New Zealand is unlikely to suffer any reputation damage from a recent crackdown in China on the alleged smuggling of kiwi baby formula, an expert on the East Asian nation says.
Last month, Chinese authorities detained 15 people in coordinated raids across the county. This came amid accusations criminal gangs have smuggled US$152.4 million (NZ$203m) worth of baby milk formula into China over the past two years, according to the South China Morning Post.
The report said in one of the raids 170,000 cans of baby milk formula originating from New Zealand were found in a warehouse while an Auckland-based courier firm allegedly had links to the smuggling operation.
No food safety issue
China infant formula market expert Jane Li said there is no problem for New Zealand “as there is no suggestion of any issues with quality or food safety”.
Rather, “this is about freight forwarding companies who appear to be working with large scale daigou on the China side who are under-declaring the value of the formula in order to gain a competitive price edge over other importers”.
Daigou is cross-border exporting by an individual or a syndicate outside China for customers there.
According to Li, it looks like the logistics partner in China has been under-declaring the value of the goods to avoid paying tax.
“Foreign baby formula trade is very competitive as everyone is selling the same products to everyone. The only way to compete is on price, so any way to gain an edge will be exploited,” she said.
“They pushed the envelope too far, for too long by the looks of it.”
In New Zealand, authorities have referred questions to the Ministry for Primary Industries (MPI) as the required export permits are its responsibility.
China domestic issue
MPI director of compliance services Gary Orr said this is a domestic issue in China being dealt with by Chinese authorities.
“If there are any issues relating to New Zealand products, we work with the importing country's authorities to resolve these issues as required. MPI has stringent controls on the export of milk powder, and where appropriate, it will take enforcement action.”
New Zealand's export revenue from infant formula was about $1.6 billion in 2019.