The New York Times, in its inimitable style, is shocked (shocked, I tell you) and appalled (appalled, I tell you) about China’s recent detention of a German (and his “Chinese associate”) on charges that they undervalued imported art to avoid USD$1.6 million in customs duties.

I have a very different take on the whole thing.

First off, let me state right off the bat that I have no facts regarding the guilt or the innocence of these two individuals.  None.  Zero. Zilch. Nada.  So this post is not so much about them.  It is instead, about the countless companies that have come to my international law firm with plans to undervalue their imports with Chinese customs, based on the belief that “this is what everyone is doing.”

Before I talk about what we see on this front, let me give some of the background regarding this particular fine arts customs case, and what better way to do so than to let the New York Times set the stage:

Gallery openings are a bit more subdued, anxious art dealers have been keeping a low profile, and several wealthy collectors have been barred from leaving China while the investigation continues. Auction house giants like Sotheby’s and Christie’s have been asked to cooperate with the authorities in what has become a wide-ranging investigation.

“Lots of people here are not going into work, or they are only using junior staff at their offices and galleries,” said a Beijing gallery director who spoke on condition of anonymity because of the tension surrounding the issue. “They can’t arrest everybody, but everyone is still nervous.”

In the meantime Nils Jennrich and Lydia Chu, employees of the art-handling company Integrated Fine Art Solutions, languish in a Beijing jail on suspicion of smuggling, a crime normally associated with the illegal importation of drugs or arms. The charges carry a maximum of a life sentence.

Needless to say, this experience has not been pleasant for Mr. Jennrich, as the New York Times makes all too clear:

Mr. Jennrich, 31, the company’s general manager and a German citizen, was taken away on the evening of March 30 during a raid of the business’s Beijing offices; hours later Ms. Chu, 29, its operations manager, was summoned for questioning. Mr. Jennrich’s family and colleagues have expressed concern for his health, saying he has been forced to share a cell with 11 others. During the first days of his detention, they added, he was interrogated for 36 hours straight, a violation of Chinese law.

“It’s a living nightmare,” said Mr. Jennrich’s fiancée, Jenny Dam, who said the couple had planned to marry in May.

And the New York Times blames China because, apparently:

The detentions have put a spotlight on the mercurial Chinese legal system and raised questions among collectors and industry executives about the potential pitfalls of China’s fast-growing art and antiques market, which last year surpassed the United States to become the world’s largest, according to the European Fine Art Foundation. The crackdown, industry professionals have warned, could dissuade Chinese collectors from bringing home art purchased abroad.

*   *   *   *

“China is supposed to be a lot more integrated with the world economy,” said Jonathan Schwartz, chief executive of Atelier 4, an art logistics company based in New York. “The decision to throw someone in jail tells you that China is not really playing by similar rules as the other large nations that are dealing with culture and transit.”

The CEO of Jennrich’s company had this to say:

“We forward, store and install artwork, that is all,” said Mr. Hendricks, who was also questioned in Beijing by the authorities but was later allowed to leave the mainland. “Determination of value, the statement of this value, is not our responsibility.”

According to “legal experts,” “art handling firms simply work with the values provided by their clients, but that Chinese law is murky on whether individuals employed by shipping companies can be held liable for undervaluing a work.”

The New York Times then quotes from Jennrich’s lawyer and the Chinese associate’s fiancé:

Nancy M. Murphy, a lawyer at the Beijing firm Jincheng, Tongda & Neal, who is advising Mr. Jennrich’s family, said she hoped that the authorities would take into consideration whether the accused personally profited from undervaluing the work in question.

Ms. Chu’s fiancé, Benoit Granier, said he found the accusations hard to fathom, given Ms. Chu’s modest life, including sharing an apartment with five others. “She’s just trying to find a way in her life,” he said.

The New York Times then seems to justify whatever wrongdoing may have occurred:

Setting aside questions of Mr. Jennrich’s and Ms. Chu’s culpability, several industry experts say the practice of undervaluing art and antiques on Chinese customs forms is widespread. The International Convention of Exhibition and Fine Art Transporters, a trade organization, noted the problem last year in a newsletter and suggested that the practice was harmful to all involved. “There is no way around these regulations without breaking the law,” it wrote.

In China imported art is often levied with duties that can reach 35 percent of an object’s value. Many industry veterans complain of a customs process that is notoriously onerous.

International art experts acknowledge the difficulty of valuing contemporary art, noting that a wild jump in price at auction after a piece passes through customs does not necessarily suggest undervaluing at the border.

Ms. Murphy, the lawyer, said it took an experienced appraiser to know the difference between fraud and the vagaries of a white-hot art market.

As much as I feel for those arrested, I cannot help but have a different take on things.

Let me explain some of my beefs with the New York Times’ article and then I will discuss why this case could very well matter for YOU.

I doubt very much that many jails are particularly nice places to stay and we do not need the New York Times reminding us of that. I mean, how often does the New York Times mention jail conditions in its other stories, and in a way designed to evoke sympathy for the person detained?

