Hello and welcome to another edition of  Frontline, the weekly feature story brought to you by China Radio International, I am the host Wu Jia.

In recent years, companies dealing in car imports made a fortune as people became wealthier and demands for imported luxury cars grew.

Jiehe is one such company. Located in Tianjin, a port city in northen China, Jiehe has been in the business well for several years.

But lately it was stopped by Tianjin Customs. What happened? Let's follow our reporter Yang Lei.

Reporter:

"We received a report saying Tianjin Jiehe has been illegally importing cars from Guangdong in south China. The cars are then transported to Tianjin and sold here."

"They are Toyota's Land Cruiser, Audi's Q7, Volkswagen's Turan and Mercedes Benz jeeps. We have spotted and monitored a dozen cars."

These are the voices of two officers from Tianjin Customs. They have been investigating the company for weeks. Generally speaking, there should be no problem for the car company to import cars from Guangdong and sell them thousands of kilometres away in Tianjin.

But in this case, the most direct way of finding out if the company is doing anything wrong, is to see if there's any problem with the cars. Getting car frame and engine numbers is no easy task.

Here is director Qin Huangjun from Tianjin Customs.

"Every car has a frame number, which is like a citizen's ID. There should be no identical one throughout the whole world. "

Usually the frame number is very easy to find. It is printed on the left of the control panel under the front window. But it is very small and you have to get very close to the left mirror to see clearly. And getting close to the car without being noticed is a problem.

Liang Junior is the sales manager of the Tianjin Jiehe company. The Customs officers decided to follow him, waiting for a chance to get close to the cars he handled.

One day, Liang Junior drove away a new luxury car after delivery. Without being noticed, the officers followed him to a residential compound.

The chance came.

"He left the parking area. One of us chatted with the warden to distract his attention whilst the other went up to the car, read the frame number, and recorded it."

Afterwards, the officers checked the frame number. To their surprise, the car had been imported through Tianjin Customs half a year ago.

So how could it be transported back to Tianjin from Guangdong after six months?

"The time difference made it suspicious. Usually, imported cars sell quickly. But the situation here was that the new car came through customs six months ago, and was then transported to Guangdong. Six months later the car came back to Tianjin. It was against the common sense."

Anchor: Booking sales are common practice in the imported car business. Customers usually book the car they want first from the dealers, and then the dealers import the specific model from overseas. It can take a long time from booking to actually getting the car. And normally, those booked cars will be bought privately right after they come through customs.

However, this new car, without being booked, was sent back to Tianjin half a year later. The customs officers believed there must be some problem with Jiehe. They intensified their monitoring over the following weeks, and found out that Liang Junior received new cars from Guangdong almost every week.

Reporter: 

"We continued the monitoring for months, and found that the time difference between the cars being imported and sent back to Tianjin was always the same, about six months. This was no coincidence. There must be something important happening. "

The customs officers enlarged their surveillance on Jiehe and found that Liang Junior was only No. 2 in the company. The whole company was actually under the control of Liang Senior. Here is Du Bin, an officer of Tianjin Customs.

"We found the suspect in a video recording. He is the top person named in the case. Liang Zhijian, better know as Liang Senior."

Liang Senior became a major suspect in the case.

From Foshan, Guangdong province, Liang Senior came to Tianjin in the early 1990's. He has been in the car business for years. Although most of the cars he sold were imported luxury cars, he personally drove a rather small and plain car.

But the problem was that Jiehe's business seemed perfectly normal, and all import procedures were above-board.

"Everything appeared normal, just like other car dealers. Jiehe's business was running legally and smoothly."

But the customs officers still felt something was wrong. They continued to follow the top suspects of Jiehe to learn more.

Another week passed and Liang Junior received another Mercedes Benz jeep. The officers checked the frame number and once again, found it was imported half a year ago through Tianjin Customs. But this time, there was something different. The record showed the jeep had been wrecked.

Here is Du Bin, one of the Tianjin Customs officers.

"The record showed the jeep was carried to Chongqing municipality, in southwest China. During the process, the carrier car self ignited and burned the jeep."

A destroyed car was brand new again. The Jeep Liang Junior received could not be the one imported six months ago through Tianjin Customs. The investigators quickly came to the assumption that the frame and engine numbers had been altered.

