China detains gangs accused of smuggling 440,000 tonnes of oil

BEIJING (REUTERS) - Chinese customs have detained members of two gangs involved in smuggling in 440,000 tonnes of fuel using retooled fishing boats or vessels done up to look like boats that carry out cleaning work on oil tankers, authorities said on Monday.

Fuel smuggling has picked up since late last year after China raised consumption taxes sharply on a variety of oil products from diesel to fuel oil, widening the margins between domestic oil prices and supplies that evade the levies, traders have said.

The arrests were made earlier this month when authorities detained more than 250 suspects from two gangs who had attempted to smuggle in fuel worth approximately 2.2 billion yuan (S$480 million) in seven coastal provinces, according to a statement on the Chinese Customs Administration website (www.customs.gov.cn).

The operations involved the country's top oil ports such as Ningbo, Qingdao, Dalian, Xiamen and Shenzhen.

In one case smugglers had used a fairly common method, using converted fishing boats or unlicensed tankers to transfer fuel from bigger "mother tankers" on the high seas, the statement said.

In another case, a gang with operations at multiple ports had used vessels disguised as specialist oil tanker cleaners and had bought bunker fuel to be sold on illegally.

Taking advantage of a steep fall in global oil prices, China raised consumption taxes on fuel three times in six weeks between November last year and January. The tax on diesel and fuel oil, for instance, rose 50 percent, creating a wide gap between supplies priced on Asian spot markets and domestic products.

Traders have reported that in January a price gap of around 1,000 yuan per tonne attracted a heavy flow of diesel smuggled in by fishing boats along the shores of southern Fujian and Guangdong provinces.

"Compared to the smuggling back in the late 1990s, they've become a lot more organised, discreet and hard to track," said a veteran trader in Xiamen in Fujian province, referring to rampant diesel smuggling in 1998 when large oil tankers were used.

The hefty tax on fuel oil has resulted in a sharp drop in China's official fuel oil imports, with volumes down nearly 30 percent in the first two months of the year, according to customs data.