And I just love how the Times mentions how these two defendants are “languishing” in prison on a smuggling charge, “a crime normally associated with the illegal importation of drugs or arms.”  Really?  I have always thought of “smuggling” as importing or exporting something contrary to customs laws and, hey, guess what, Meriam Webster agrees with me on that. It defines it as importing or exporting “secretly contrary to the law and especially without paying duties imposed by law.”

And the bit about this arrest putting “a spotlight on the mercurial Chinese legal system” and harming China’s lack of integration with the world economy is a bit over the top (O.T.T.).  I really get the sense from this (and from much of the rest of the article) that the New York Times is essentially saying, “hey, these people love art and so even if they did violate the law, we should let them go because that is how we here in the West would handle this sort of thing.”

But where the article really falls short is when discussing the core question.  If these two defendants did undervalue the art, did they do anything wrong?  They say legal experts find the law “murky” but then, Ms. Murphy, a lawyer involved in this case on the side of Mr. Jennrich (and a very fine lawyer, I might add) seems to say that his defense plan is not going to be that he did nothing wrong, but instead to seek mercy from the court because he didn’t make much money on the deal.  Mr. Chu’s fiancé hints at the same thing. It would have been good if the article had given us more insight into their possible defenses.

The article then talks about how difficult it is to stay within the law because the paperwork can be onerous and because so many cultured and sophisticated art buyers just really don’t like paying up to 35% duties on fine art.  Come on.

Now let’s talk about the more quotidian world in which my law firm deals. A few years ago, we were approached by someone wanting to import art who was essentially seeking our imprimatur for them to undervalue their incoming art shipments. We wanted nothing to do with this client, who kept trying to assure us “that this is what everyone in China does” and that “you have to do this if you are going to import art into China.”  I do not remember our exact response in this instance, but I am going to assume that it was the same as the one we always give to people in similar circumstances, which is something along the following:

Look, it’s illegal and our advice to you is that if this is really what is required to survive in this business, you should find another business.  And just because “everyone” else is doing it and not getting caught doesn’t mean you won’t get caught. In any event, we want no part of this because we know it to be illegal and it just isn’t worth it to us — for a whole host of reasons — to be associated with it.  And, if you are going to be doing something illegal, why do you even want an attorney anyway?  Our job is to help you do things legally.

We have received a number of similar requests outside the art world as well.

I apologize for the lawyer related digression here, but I cannot resist mentioning a great China Hearsay post from a few months ago on the lawyer’s role in when confronted with a client who intends to violate the law. The post is entitled, Should You Fire Your Corrupt Client, and the conclusion is that lawyers should, for their own benefit:

My students at this point often ask what happens if, after the lawyer carefully explains that the company may be in violation of the law, the client refuses to stop? Is that the time to go to the police? No, you still don’t report on your own client. Your response, however, will depend on your role as outside counsel (i.e., what you were hired to do).

For example, if I was hired to review a commercial contract, I do my job, briefly mention the FCPA issue to my client, and then get out. I’ve given proper legal advice to my client, even venturing briefly into a topic unrelated to the matter I was hired to handle. After that, it’s the client’s responsibility to clean up its act.

As a side note, exactly who you send this advice to is often a difficult question, one that trips up my students on occasion. If you don’t understand how large companies operate and who the different constituencies may be at a multinational, your life as outside counsel can be rough. Just to use one hypothetical, what if you were hired by a local manager, and then you discover bribery? Do you report this to the regional HQ? Corporate HQ? Or do you keep that local manager who hired you happy and just talk to him? (Most lawyers I know would do the latter, but in some cases, it isn’t possible and you have to go over that person’s head.)

Let’s change the facts slightly. What if this is a long-term client for which you are acting as general outside counsel for corporate matters? Now it’s a little more complicated. If, after counseling the client on the bribery issue, they decide to continue violating the law, I would probably try to drop that client as soon as possible.

Are lawyers ethically obligated to “fire” their clients who engage in such activities? In many jurisdictions, the answer is no. I always figured, however, that it isn’t worth the risk to associate oneself with a client like that. While I sympathize with clients who tell me that all of their competitors engage in bribery, and if they do not do so as well, they will not be able to survive, at the end of the day, that’s not my concern. I’m going to discharge my obligation to my client, but once that’s done, I’m going to look out for my own liability and professional reputation.

Back to our regular programming and to how all of this relates to you, the company doing business in or with China.  Here are the basics you need to know:

  1. China has laws.
  2. China enforces those laws.
  3. We can argue all we want about whether those laws are enforced equally as between foreigners and Chinese citizens, but the bottom line is that they are sometimes/oftentimes/always enforced against foreigners.
  4. If you violate the law in China you could very well face criminal action.
  5. If you are facing criminal action in China, your embassy/consulate are of very little help. They can help you find the right lawyer and bring you food and magazines in your own language, every few weeks, but not much more than that.

In The Sentencing Of Matthew Ng. A Very Long “No Comment,” we spoke of the risks of criminal activity and the almost blithe attitude too many foreigners have about it:

We have many times written of the risks foreigners face of being found on the wrong side of China’s criminal laws. I cannot emphasize enough the need for foreigners to take China’s criminal laws seriously. My firm has helped oversee a number of criminal cases in China involving foreigners in China and I cannot tell you how tired I am of hearing our clients confidently (at least initially) seek to assure us that they will be fine because what they were doing helped bring jobs and money to China.