"Under the front window is the frame number. It is very easy for experienced technicians to change the serial number. And referring to the engine number, professional technicians can also alter it. Although the engine numbers are ironed in the outfit of the engine, and hard to erase, skilled technicians can erase them with small grinding wheels. After fine polishing of the erased part, a new engine number could be ironed on again. The naked eye would have a hard time telling if the numbers were genuine or not. Even for customs officers like us, it is very hard."

Anchor: The customs officers managed to get the sales record of Jiehe, trying to find out if there¡¯s anything wrong. But the record showed the cars had been sold with a complete set of documents.

Thought it over, the officers predicted Jiehe must have had the necessary import certificate, and then ordered a new car according to the certificate. After getting the new car, they altered the frame and engine numbers and changed them into the ones specified in the earlier document.

In this way, an illegal car could be turned into a legal one.

In order to prove their idea, the officers took the investigation even further.

They found out that Liang Senior did have bought some import certificates. The prediction was right. The officers then checked all the suspected cars dealt by the company, but once again found something hard to explain.

Reporter: Every imported car must have one set of documents with fixed frame and engine numbers. And only one car could be registered according to the document. If Liang senior were cloning imported cars, logically speaking there should be two identical cars. But records showed there was only one car with the suspected frame and engine numbers, and they were sold by Jiehe.

Anchor: Where were the cars imported through Tianjin Customs? Had they all been destroyed like the Mercedes Benz jeep mentioned earlier? Customs officers thought it was not wise to detain Liang senior at this stage. Further investigations were still needed to gather more evidence.

The secret monitoring continued.

Reporter: More clues were collected that proved all the cars delivered from Guangdong province to Jiehe were actually bought from neighbouring Hong Kong. The officers focused their attention in Guangdong. Maybe the cars were illegally imported into Guangdong.

But Du Bin, a Tianjin officer, said it couldn't be possible.

"Cracking down on illegal car trafficking has been very severe in the Pearl River Delta region, including the Guangdong province. It was hard to figure out how they managed to get the cars in illegally."

In the last three months, Liang Junior received new cars every weekend in a car park in Tianjin. Customs officers intensified their investigation but still got no breakthroughs. Suddenly, Liang Junior stopped, and no new cars were delivered. The officers were stuck, as no more clues to carry out their investigation could be found.

"We had no more clues then. We had thought about cracking the illegal chain in May. But now it had vanished, and we hadn't even got hold of any copied cars either. It was impossible to carry on the investigation."

After that, Liang Junior stopped receiving cars completely. It seemed like nothing had happened. But the officers didn't give up monitoring the Liangs. They found Liang Senior often carried two bags which he paid special attention to.

"During that period, from morning till night, he always had them with him. They were two handbags, black ones. He would always carry them by himself."

"We followed him to restaurants, and found he paid too much attention to the bags. He would even take them to the toilet."

Anchor: Could there be evidence in the bags? The investigators were trying to figure out. The situation was that the suspects had ceased any illegal car dealing. The cars, which had been monitored, were sold, and the buyers didn't know they were illegal. No concrete evidence were left. Although customs officers believed the Jiehe was illegally trafficking in cars, they couldn't prove it. They knew they had to find ways to collect more evidence, and started all over again.

Reporter: Continued monitoring found that the Tianjin Jiehe company didn't stop their business at all. Although they didn't receive new cars from Guangdong, they still imported a lot from other channels. And the cars they imported were very different.

"All the imported cars they dealt with were middle-eastern or US versions. In other words, the cars were not for the Chinese mainland market."

Anchor: US and middle-eastern cars are specially manufactured for consumers in those regions, and are tailored to their driving habits and body features. But there are also Chinese versions. Most of the cars imported into China were the Chinese versions.

There are also a small number of versions imported for diplomats and foreigners working in multinational companies in China.

Generally speaking, a company mainly serving domestic consumers like Jiehe, should import Chinese version cars. Why did Jiehe import these other types?

Reporter:

"We believed that the price they submitted to the customs must be lower. They were cheating to avoid tariffs by offering false prices."

According to trade rules, car dealers must submit the import price of the car to customs. The customs then levies tariffs according to the prices, before allowing it to enter the Chinese market. Higher prices mean higher tariffs. Cunning car dealers are always trying to disguise the real price, thus evading tariffs. The customs officers said that changing import prices is the most commonly attempted form of illegal car trafficking.

