Company in N.S. fined $50K in American lobster mislabelling ruse

A Chinese-owned lobster company in Nova Scotia has been fined $50,000 for illegally shipping American lobsters primarily to China and claiming they came from Canada.

Atlantic ChiCan pleaded guilty Thursday in provincial court in Dartmouth, N.S.,totwo counts related to the mislabelling.

Between May and October 2019, the big holding facility on Cape Sable Island in southwest Nova Scotiaimported 63,000 pounds of live lobster from the United States and exported it as product of Canada, according to an agreed statement of facts presented in court.

The lobster was sent from the Halifax Stanfield International Airport. At the time, the Trump administration and China were embroiled in a trade war, andMaine lobster paid a 49 per cent tariff entering China.

Federal Crown prosecutor Max Kruger said tariff avoidance was an outcome, but there was no proof that it was behind the scheme.

"In this case, a result of that would have been that the Chinese would have not applied customs tariffs to that shipment. We didn't have any evidence that that was the motivation behind ChiCan's actions," he said.

"The evidence that we did have, including statements given by plant staff, was they were trying to satisfy insatiable market demand from their Asian customers, in particular China, and that is why they were sourcingAmerican lobster."

Integrity undermined

Whatever the motivation, Kruger said the deception undermined the integrity of Canadian customs and food traceability commitments.

"Our international trading partners rely on that reporting system. We share data with our partner agencies. They rely on that to determine what the country of origin is for the products being shipped," Kruger said.

Canadian food traceability and customs certificates are based on an "honour system" that allows the exporter to fill out country of origin in documents.

The Atlantic ChiCan ruse was detected by the Canadian Food Inspection Agency during a Sept. 24, 2019, inspection at Clark's Harbour, on Cape Sable Island.

The findings were passed on to the Canada Border Services Agency, which obtained a search warrant. A check of customs declarations showed Atlantic ChiCan exported lobster 286 times between June 1 and Sept. 30, 2019, always indicating Canada as the country of origin.

Atlantic ChiCan temporarily lost honour-system privileges, "resulting in significant costs accrued" to the company, according to the joint statement.

Owners were unaware, lawyer says

Atlantic ChiCan lawyer Victor Goldberg said the Chinese owners were unaware of what was going on.

Those in charge of the plant have left or were fired, consultants were brought in for spot audits and the company no longer imports U.S. lobster, he told the court.

"My client is acknowledging that the company was in breach of a regulation and is intent on ensuring that all regulations are adhered to in the future," Goldberg told CBC News after the case.

Charges against company president Shang Long He were withdrawn in court.

The company pleaded guilty to one charge under the Customs Act and one under the Safe Food For Canadians Act.

Atlantic ChiCan has not committed any violations since, according to the statementof facts.

Chinese presence in N.S. lobster industry

The company is part of the increased Chinese presence in the Nova Scotia lobster industry over the past decade. Exports from Nova Scotia to China have exploded in recent years.

In 2019, Nova Scotia shipped $440 million worth of live lobster to China. Atlantic ChiCan is part of that growth. A new holding facility has 13 tanks capable of floating more than a million pounds of crated lobster.

"As can be seen by the size of their facility, the amount of lobsters in question was minuscule with regard to their total production," Goldberg said.

The company is committed to Cape Sable Island,where it's already a major employer and is expanding its operations, he said.

"They really have taken the industry to a whole new height with regard to exporting lobsters to China and to vertical integration of the lobster production market," he said.

In the meantime, the company will have authorities looking over its shoulder.

"You can expect heightened scrutiny in the coming months and coming years, as they have been flagged," said Kruger.