We are always emphasizing that China will, with little or no compunction, jail foreigners who violate China’s criminal laws, even if the offending action is not a crime back in the home country.  And forget about getting much help from your embassy beyond maybe some help in finding your lawyers and seeking to monitor your case for procedural fairness.

Similarly, in Avoiding Chinese Jails. I’m Talkin’ To You, we had this to say about the need to follow the laws in China:

Aimee Barnes highlights how important it is for foreigners to follow the law in China. All of the laws. All of the time. No matter how much you may disagree with them, no matter how silly you may find them, and no matter how different they may be from those to which you are accustomed. Most importantly, you must strive to follow the law no matter how much you may see those around you disobeying them, particularly if those you see are not foreigners.

And when it comes to customs in China, we are seeing a huge increase in customs people trying to turn even honest mistakes into criminal matters. We have successfully handled a number of these cases and we have done so by responding to the problem immediately, by taking the problem very seriously, and by getting as much information to Chinese customs as quickly as possible and in as helpful and proper a form as possible. By proper, I mean that customs wants everything apostilled and consularized, so that is how we do it. We have found that customs initial assumption is that there has been criminal activity, but that if you work with them, they absolutely can be convinced that it was really just an honest mistake (presuming that you have real proof that it was just an honest mistake). When it comes to customs, we have found that the key is to deal with any problems early and head-on.  I have absolutely no idea whether that would have even been possible in the art case discussed above (I doubt that it would have been), but it usually is.

Overall, in the last six months we have seen an absolutely unprecedented increase in China’s tightening down on its laws as they apply to foreigners. (It is possible that China is cracking down on its laws with respect to everyone, but because my law firm just represents foreigners in China or doing business with China, as opposed to Chinese citizens in China, we do not know if that too is the case.) China is shutting down improperly formed WFOEs like never before. Beijing is left and right shutting down WFOEs that do not have the proper facilities or are operating outside their scope of business. And we hardly need to tell you about the recent crackdown on foreigners in China without proper visas. There is an easy explanation for all of this and we have seen it before (though never to such an extent). It’s the economy, stupid.

Bottom Line:  Again, I have absolutely no independent information regarding this case and this post is not meant to opine on the guilt (or the innocence) of anyone involved.  It is meant only to highlight how easy it can be to find yourself on the wrong side of the law and to emphasize the need to know the laws of the country in which you are doing business and to not violate those laws. I hate to sound so trite, but the key for you if you are doing business in China is simple: follow the law no matter what.

What do you think? What are you seeing?

 

  • Laowai4life

    I would like to commend you for hammering the New York Times. They have been on the forefront of misinformation as it concerns China for nearly a decade. Sadly, the Times’ coverage is getting worse. Notice how the article is written by a New York Times staff writer and an intern, neither of which have any actual experience in China. Neither of which speak or write or even read Mandarin. One at least has a degree in oriental studies, but doesn’t even have her Chinese Linkedin translated. Cough… 

    The New York Times has put together the least credible, most fanciful, poorly experienced staff of any major journalistic outfit in China. 

    http://cn.linkedin.com/pub/clare-pennington/39/703/49

    Clare Pennington – a researcher for the New York Times. No China experience. No journalistic education. No translation certification. A Brit in Beijing with a bachelor’s in Oriental Studies. 

    http://silverdocs.com/bios/jacobs-andrew/

    And we cannot forget the now infamous Andrew Jacobs. I have actually emailed the New York Times about this guy – he is either a deliberate liar, or just extremely incompetent. His only experience in China is doing an overseas program for a year during the pro-democracy movement. 

    Here is a link to one of the stories Andrew Jacobs published, and an interview with the person he wrote his story about. 

    http://blog.hiddenharmonies.org/2011/09/nyt-says-journalist-is-detained-in-china-for-article-on-sex-slaves-but-journalist-says-not/#more-13116

    Turns out, Andrew Jacobs never even talked to the guy!

    I am of the ardent belief that the New York Times is paying low wages to interns and other Chinese locals to get great headlines that have questionable sources. I am also of the opinion that they are outright purchasing stories in some cases without doing the legwork. I am further of the opinion that they have the aim to paint China in an unfairly negative light do to the yellow journalism culture of the New York Times. 

    http://www.npr.org/2012/07/06/156311078/fake-bylines-reveal-true-costs-of-local-news

    A lot of papers are cost cutting by outsourcing their research. It is now a common industry practice. As anyone familiar with China would know, in China you can never outsource your research. 

    Now onto your point. I could not agree more. ALWAYS OBEY CHINA’S LAWS! 

    It still surprises me that in a nation that puts people to death for drug dealing, imprisons for life for a multitude of offenses, that foreigners still flout the Chinese legal system. Oh, the things I have seen. 