"Cheating on import price is often seen in Tianjin Customs. More than 95 percent of illegal car traffickers do it."

In order to prevent it, customs officers usually ask for a list of car prices from the car manufacturers. A price margin would then be made. When a curtain model's offered price is lower than the price margin, customs officials notice and start their investigations into the car dealers.

Anchor: So why did Tianjin customs suspect Jiehe was cheating? The officers explained it's because the company only imported US and middle-eastern versions. Common practice dictates that car manufacturers in overseas countries usually inform Chinese customs about the prices of their Chinese version cars. But citing reasons of protecting business secrecy, foreign manufacturers usually refuse to inform the Chinese customs about the prices of other versions.

Since the Jiehe company imported only these versions, they would very likely try to take advantage of the system and offer lower prices to avoid higher tariffs.

Tianjin customs officers believed the import prices would be a breakthrough in the case.

But the officers faced more difficulties as getting import prices of US and middle-eastern cars was hard. They could only be ascertained by the sales contracts from the Jiehe company, but were they genuine?

Reporter: The investigators summoned all related sales contracts of Tianjin Jiehe for examination. They found nothing extraordinary.

But later, officers managed to discover some important statistics about the manufacturer's prices.

"The manufacturer's prices were actually higher than the offered prices, which was not right. Say the manufacturer's price is 60 thousand dollars. Since the car is not made in China, the transportation cost should be added into the real price. But the problem is that the car dealer offered only 50 thousand dollars, which is abnormal."

Tianjin customs believed there must be a problem in the sales contract between Jiehe and foreign car dealers, since they were sure of the real prices obtained from the manufacturers.

"Either Jiehe was faking its documents, or some foreign car dealers in China were helping."

The investigation got a breakthrough. Two foreign car dealers in China emerged. They were found working with Liang Senior to make fake car sales contracts. They also stated lower prices to customs for more than 200 imported jeeps.

Anchor: Tianjin customs could close the case by arresting the Liangs, and dissolving the Jiehe company. And the real origin of the cars transported from Guangdong was known. But the investigators found details that the two foreign car dealers had also done business with other car dealers in China. A bigger illegal car trafficking network was waiting to be uncovered.

Reporter: The customs officers strengthened their monitoring efforts on foreign car dealers, finding more domestic car dealers involved. Here is the Director Qin Huangjun from the Tianjin Customs.

"The car dealers were using the same cheating techniques: faking documents and receipts."

After uncovering the whole trafficking network, Tianjin Customs searched and arrested suspects from 2 foreign car dealers and 7 domestic ones. More than 600 imported cars worth 400 million yuan, or 58 million US dollars, were confiscated.

Liang Senior was found at home with the two handbags.

"A laptop was in one of the bags. All the digital records of imported cars were saved on the laptop, including the prices. It was one of the most important pieces of evidence. In the second bag, a lot of contracts and receipts provided by the foreign car dealers were found, showing the real prices of the imported cars. "

After the interrogation, investigators finally got a complete picture of just how those luxury cars had been sold in China.

First of all, Liang Senior bought unwanted import certificates from all over.

"Some departments do not need import certificates to buy cars from overseas. It created possibilities for people like Liang Senior."

Afterwards, Liang Senior bought the same car in Hong Kong as specified in the import certificate, and then illegally trafficked them into the mainland.

"They first transported the car into Vietnam, then to the neighbouring Guangxi Zhuang autonomous region in South China. Finally, they re-transported the car from Guangxi to Guangdong. "

And it was in Guangdong that the frame and engine numbers were altered.

Finally, the cars were sent back to Tianjin in the north of China and delivered to the buyers.

Anchor: The Tianjin Customs officers called the cars dealt by Liang Senior 'clone cars.'

To avoid this problem, departments should be strict with the issuance of import certificates. If neglected, those certificates might be used by the car traffickers like the Liangs.

And in order to avoid the problem of faking prices of alternative versions of cars, the Chinese customs initiated an import car identification code called "3c". Without the "3c" authentication, no foreign cars can be sold in China.

And with that, we end this week's  Frontline. If you have any comments and suggestions, don't hesitate to write to us, either by email or post. The email address is frontline@cri.com.cn.

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You can also listen to the whole program online by visiting our website at crienglish.com.

With our program producer Yunfeng, I am Wu Jia. Thank you for listening. Until next time, bye for now.