Subject: Sugar: bogus trader duping buyer

From: [email-masked] (Andy Nachbaur)
Date: Mon, 13 Feb 1995 15:34:00 GMT

Hello Beekeepers!

   It is well known that China is short of all types of sweetness and
must import sugar at the same time they export HONEY below their cost
of production, or the local value, (at least some US beekeepers have
claimed in a trade dispute with Chinese Honey exporters). So here is
some information road killed on the internet highway that gives some
insight into how bad Chinese buyers want sugar and how a few have
taken advantage of them. I know most of you are not that interested
but read it anyway its kind of funny and maybe later I will tell you
about shipping river rocks to Holland disguised as honey to avoid
high import duties on the rocks.

DIALOG(R)File 799:Textline Curr.Glob.News
(c) 1995 Reuters Info.Svcs. All rts. reserv.

HONG KONG: BOGUS SUGAR TRADERS DUPING HUNGRY CHINESE BUYERS
- January 27, 1995
By: Lynne O'Donnell

HONG KONG, Jan 27 (Reuter) - China's insatiable appetite for sugar,
combined with tight world supply, is attracting bogus traders who are
cheating inexperienced Chinese buyers out of enormous sums of money,
traders and bankers said on Friday.

   Some middlemen, mostly in Europe and the United States, were offering
bogus deals on Brazilian sugar at unrealistic discounts, regional trade
sources said.

   "I get these inquiries every day, all the time," said a trader with an
international house in Hong Kong. "But they're wasting my time because I
know the sugar doesn't even exist."
   But some inexperienced Chinese traders were accepting the deals, the
traders said.

   A Western trader said it was impossible to know the exact quantities of
sugar or money involved. But his firm often received pleas from provincial
Chinese traders trying to source sugar from bona fide suppliers after the
bogus deals had fallen through.

   Another trader in Hong Kong said he had heard of letters of credit
having been opened with a variety of Chinese banks for between 200,000 and
300,000 tonnes of sugar.

   "There are two ways these middlemen can make money," the Western trader
said.

   "They negotiate fake documents, in which they post a performance bond of
two percent of the total contract and get paid 100 percent of the deal.
Then, when the sugar doesn't arrive, the buyer cashes the bond, and the
fake seller ends up with 98 percent of the contracted amount," he said.

   "The other way is when a Chinese buyer opens (a letter of credit) and
the middleman takes that, and borrows from his own bank against it, either
getting money he couldn't otherwise get, or getting it at favourable
interest rates," the trader explained.

   A Chinese trader in Hong Kong said: "I heard of one deal where the
'sugar' was delivered -- and it was all sand."

   Raw sugar for March delivery is currently trading in New York at 14.37
cents per pound, or about $320 a tonne.

   The fraudulent contracts cut this price by up to 40 percent, a financier
in Hong Kong said. An Australian marketer concurred, saying he heard of
discounts of $50-100 a tonne.

   The trading sources said China's decision last September to liberalise
sugar imports, which until then were conducted under the auspices of the
government's food trading company, Ceroils, was partly responsible for the
proliferation of cheats.

   "Now you have outsiders in the trade, people trying to take advantage of
the Chinese demand by quoting below-market prices to attract
intermediaries. And this leads to fraudulent transactions," the banker
said.

   "I think the prices we see on these quotations, sometimes 30 to 40
percent below the market, in no way can be delivered," he said.

   Queensland Sugar Corporation Chief Executive Officer David Rutledge said
his company had encountered the problem.

   "We do find from time to time when we are in the market that our
potential customers will make reference to prices they have been offered
from other origins that are clearly not bona fide," he said by telephone.

   Another Australian industry executive said: "In some cases they (Chinese
buyers) will put the money down, then find they have been negotiating false
documents and the stuff never arrives."

   Sugar shortages in China have seen prices soar, hitting $588 a tonne in
the south late last year. Hong Kong traders said raw sugar was now $470 a
tonne. They expect it to hit $530 by mid-year.
   China's 1994 sugar output was officially 5.82 million tonnes, a
significant drop on the 7.44 million of the year before, which itself was a
drop of 8.7 percent on 1992.

   Customs figures show imports for the first 11 months of last year were
1.28 million tonnes, up from 420,000 tonnes the year before.

   Exports, principally of sugar imported raw for refining, were 875,658
tonnes, down from the 1.735 million tonnes in 1993.

   Industry experts say demand is rising at six percent a year and they
expect China to import two million tonnes this year.

   A delegation from the China Sugar and Beverage Corporation was in Brazil
this month looking for buying opportunities. The head of the corporation,
Xu Zhijian, told the local press China could buy a million tonnes,
depending on the price.
   (c) Reuters Limited 1995

****
Well you read it, it was kind'a interesting and now for my story on
Pet Rocks smuggled to Holland. Can't say this is accurate as it has
been a few years, but I will say when I think of the beekeeper who
told it to me, (he has since passed to Heavens many pastures of
flowers), it does give me the warm fuzzes as he was a friend and
one who is missed.

   One evening at a national beekeepers convention, John and I ducked
out, (had ourselves telephone paged), to the beekeepers club room to
puff on our cigars and sip good whiskey. John and I were talking about
personalties in the Honey packing business and how he enjoyed doing
business with this one family that had been in the business for several
hundred years and the honey he sold them to be shipped to Holland. John
said that after he made a trip to visit them they asked him to do a
favor for him in the future. They wanted him to ship them a drum of
river rocks with the next container of fine clover honey. He was more
then glad to do it, you know anything to keep a good honey customer
happy. The rest of the story as related to me is that they don't grow
rocks in much of Holland which has been reclaimed from the sea, and they
don't really want rocks, maybe because kids throw them at birds and
windows, so rocks have value. So a few are smuggled into the country in
honey drums. Don't remember if he said he added honey to cover the rocks
or not.

   Well maybe its true and maybe its not. Only the Dutch beekeepers
would know, maybe they would like to add to this story.

                                ttul Andy-

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