    We, as a foreign collective in China, have acted pretty terribly into the modern century. With nearly 80% of recent China graduates not using their degrees, and with China having the largest market of mobile phones in the world, it was only a matter of time until economic crisis and precocious weiboer met in a conflagration of the perfect anti-foreign storm. 

    Although, I have seen little change on the ground, I am well insulated. My family is half Chinese. I speak the language. And my friends are mostly Chinese. 

    But for some of my foreign friends, not so much. I have seen a few friends get hit with massive fees for staying past their visas. Some clubs got hit where I was staying, and nearly 200 foreigners were detained. I don’t go to clubs – so no problem there. But, I have a few friends that do, and the party hard , wild-west, lawless attitude that has drawn so many foreigners to China is quickly coming to an end. It is interesting to see how surprised and offended people are that China is finally enforcing its laws. And it is sad to see how many people have only relied on the white guanxi to get ahead. 

    There are some really great foreigners in China too. The most depressing aspect is that some of the good guys are getting caught up in the anger directed at a massive surge of foreigners, many of whom have no interest in China, that have been solely drawn for less than savory reasons. 

    Never forget that this was the nation that brought about the cultural revolution. That THAT China, however subdued, however much changed, is still beneath our foreign feet. So walk carefully friends. 

  • Laowai4life

    I would like to commend you for hammering the New York Times. They have been on the forefront of misinformation as it concerns China for nearly a decade. Sadly, the Times’ coverage is getting worse. Notice how the article is written by a New York Times staff writer and an intern, neither of which have any actual experience in China. Neither of which speak or write or even read Mandarin. One at least has a degree in oriental studies, but doesn’t even have her Chinese Linkedin translated. Cough… 

    The New York Times has put together the least credible, most fanciful, poorly experienced staff of any major journalistic outfit in China. 

    http://cn.linkedin.com/pub/clare-pennington/39/703/49

    Clare Pennington – a researcher for the New York Times. No China experience. No journalistic education. No translation certification. A Brit in Beijing with a bachelor’s in Oriental Studies. 

    http://silverdocs.com/bios/jacobs-andrew/

    And we cannot forget the now infamous Andrew Jacobs. I have actually emailed the New York Times about this guy – he is either a deliberate liar, or just extremely incompetent. His only experience in China is doing an overseas program for a year during the pro-democracy movement. 

    Here is a link to one of the stories Andrew Jacobs published, and an interview with the person he wrote his story about. 

    http://blog.hiddenharmonies.org/2011/09/nyt-says-journalist-is-detained-in-china-for-article-on-sex-slaves-but-journalist-says-not/#more-13116

    Turns out, Andrew Jacobs never even talked to the guy!

    I am of the ardent belief that the New York Times is paying low wages to interns and other Chinese locals to get great headlines that have questionable sources. I am also of the opinion that they are outright purchasing stories in some cases without doing the legwork. I am further of the opinion that they have the aim to paint China in an unfairly negative light do to the yellow journalism culture of the New York Times. 

    http://www.npr.org/2012/07/06/156311078/fake-bylines-reveal-true-costs-of-local-news

    A lot of papers are cost cutting by outsourcing their research. It is now a common industry practice. As anyone familiar with China would know, in China you can never outsource your research. 

    Now onto your point. I could not agree more. ALWAYS OBEY CHINA’S LAWS! 

    It still surprises me that in a nation that puts people to death for drug dealing, imprisons for life for a multitude of offenses, that foreigners still flout the Chinese legal system. Oh, the things I have seen. 

    We, as a foreign collective in China, have acted pretty terribly into the modern century. With nearly 80% of recent China graduates not using their degrees, and with China having the largest market of mobile phones in the world, it was only a matter of time until economic crisis and precocious weiboer met in a conflagration of the perfect anti-foreign storm. 

    Although, I have seen little change on the ground, I am well insulated. My family is half Chinese. I speak the language. And my friends are mostly Chinese. 

    But for some of my foreign friends, not so much. I have seen a few friends get hit with massive fees for staying past their visas. Some clubs got hit where I was staying, and nearly 200 foreigners were detained. I don’t go to clubs – so no problem there. But, I have a few friends that do, and the party hard , wild-west, lawless attitude that has drawn so many foreigners to China is quickly coming to an end. It is interesting to see how surprised and offended people are that China is finally enforcing its laws. And it is sad to see how many people have only relied on the white guanxi to get ahead. 

    There are some really great foreigners in China too. The most depressing aspect is that some of the good guys are getting caught up in the anger directed at a massive surge of foreigners, many of whom have no interest in China, that have been solely drawn for less than savory reasons. 

    Never forget that this was the nation that brought about the cultural revolution. That THAT China, however subdued, however much changed, is still beneath our foreign feet. So walk carefully friends. 

  • Anon

    I agree with you.  The New York Times is whining because someone in the art world is being accused in China for doing what people in the art world always do which is lie on the import forms about the value of their art.  We do that hear in New York every day even though we know it is illegal but we just figure we won’t get caught and if we do we won’t go to jail.  Seems this poor schmuck just got the equation wrong in China where they just seem more willing to follow and enforce their own laws.  I do feel bad for the guy but I don’t think it’s an international incident. 

