Today, U.S. Senator Charles E. Schumer called on the U.S. Immigration and Customs Enforcement (ICE), U.S. Customs and Border Protection (CBP) and the U.S. Food and Drug Administration (FDA) to crack down on “honey launderers” that are undermining New York’s honey producers. Almost a decade ago, the United States started imposing duties on honey imported from China after it found that Chinese exporters were engaging in predatory trade practices. But in the subsequent years, Chinese companies began to get around the duties by shipping the honey through other countries –such as Malaysia and Indonesia – and thereby circumventing payment of U.S. duties and food safety standards. Chinese exporters also intentionally mislabel their honey shipments and set up shell corporations to avoid paying duties. The practice threatens to undermine New York’s multimillion dollar honey market and deprives the United States of $100-200 million a year in duties. Additionally, because bees pollinate all sorts of crops, any threat to the domestic honey industry is a threat to many major agricultural industries.
“This is just one more example of China playing by its own rules to the detriment of every else,” said Schumer. “Instead of simply selling their product in a fair and competitive way, the Chinese are using illegal, backdoor deliveries and mislabeling their product to accomplish their goal. Today I am calling on the federal government to issue a stinging rebuke to these practices, and once again level the playing field.”
New York’s honey industry is one of the nation’s largest, ranking 12th in total production in 2009 and serving as the Northeast’s largest beekeeping state. Just last year, New York’s honey producers manufactured over 3 million pounds of honey and racked up $5.3 million in sales, all while employing thousands. Despite the fact that New York has a robust honey industry, it is has been severely strained over recent years as cheap honey from China has flooded the U.S. market. For example, the United States Department of Agriculture (USDA) keeps track of total sales from the honey industry and in the last year that final sales figures are available (2003-2007) show a 36.4% decline, which coincides with China’s ‘honey laundering’ scheme to circumvent the duty.
Although USDA estimates indicate that New York’s honey industry has ticked slightly upward since 2007, the overall trend is still downward- over 15% from 2003. If the federal government does not step in and blunt China’s predatory trading practices then the industry will continue to decline hurting New York’s economy and endangering thousands of jobs. Also, since bees pollinate so many crops a further deterioration in the honey industry is likely to have a cascading effect on the entire New York agriculture industry. Beyond the domino effect that China’s continuing trade practice would have on agriculture across New York , the continued predatory trade practice would hurt small businesses that sell honey products. Throughout every region of New York, businesses that sell honey boost the local economy and create jobs but would see a crucial part of their business put at risk if the status quo continues.
Below is a regional breakdown of the number of small businesses throughout the state that offer New York honey or New York honey products:
· In the Capital Region, 33 businesses offer New York honey and honey products.
· In Western New York, 8 businesses offer New York honey and honey products.
· In Rochester-Finger Lakes, 10 businesses offer honey and honey products.
· In Central New York, 12 businesses offer honey and honey products.
· In the Southern Tier, 10 businesses offer honey and honey products.
· In the Hudson Valley, 5 businesses offer honey and honey products.
· In the North Country, 11 businesses offer honey and honey products.
In 2001, the United States began levying duties on Chinese honey to balance China’s unfair trade practices. Since then China has developed a complicated scheme to circumvent international trade laws and sell cheap honey in the U.S. at the expense of domestic producers. China does this in several ways:
1) China mislabels honey as malt sweetener or blended syrup to avoid paying the antidumping duty. Schumer said that such a method could be thwarted simply by the FDA instituting a “pure honey standard,” essentially a definition of what honey is - something he today urged the FDA to implement. Schumer said the FDA and USDA’s Food Safety and Inspection Services (FSIS) share responsibility for ensuring that food labels are truthful and not misleading. FSIS has the authority to regulate the labeling of meat and poultry products, and FDA has the authority to regulate the labeling of all other foods. Food standards are used to ensure that products sold under particular names have the characteristics expected by consumers.
While the FDA is not responsible for enforcing trade law, the agency is responsible for ensuring the safety of much of the U.S. food supply. Standards of identity are referenced throughout FDA regulations and the existence of a standard of identity can trigger application of laws not otherwise applicable to non-standardized foods. Establishing a honey standard would provide FDA and other federal agency enforcement officials with a tool to ensure the purity of imported honey and to detect the existence of potentially hazardous additives. In addition to safeguarding the food supply, this tool would make it easier for U.S. officials to prosecute those who seek to exploit loopholes in our food safety system.
2) China exports honey to the United States through other countries. The United States produces less than half the honey that it consumes, which means the U.S. relies on imports to make up the difference. The U.S. imports from major honey producers like Canada, Argentina and Brazil. However, customs data also reveals that the U.S. imports a significant percentage of honey – perhaps as much as a third of total imports – from countries with no significant commercial honey exporting business. Four of the top eight countries – India, Malaysia, Taiwan, and Indonesia – export far more honey than their domestic bees produce.
