co. of Mt. Vernon, N.Y., a competitor of Chen, went to China in May 1997 and videotaped a truck leaving the AIMCO factory with unassembled clips, then returning from the nearby prison with assembled clips. Immediately after his return, Levy presented his evidence at congressional hearings. Upon learning of the allegations, the Customs Service opened an investigation into the matter. The investigation enabled it to seize all further AIMCO shipments into the United States.
The case was prosecuted under the direction of Robert J. Cleary, U.S. Attorney for the District of New Jersey. The Customs investigation was directed by Special Agent in Charge Joseph R. Webber, N.Y. The Internal Revenue Service investigation was directed by Special Agent in Charge Anne Fahy, N.J.
(end text)
(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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