  • Roberto

    Hmmm, lengthy post, Dan. The Times obviously pressed a few of your buttons. 🙂

    I’m not a lawyer, and I am obviously not a China lawyer, but … “murkiness”: legal murk is and has been of great concern for foreigners and Chinese since it again became possible to engage in commerce in the P.R.C. in the post-Mao era. What people want is transparency.

    Next … “smuggling”. Yes, it’s possible to smuggle anything (and in my time in China I have seen that Chinese will smuggle ANYTHING – fake soy sauce at $1 a liter! mainland government-subsidized diesel through a pipe into Hong Kong!), but smuggling is indeed “a crime normally associated with the illegal importation of drugs or arms” because the profits on those products are outstanding, not least because there is usually no possibility of legal importation. For the same reason, governments and the media make more noise about seizures of illegal drugs and arms.

    Last point: the Times (and you’re hearing it from a native New Yorker) has always been about “us” and “them”. The “us” is “people like our readers, and ourselves”. The “them” is … everyone else: into that category fall “foreigners who don’t live in London and Paris, or have second (or 12th) homes in those cities” and “Americans who live in between the coasts, with the exception of very rich people who live in Texas because they have oil fortunes, or others who have somehow made fortunes in the ‘flyover states'”. An old friend and I joke about the occasional Times articles about “the last Jew”. [Lots of Jewish readers on the Times’s subscription rolls.] If you read the Times regularly, you will see articles several times a year about “the last Jewish person/family in [Bozeman, Montana] [Tashkent, Uzbekistan] [Lagos, Nigeria]. I chuckle.

    My point is that the Times is for the most part written from that perspective. Human interest stories are sourced via reporters’ friends. Slate magazine created a regular feature (that has yielded over 40 articles) calling out the Times for its reporting of “fake trends” – “trends” that see a reporter observe some morsel of human behavior through the narrow lens of his/her friends and family in Brooklyn, then extrapolate that out to the country or world. Hence the word “languish”. People “like us” languish in prison. Where Martinis are NOT served at the correct temperature.

    Yes, we should all observe the laws of the lands in which we reside/work/do business. Or face the consequences. But when push comes to shove, taxes are for suckers. And my Swiss and Cayman Islands bank accounts are my business, not yours. Or Uncle Sam’s.

    That’s the way “we” see it, anyway.

  • Celawyn

    Dan,

    Thank you once again for such a detailed and insightful post.

    If you can excuse me for channeling Captain Renault with you, I, too, am shocked — shocked! — to find such a thing going on here.  However, I am honestly surprised at the amount of duties that was dodged.  $1.6mil in duties equates to about $5mil (at least) in invoice value.  I wonder how much volume, how many invoices, and over how long a period of time the shipments must have been spread out.

    “We have received a number of similar requests outside the art world as well.”

    Our company has had a number of clients ask us how to minimize their duty payments, usually requesting a different HTS classification for their product.  While there’s a big difference between arguing for one HTS classification over another and straight-up fabricating your commercial invoice, it does not surprise me one bit that some would take that next logical, nefarious step.

    “this is what everyone is doing.”

    And I SWEAR I want to strangle a puppy every time I hear those words, regardless of the context.

    “When it comes to customs, we have found that the key is to deal with any problems early and head-on.”

    100% agreed, regardless of which country’s customs you’re dealing with.  You can’t dig yourself out of a hole by digging down; that only makes them throw more dirt on you when they finally do bury you.

    “Bottom Line:  I hate to sound so trite, but the key here really is simple: follow the law no matter what.”

    “The charges carry a maximum of a life sentence.”

    Ouch.  The maximum for the crime seems a little draconian to me, but I suppose that it is all the more reason to follow the law — sure, your neighbor / competitor may not get caught, but if you ARE caught, China may make an example out of you.  And you do NOT want China to make an example out of you.

  • Ethan

    Great post.  Let me sum it up for you as a Chinese person would: Don’t act like a imperialist when you are in China.  

    Following the lead of the article, I will not discuss this specific case, and for the same reason.  But I will generalize from my own experiences.  When one goes to a foreign country, the expectation was, and still is, that you would follow the laws and you tried to be a good representative of your country; because for most people, you are the only (insert nationality here) they would ever meet.  I know there are plenty of people of all nationalities that ignore that rule, and one can still choose to hold themselves to that standard, but don’t expect a warm response from the locals.  There is a strong undercurrent of exceptionalism among foreigners in China.  Those days are over.  Don’t complain because you are no longer treated like royalty simply because of your country of origin.  You have to earn it, like all foreigners all around the world.  Is that so unfair?  

    • Your post is discredited by the reference to the boogyman of imperialism.    Irresponsible business practices in China are practiced by Foreigners and Chinese alike.  Are the Chinese business scammers acting like imperialists?  Or are they simply victimized locals in your view?

      • Not really. He’s pointing to the ancient legal practice of ‘home cooking’ and warning that, in a still not reunited China, Imperialism is still a live issue. Yet another reason to keep one’s nose clean. Incidentally, that observation applies equally to Thailand, where I live.

