Businessman Yan Yongxiang was trying to get around stiff U.S. levies on imports of cheap Chinese honey. So he sent 15 shipping containers of cut-rate honey to the Philippines, where it was relabeled and sent on to the United States.
It's called honey-laundering, and the subterfuge let Yan skirt $656,515 in taxes before he was caught in a bust and pleaded guilty. Yan's factory in central China's Henan province even filtered the metals and pollen from the honey so that U.S. tests would not show it came from China, according to the 60-year-old's plea agreement. Now he awaits sentencing in a U.S. jail.
Honey-laundering is just one of many unsavory practices that have besmirched China's vast honey industry and raised complaints from competing American beekeepers. China produces more honey than anywhere else in the world, about 660 million pounds a year or about 25 percent of the global total. But stocks are tainted with a potentially dangerous antibiotic and cheaper honeys are increasingly getting passed off as more expensive varieties.
Earlier this month, the U.S. Food and Drug Administration seized 64 drums of Chinese honey tainted with chloramphenicol, an antibiotic, at a warehouse in Philadelphia. Last year, the agency said two Chinese honey shipments were found to contain the drug, which is approved for medical use but banned in food products because in rare cases it can cause aplastic anemia, a potentially fatal illness.
Experts say quality problems are hard to avoid in a business dominated by small manufacturers, many of whom are poor and uneducated.
Chinese honey collectors like Min Junguo, 47, spend every spring and summer chasing the flowers, lugging their bees from the chasteberry trees of south China to the yellow acacia blossoms around Beijing. While on the road, Min lives with his wife in a collapsible woodframe hut with a tarp draped over it and sleeps on a board propped up on boxes. He has a fifth-grade education and makes about $4,500 in a good year, though much of that gets spent on sugar to feed his bees in the winter and transportation fees.
Compared to the average rural income, which was just 5,153 yuan (about $760), in 2009, he is doing pretty well.
"I am not getting rich doing this, but it buys my freedom so I can be my own boss," said Min, as he stood in a shady patch of trees and flowers near the Great Wall, surrounded by more than 100 of his bee boxes.
Min denies using antibiotics. But China's supply chain for honey is long and little policed, so that it's hard to tell what corners are cut where. Min sells 5 tons of honey a year to roving middlemen, who batch it with other honey and resell it to factories and exporters.
One of Min's buyers, Wei Nianhai, said Chinese authorities have cracked down on illegal antibiotics like chloramphenicol in recent years, but it's still a hard habit to break for many bee keepers.
"If their bees got sick, the first thing in their mind is saving their bees instead of caring about the quality of honey," said Wei, a honey dealer from Chengde in central China's Henan province. "They can't afford the loss of bees."
He also admitted that he doesn't test the honey he buys for the antibiotic because he doesn't have the time or the equipment — an indication of the lax enforcement behind China's food safety regulations.
Peter Leedham, managing director of the Suzhou office of the food testing company Eurofins Technology Service, says many Chinese bee keepers are untrained and unknowingly give their bees the medicine.
"A lot of the honey farmers or honey collectors here are small businesses or even families and they do it basically to supplement income," he said. "They often will be told to add this wonderful mixture to whatever they are doing because it will help improve their yields. And they are not told what's in it by the sellers or what it does."
Leedham said his clients, who rely on Eurofins to test samples of Chinese honey to ensure it meets export standards, are increasingly concerned about authenticity or cheaper Chinese honey being passed off as more expensive varieties.
U.S. Sen. Charles Schumer of New York has called for a federal standard for pure honey similar to guidelines already established for olive oil to help combat fakes or blends. He has also lobbied for tougher measures against customs cheats like Yan and says that between $100-200 million in duties are being lost because of Chinese honey being laundered through India, Malaysia, Taiwan, Indonesia and other countries.
Honey fraud and honey-laundering are part of a controversial debate over whether or not the U.S. needs heavy subsidies to protect its homegrown honey industry.
Eric Mussen, an apiculturist or bee expert at the University of California, Davis, said it costs U.S. beekeepers about $1.40 to make a pound of honey, including colony maintenance, transportation to honey production areas, harvesting and packing. Before tariffs, he said, Chinese honey was coming into the U.S. at about 35 cents per pound.
"Obviously, this is not a 'level playing field,'" Mussen wrote in an e-mail response to questions.
Mussen said if the antidumping tariffs were lifted, sales of U.S. honey "would probably drop way off, but not necessarily to zero. Many U.S. beekeepers would go out of business."
Fewer bees also could affect crops like California almonds, which rely on commercial crop pollination services that are carried out by bees, he said.
But Chinese honey makers and the Chinese government say the U.S. duties, which can be nearly double the sale value of the honey, are unfair and discriminatory.
China argues that because the U.S. subsidizes honey farmers, it doesn't need to protect them so vigorously from import competition. Chinese bee keepers this year welcomed a new measure that waived their highway toll fees, and they sometimes get local government support, but are not covered by a federal subsidy program.
Asked by a reporter to comment on honey laundering at a press briefing this month, Chinese Commerce Ministry spokesman Yao Jian sidestepped the question and expounded on China's frustration with U.S. import duties instead.
"Currently, the U.S. levies $2.63 in antidumping duties for every kilogram of Chinese honey," Yao said. "We hope to resolve this issue as soon as possible, and do away with this discriminatory measure. However, so far the U.S. side has not been very energetic in this regard."
The case of Yan, the seller busted for transshipping honey through the Philippines, so angered American beekeepers that a group of them wrote to Illinois District Court Judge Wayne Andersen in January, arguing he should get "the stiffest sentence that you are able to order."
E-mails seized by customs agents from Yan's buyer, a German company with offices in Chicago, showed staff there referred to him as "famous Mr. Non stop smoker." The buyer, Alfred L. Wolff, Inc., is being investigated for fraud.
Yet to his son, Yan is "a self-made entrepreneur who worked hard all his life," and became an unlucky pawn in an international trade dispute.
"I feel that this case is mainly about a controversy between the two countries and we're caught in the middle," said Yan Chaofeng by telephone from Changge, Henan province where his father's factory is located. "We've hired a lawyer but I'm afraid it won't make any difference, since the (U.S.) government is behind this."
(Associated Press researcher Xi Yue contributed to this report.)