Concern grows for health of shippers detained by Chinese customs
Two employees of an art shipping company are being held by police outside Beijing as part of a probe into the alleged undervaluation of works imported to the mainland
By Georgina Adam, Charlotte Burns and Alexandra Seno. Web only
Published online: 23 May 2012
The director of a China-based art shipping company that had two employees detained by Chinese customs officials at the end of March says he is concerned for their health and has not heard from them since police took them into custody. The pair are being held as part of a probe into alleged undervaluation of works of art imported into the mainland.
Nils Jennrich, the general manager of Integrated Fine Art Solutions, Asia Pacific (IFAS) and Lydia Chu, the firm’s operations manager, have been held in a jail outside Beijing since a raid on the freight company in March. They were arrested for allegedly falsifying the value of imported art so that buyers could avoid $1.6m duties, according to a report on Bloomberg. Works of art imported into the mainland are subject to tariffs of up to 35%.
“We are very worried about our people since there has not been much information about them. Nils is not in good health and no one has seen Lydia since they took her,” says Torsten Hendricks, the Hong Kong-based director of IFAS. He confirmed that Chinese authorities raided the company’s Beijing offices on 29 March and seized its files. Jennrich and Chu were questioned for around 36 hours individually before being taken into custody without the option to post bail. Hendricks was questioned by authorities for around 20 hours, but was released, at which point he immediately returned to Hong Kong.
According to Chinese law, Jennrich and Chu face prison sentences of between ten years and life if found guilty. And in some cases, the death penalty can be imposed for those convicted of tax evasion.
“I understand that Nils is being held in a cell with 14 other men. I’m told that he has lost a lot of weight. The drinking water is not clean, so he has some health problems. He has been throwing up a lot,” Hendricks says.
“I do not know what they are looking for,” Hendricks says. He believes that the probe is related to purchases of antiques at auction, which account for less than 2% of IFAS’s business. The bulk of the company’s revenue comes from handling and storing works of art in its 800 sq. m facility in Shanghai, and transporting them in and out of China. Last year, the firm handled mostly contemporary works.
“People have been worried about the impact on the market,” Hendricks says. “Everyone is concerned about how to proceed in China, which is already one of the most expensive places to ship art. We have to go through a lot of hurdles [such as obtaining] licenses, and freight costs from China to Europe (or the US) are triple that as from Europe/US to China.” Freight costs are higher because there is a greater demand for transporting goods out of China.
The Hong Kong branches of Sotheby’s and Christie’s auction houses tell The Art Newspaper that they have been contacted by Chinese authorities and are co-operating with the investigation. “We’re assisting [them] in conjunction with our internal and external lawyers and compliance people,” says Kevin Ching, the chief executive officer of Sotheby’s Asia. “The authorities would like to find out more about what’s been happening in the last few years—they seem to know a lot already.” A spokesman for Christie’s confirmed that the auction house had handed over price-lists and catalogues to the authorities.
At the contemporary art fair, Art HK (16-20 May), where 200 IFAS staff served at least 60 galleries, there were rumours that high-profile Chinese collectors were also being investigated, as well as the curator of a major Chinese bank. “We won’t know the actual number [of people being investigated], but I think it’s around 20 or 30,” Ching says. One of the rumours, which Hendricks denies, is that IFAS helped import furniture for the disgraced Chinese leader Bo Xilai. “I am sure we never worked with Bo Xilai,” Hendricks says. There was also talk that Beijing-based galleries that had worked with the shipping firm were being investigated. All of the galleries we spoke to declined to comment.
“Though it was common practice to understate values, those values are usually designated by the person or company importing the work, not the shipping agency. I am not even sure if it falls into their responsibility to establish if the values are correct,” says Brian Wallace of the Beijing-based Red Gate Gallery. “I think the case is more political, and IFAS and Noah [another freight company under investigation] are caught in the crossfire of corruption and customs,” he says.
According to a number of Chinese galleries, undervaluing imported works of art has been a widespread practice for a number of years. The timing of this crackdown may be linked, according to one source, to the publicity surrounding the news that China is now the world’s biggest art market. A report published in March during The European Fine Art Fair (Tefaf) at Maastricht which claimed that China has overtaken the US with 30% of total market share, compared to 29% in America, received extensive press coverage in both China and abroad.
Opinions vary as to the long-term implications of the investigation. Inevitably, some The Art Newspaper have spoken to minimise its importance. Nonetheless, “it could be serious”, Ching says. The investigation may be related to the political power struggle in China as the country prepares for a leadership change later this year.
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