        •  Frankly that’s a bunch of hot-air used to cover up and excuse a nationalist superiority complex in China. “Home Cooking” is all well and good, but even if the Chinese sincerely operate their foreign policy with the overriding goal of an elusive “reunification” (leaving aside that this is childish thinking and a recipe for war), It has nothing to do with this case, these individuals, or the practice of dishonest customs declarations in general.  The fact is that when the above poster throws in “imperialist” it is a pseudo-racist term meant to justify the harsh legal treatment of foreigners in China, base on China’s inability to reconcile with its past. 

          I’m all for fair application of the law and the Chinese have every right to prosecute those who break the law, but leave “imperialism” out of it. 

          • Ethan

            The attitude that as a foreigner, you can go to China (or any other country) and operate according to your own definition of morality, law, and enforcement standards is supremely arrogant.  That mindset is what I am calling imperialist.  

  • i’m not surprised at all that the NYT took this excuse to fill their China-bashing quota. in my opinion, the most ridiculous piece of this article is the reporter snorting that smuggling is “a crime normally associated with the illegal importation of drugs or arms.” what he doesn’t acknowledge is that art and antiquities are often used as collateral for drug and arms deals internationally. obviously this customs issue — the inherent nature of an art object as a flexible monetary index — is at the heart of it. viewed this way i think it’s laudable, at least in theory, that China makes some kind of legal recognition of this type of fraud… though i don’t know the exact truth of this particular scenario, i’m not a lawyer, and i realize there are undoubtedly much higher and more complex interests involved.

  • art has no intrinsic value .. if you are locked in a room with no food, but a lot of art, you will starve. additionally, despite the art world hype, which is its bread and butter, very little art even has a realistic market value, apart from an in-the-moment price paid … in terms of cost of materials, which is most always rather low.

    and, what of the mention in that article that the chinese government is starting an art-handling business, and perhaps wants to discourage competition?

  • Well, we never import art because our view is that an undervalued Yuan presents the possibility of of losing half the value, if and when the Yuan is allowed to float.  However, even the old shirts and shorts that my niece sent me required an import fee of 20% of Y3,000, which was more than I paid for them when i bought them 10 years ago.  Indeed, I have very few things sent to me from abroad because of the stiff import fees, which could put me off on a whole other diatribe, but I’ll restrain myself.
    We do get, on occasion, someone coming to us to ask us to help them get antiquities out of the country, and I practically kick their asses out the door.  Even when we send art out of the country, we put the value of sale on those works because we insure them for value, and we don’t even want any trouble, not that there could, technically, be any, but who knows, for improperly valuing.
    Even in the U.S., some people have things [actually empty boxes] sent to them at addresses out of state to avoid sales tax, but I never did that when I was there dealing in art, back in the 1980’s and 1990’s, but I did lose a bundle of money when the head of a company, whose stock I held, did that with his personal art works and ended up in jail.
    Of course, even when I was a merger arbitrageur, I never traded on inside information, like some did, back in the 1980’s.  And all of this is part of my greater philosophy that: if you can’t win the game by playing fair, you should not be playing the game.  So, even though, China is often: heads, I win; tails, you lose, I play by the rules, and I dress anyone down, as only an Italian prince can, when they ask me to try to break them or get around them, in China or anywhere else.

  • Alex Cheng

    I think commenting on other lawyers cases and foreign individuals in China in such a manner is outrageous as well as potentially prejudicial against the foreign client who is trying to clear his name.  

  • Chuckie Cheese

    Reward for tips
        RESIDENTS who report foreigners who illegally enter, live or workin Shenzhen can receive financial rewards from authorities, accordingto a policy that has been in place since 2004 and is back under thespotlight during Beijing’s crackdown on foreigners living or workingillegally in the capital.
        In Shenzhen, foreigners working illegally can be fined 1,000 yuan(US$158), while employers of illegal workers can be fined 5,000-50,000yuan, according to law.
        Residents can call 12333 to report such violations, and canreceive 100 yuan if a violation is verified.
    http://szdaily.sznews.com/html/2012-05/29/content_2061430.htm

  • Anders

    I will say that everyone here (including the FT) has missed the real issue.

    The problem
    is that everything in China is or can be deemed illegal.

    I would argue that an American lawyer giving
    advice on Chinese law from outside of China could be
    deemed illegal in China. If there is any profit in it of course. I would even argue that if a foreign lawyer (during his visits in China) at any point gives
    oral advice this would
    be illegal. In short any advice given must be checked with the relevant
    authorities first or only given by Chinese lawyers. Please remember if a foreign or Chinese lawyer at anytime gives advice that is deemed as against
    the interest of the Chinese State this would also be illegal, so make sure you know all laws and interest of the Chinese state if you give advice. 

    It is also illegal to operate a blog (that
    goes for the Chinahearsay blog as well or any other blog which provides
    information about China) without the approval of the relevant authorities in China.
    In short we, including this blog, are all breaking the law in China by being
    there and doing something there. We have just not been caught yet.
    The problem
    is never if the person caught was an offender but the degree of his offence.

