LA warehouse, logistics operators charged in massive Chinese smuggling scheme

LOS ANGELES (CN) — The U.S. Justice Department said on Monday that it has indicted nine people in a massive scheme to smuggle counterfeit merchandise from China through the Southern California ports, including by surreptitiously removing goods from containers that were marked for customs inspection.

Federal investigators have seized $130 million in contraband as part of the investigating, according to an announcement from the U.S. attorney’s office in Los Angeles. The smuggling ring may have brought in as much as $200 million in fake shoes, handbags, apparel, perfume and watches, according to the goverment.

Of the nine people charged, eight were arrested in recent days while one remains a fugitive. The defendants include owners logistic companies that handle freight imports through the ports, owners of warehouses in the LA region and the owner of a trucking company.

As part of the scheme, prosecutors say the defendants took containers that were selected for inspection by the U.S. Customs and Border Protection agency from the ports to one their warehouses near downtown LA, breaking the customs seals on the containers and removing the contraband.

They would then replace the broken seals with counterfeit ones and have the truck drivers who were also involved in the conspiracy take the containers to the government’s inspection facility near the ports, according to prosecutors.

“Secure seaports and borders are critical to our national security,” Acting U.S. Attorney Joseph McNally said in a statement. “The smuggling of huge amounts of contraband from China through our nation’s largest port hurts American businesses and consumers.”

To date, law enforcement has seized more than $1.3 billion worth of counterfeit goods associated with this and similar seal-swapping schemes, the government said.

Customs and Border Inspection agricultural specialists assigned to the Ports of LA and Long Beach first discovered the smuggling operation during a routine inspection in 2023.

In June of last year, law enforcement searched of one the organization’s warehouses in the City of Industry, east of downtown LA, and seized $20 million worth of counterfeit items including shoes, perfume, luxury handbags, apparel and watches, the government said.

The nine face charges of conspiracy, breaking customs seals and smuggling. They could face as long as 20 years in prison if convicted on the smuggling counts.

China continues to be the number one source of counterfeit products in the world, the Office of the U.S. Trade Representative said in its annual “Review of Notorious Markets for Counterfeiting and Piracy” issued this month.

Counterfeit and pirated goods from China, together with transshipped goods from China to Hong Kong accounted for 84% of the value and 90% of the total quantity of such goods seized by U.S. Customs and Border Protection in 2023, according to the report.

Apparel and accessories make up the largest category of counterfeit merchandise seized by customs with 26% of the total, followed by handbags and wallets at 24%.

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