Official imports from China, which as recently as 2006 provided over ¼ of U.S. honey imports, are now virtually nonexistent – unofficial, illegal imports are another matter. Since the United States imposed stiff antidumping duties on imports of Chinese honey in 2001, attempts to avoid such duties – by sending Chinese honey into the U.S. from a second or even a third country -- have proliferated. This transshipping or “honey laundering” – i.e., the intentional mislabeling of the country of origin – is costing the U.S. millions of dollars in unpaid duties and putting consumers at risk from honey contaminated with antibiotics, a problem common with Chinese honey.
3) Shell companies are set up to import Chinese honey and then disappear when it comes time to pay the duty. Efforts to stem the flow of Chinese honey imports are being severely weakened by intentional circumvention of U.S. trade and food safety laws. These circumvention schemes often depend upon fly-by-night importing companies that are thinly-capitalized and specialize in importing questionable food products. When CBP tries to collect antidumping duties or ICE tries to take enforcement actions, these companies shut down operations and become insolvent; the owners simply disappear. The companies are then replaced with new, undercapitalized shell companies, often run by the same owners of the previously-shuttered entities. Legislation is needed to fix the loopholes and gaps in U.S. trade laws that allow these problems to persist.
Schumer said that the first problem that needed to be addressed was the establishment of “pure honey” standard of identify. It would give federal agents much greater authority to crack down on adulteration, misbranding, and fraudulent mislabeling. Schumer also said that he would be working with the honey industry in New York to prepare legislation that would give Customs greater authority to crack down on “honey laundering” through other countries. His legislation would make it harder to set up shell corporations and provide more resources to Customs and the FDA to crack down on these scammers.
The text of Schumer’s letter to FDA is below:
June 9, 2010
The Honorable Margaret A. Hamburg, M.D.
Commissioner of Food and Drugs
U.S. Food and Drug Administration
10903 New Hampshire Avenue
Silver Spring, Maryland 20993
Dear Commissioner Hamburg,
I am writing to express my concern that the Food and Drug Administration has yet to issue a national standard of identity for pure honey. Such a standard would be a critical tool in promoting truth in labeling, and provide a basis for enforcement actions by State and Federal agencies against those responsible for imports of mislabeled or adulterated honey.
The request for establishment of a federal pure honey standard – filed by a broad coalition of American beekeepers, honey producers, packers and dealers – has been pending before the FDA for over four years, since March 2006. And, in response to a QFR from the June 3, 2009, hearing on food safety legislation before the Subcommittee on Health, House Energy and Commerce Committee, you promised to respond to that request within the year. It is my understanding that the FDA has yet to do so. I urge you to take immediate action in response to the 2006 request.
Even though honey is produced in the United States, traded internationally, and consumed both as a packaged food and as a food ingredient, there currently is no federal standard of identity for honey in U.S. law. A number of states, however, have decided they can no longer wait for federal action on this important issue. Florida and Wisconsin both recently established their own honey identity standards, and other states are considering doing so. The FDA has previously expressed concerns that differing state standards for honey may cause unnecessary burden on interstate commerce if producers are required to make honey to different specifications. The increasing state activities regarding standards of identity for honey would seem to be yet another reason to move forward expeditiously with establishment of a federal standard.
I also have serious concerns about the quality and labeling of Chinese-origin honey brought into the United States. Official imports from China, which as recently as 2006 provided over ¼ of U.S. honey imports, are now virtually nonexistent – unofficial, illegal imports are another matter. Since the United States imposed stiff antidumping duties on imports of Chinese honey in 2001, attempts to avoid such duties – by sending Chinese honey into the U.S. from a second or even a third country – have proliferated. This transshipping or “honey laundering” – that is, the intentional mislabeling of the country of origin – is costing the U.S. millions of dollars in unpaid duties and putting consumers at risk from honey contaminated with antibiotics, a problem common with Chinese honey.
The FDA has established over 280 food standards of identity, including standards of identity for everything from parmesan cheese and grape jelly, to milk chocolate and maple syrup. Such standards establish a common language for trade while providing consumers more assurance about the quality of the food that they purchase. Given the importance of protecting the health of consumers and ensuring fair trade practices, establishment of a federal standard of identity for honey would seem to be a reasonable and appropriate response. Moreover, a standard of identity for pure honey would serve notice to unscrupulous importers that the United States will no longer be a haven for mislabeled or adulterated honey.
I respectfully urge you to act expeditiously on the 2006 petition for establishment of a national standard of identity for pure honey. I also ask that you please keep me apprised of developments on this issue. If you have any questions, please contact Stacy Ettinger, on my staff, at 202-224-7945.
Senator Charles E. Schumer