    I really
    like this

    第六条 外国律师事务所在华设立代表机构、派驻代表,应当经国务院司法行政部门许可。

      外国律师事务所、外国其他组织或者个人不得以咨询公司或者其他名义在中国境内从事法律服务活动。

    I would argue that a blog accessible in China
    would constitute legal advice thus being illegal. I don´t want this blog or
    Chinahearsay to close down, but I will point out if I think we are getting
    close to hypocrisy. 

  • bystander

    There is (or might be) one mitigating factor that Dan doesn’t mention: it really is very difficult to assign a price tag to artwork.  Suppose you are given, under commission, 10 new paintings by a successful modern painter.  If you sell them you will pocket say 20%.  I’m just making up that number, I have no idea what commissions are in the art world.  If you’re in Soho, you hang them on the wall and put a price tag on them.  I once saw (I’m not making this up) an ice pick stuck in the wall of a gallery in River North in Chicago with a $10,000 price tag on it.  When I saw it I thought it was a joke, or that someone had taken the art away and left the ice pick there as a placeholder.  Point is, you don’t know what it is worth until you sell it.  Perhaps these pieces of art have a well-established price, for example, the last price they traded for.  But it seems conceivable to me that the actual dollar value of the pieces is relatively unknown.  How many people can accurately predict what some wacky new painting or sculpture will fetch in an art auction?  Putting it differently, what if the Chinese gov’t slaps a $1,900,000 duty on those pieces of art and they end up being sold for $200,000 because, well, buyers don’t like them as much as they should?  We aren’t talking iPads here.

  • HKRen

    Despite your saying “the bottom line” and stressing you have no independent information, your article is nonetheless potentially prejudicial against the foreign party concerned. As you are a US and not China lawyer, I suggest you refrain from making comments about cases involvinmg foreigners that have not even been charged.

  • Jiangchuowangshuo

    Well done Mr. Dan tellings the cheating German and foreigners to pay taxes. And send the Germans lawyer to the jails as well for assisting cheats the Chinese peoples. This nasty foreign imperialists all coming steal China’s money, their own economys all rubbish, stealing Chinese people money like always. Now China is strong and has laws place these German art dealer smuggler in jails, throw away the key. Good China Law Blog help China and help foreigners keep our laws or otherwise go to the jails here.   

    • John Wayne

      Jiangchuwangshuo,

      To quote John Wayne in the movie “The Green Berets”:  “I like the way you talk.”

  • Business man

    Dan thanks very much on running this case on your blog and your thoughts on it. After reading it and the comments I have a question and comment which I feel are essential and still left open. 
    Question: Basic knowledge of chinese business law is quintessential in every day China business and customs law in particular since it applies to almost all of us that are running businesses in China ( I do that now for 5 years). According to chinese law who then is in charge of valuing the imported product? I think it is a pretty ridiculous law if it asks the customs agent to be responsible of valuing the good (as mentioned in earlier comments about the valuation of art). I am importing customized machines on a regular basis to China and I cannot think that the customs agent is in any way capable of verifying the real value of my product since only a couple of experts in our industry are able to do that. However in the case of Jennrich this seems to be the charge! Does the law then releases the seller or importer from any responsibility? Well in this case it seems it does because none of the importers have been charged with anything. You quote lawyers that say the law is murky here. Well I really think it is important to clarify this because I would like to follow the law but if it is murky?
    Comment: Well I support your notion that whoever comes to China and breaks the law should stop whining because whoever takes that risk and gets caught – bad luck. Thats it, I agree! But in Jennrichs case he and his colleague are sitting since 4 month in prison and he is not even charged with anything. He was denied the possibility of a bail. And that is to my knowledge even against chinese laws. So when we discuss about chinese law I think we are way passed the question whether one should stick to the law because he or she should do that in any other country for that matter. But after my 5 years in China it is very hard to accept the fact that for some applies the law and for some it seems not and that includes the the jurisdiction in China. So the strategy of the lawyers of Jennrich (at least what is mentioned in NYT article) seems than again very typical for a China case: Even if you are innocent (and I have no way of telling whether they are) you plead for mercy and try to play it down. Because in a chinese court to openly discuss the wrongdoing of the authorities is just suicide and will get you nowhere – because than again somebody important lost face and that is a no-go here!

    Sorry for my bad English! 

  • China has laws, sure. China enforces those laws, sometimes. Odds are that the reason they were arrested is because they are foreigners, that goes without saying. As for laws in China, China has building codes. Chinese officials and government contractors don’t follow those laws so thousands of children died in the 2008 quake. Talking about it or listing the names of the kids murdered by is forbidden. That’s how laws work in China. Handle undervalued art as a foreigner = languish in prison. Kill thousands of kids through failure to follow building standards = get off Scott free.

  • Jimmy Swaggart

    What’s it like in Chinese prisons for foreigners?

  • Laobaixing

    NY Times coverage from China is pretty schizophrenic – they have some reporters that do amazing work, and others who’s coverage is less than stellar.  Pay attention to bylines – Ed Wong, Jonathan Ansfield and a few others do real reporting.  I wasn’t surprised their names didn’t appear on this article.

  • Twofish

    > I agree! But in Jennrichs case he and his colleague are sitting since 4
    month in prison and he
    > is not even charged with anything. He was denied
    the possibility of a bail. And that is to my
    > knowledge even against
    chinese laws.

    Your knowledge of PRC law is incorrect:

    1) Under the Criminal Procedure Law, the police with the permission of the procurorate can detain for several months pending a criminal investigation,  The exact time limit depends on various things, but for serious crimes, it’s roughly six months. 

    After a set period which can be anywhere from days to a month, they do have to formally arrest you and tell you what they suspect you of doing.  Also the police are allowed one interrogation which must be started within 24 hours after the detaining, before you are allowed to see a lawyer.

    You are only formally charged at the conclusion of the investigation.  Once you are formally charged with something, then you are almost certainly going to be convicted of what they charge you with.  In the PRC criminal procedure the important part has to do during the investigation in which your lawyer tries to convince the authorities to charge you with a lesser crime.

    The initial interrogation was legally questionable because it lasted for
    36 hours, but no one has suggested that the current detention is
    illegal, because it likely isn’t.

    2) The Criminal Procedure Law allows for bail, but it’s discretionary and you have no legal right to it.

  • Tardelbach

    Interesting read. It’s surprising to see Jennrich and Chu being jailed for undervaluation–that is
    very harsh by American standards, hence I understand the NY Times’ consternation.

    I don’t agree that
    intentional undervaluing is equivalent to smuggling. While it’s true
    that both illegal activities MAY be motivated by the desire to evade
    payment of duties, if the art had actually been smuggled in, then there would
    have been no entry declaration or other paperwork attesting to it’s
    arrival in China. If the art had been smuggled, it would instead have been brought into the country
    surreptitiously and therefore no value would have been given to Customs.

    Contrary to the author’s opinion, the Times is correct
    in writing that “smuggling is a crime normally associated with the
    illegal importation of drugs or arms.” That being said, it’s not the class of merchandise that determines whether something is
    smuggled. You could smuggle in T-shirts, cars, cigars, crack cocaine,
    whatever. The point is that when merchandise is declared to Customs and a
    value is given, it is not being secretly brought in and so it’s not
    being “smuggled” into the country. So, if the violation is falsifying the
    value of imported merchandise on a Customs form, then that would not be
    “smuggling”. Now if they lied on Customs forms and declared the
    merchandise as “canvas boards” which have a low monetary value, but actually had the art work hidden behind the blank
    canvases, then they would have been smuggling the art work. At the same time, in a certain sense they could also be said to have “undervalued” the merchandise they imported, but in such a scenario “undervaluing” does not best describe the crime.

    I definitely agree with the author’s lament about the Times article lacking significant facts about the case. The Times article is definitely incomplete, but on it’s face, I’m assuming that there is an issue with the translation of charge against
    the Jennrich and Chu. In America, undervaluing merchandise on Customs forms is
    different from smuggling, which entails a failure to declare merchandise to Customs and
    bringing it in anyway. The latter is a much more serious offense. Perhaps the Chinese term that was translated as “smuggling” has a wider meaning than the English word “smuggling” does.

    Also, if Jennrich only acted as a freight forwarder and wasn’t responsible for generating the invoices that state the art’s value, then I really feel for him. The importer, and in some more limited cases the Customs broker, would be held responsible. Once again though, the article’s deficit of details about the case make it impossible to determine in what capacity the detained individuals “imported” the merchandise.

  • Guest

    For a posting that is correcting “mistakes” in other people’s writing, I cannot help but not be able to read further when I read your mistake in the “basics you need to know”, i.e. the embassy is NOT allowed to deliver food in jail. Probably a detail, but for me putting everything else you wrote also in question.

    As you ask, what we are seeing-
    my viewpoint: in China EVERYONE can get in jail. Customs threat people with detention if they don’t pay them more bribes… So the key for me to anyone out there is: IF YOU WANT TO FOLLOW THE LAW, STAY OUT OF CHINA because the government forces you to break the law so they can put everyone in jail when they feel like it… laws are murky, everyone is operating in shades of grey and the only thing you can do is hope it will be your neighbour they take down…

    And indeed, you are completely right: IT’S THE ECONOMY, STUPID

  • Jeremy

    Dan, thanks for the post. I wonder what the elements of “smuggling” are under Chinese law. These people don’t seem to have done anything secretly, which is what I generally consider smuggling to involve. Perhaps that is not the most appropriate charge? Interested in your thoughts.

  • Lucas Blaustein

    I want to just say that I love everyone on here who has mentioned how completely poor the New York Times coverage of China can be. I now know I am not alone. 

  •  It is proper to do this. Since such things happen also in foreign countries to Chinese. Why don’t we do the same?

  • Sammy David

    But if it is true that the art holding company has no say in the matter of the listed price, your entire rant is meaningless fecal matter on your mouth isn’t it. I find it difficult to listen to a lawyer speak about the importance in following the law while that lawyer is practicing in a country where the law is whatever the PRC happens to say at any given time.