South Korean shipowner Pan Ocean Shipping and Swiss trader Gunvor are facing fraud allegations in the Singapore High Court from former clients in China, which seek to arrest a Pan Ocean tanker involved in an alleged cargo smuggling and tax evasion scheme.

Trading company China-Base Ningbo Group and cargo receiver Beihai Xinan Petrochemical say they are millions of dollars out of pocket after Chinese customs authorities arrested the Pan Ocean-owned, 46,200-dwt product tanker Grand Ace 12 (built 2008) along with its 38,000 tonnes of cargo of disputed origin in 2016.

Reuters reported at the time of the arrest that Chinese authorities had accused Yin Dikun, then managing director of Gunvor Singapore, of smuggling 36 cargoes and evading Chinese taxes and tariffs of CNY 378m ($59.8m today). The report did not mention the ship, its owner or broker.

Gunvor, which has previously denied the allegations, told TradeWinds this week that neither it nor subsidiary Clearlake had been charged, and a spokesman argued that the company is not "facing allegations" in the Singapore case because the trader is not a party to the case.

Gunvor said it views the situation as “purely political”.

“Philippines customs authorities have confirmed relevant customs documentation was issued in full compliance with applicable customs rules and regulations,” a Gunvor spokesman said. “Furthermore, Gunvor is not the importer of record into China and is therefore never the party liable to pay duties.”

But now former Gunvor customer China-Base and the cargo receiver are seeking to arrest the ship to recoup losses from Pan Ocean, claiming the owner followed the charterer’s instructions to falsify loading documents to make cargoes appear to have originated from the Philippines.

Also not named as a defendant but prominent in the documentation is major tanker broker Braemar ACM Singapore.

A Braemar ACM official, whose name appears on fixture recap documents, told TradeWinds he was not familiar with the case but had handled correspondence on behalf of more senior brokers. He said they declined to comment.

Pan Ocean tanker chartering official Sung Jeyong, who was deposed by Chinese customs officials as person in charge, also declined to comment.

Documents, including an affidavit by China-Base Ningbo Group official Shi Yunfong, show that in a series of voyages, Clearlake booked Pan Ocean ships to load light cycle oil and gasoil cargoes in South Korean, Chinese and Taiwanese load ports for transport to China.

In the case of the Grand Ace 12 voyage, the destination was Nansha port in the Guangzhou region, via a stop in the Philippines to load a small quantity of cargo at an offshore anchorage before proceeding to China.

But that is not the information the plaintiffs received.

Detailed email correspondence between the trader and Braemar ACM brokers, including fixture recaps, shows the Swiss trader ordered brokers to have new bills of lading and other documents issued to show all the cargo originating from Subic.

As a member of the Association of Southeast Asian Nations (Asean), the Philippines enjoys significant tax advantages in its trade with China.

When the Grand Ace 12 arrived at Nansha on 10 May 2016, Chinese customs officials were waiting with specific questions about the origin of the cargo. They detained the ship along with a number of officials, including former Gunvor managing director Yin.

Attempts to contact Yin have been unsuccessful.

However, the intervention by customs officials appears to have been too late for the cargo receivers, who say they allowed Gunvor to receive $16.3m worth of payment on a letter of credit for the cargo. Further costs for storage and interest while the ship was detained came to $6.05m. Receivers eventually sold the cargo for the equivalent of $17.8m, so presumably the net claim for the voyage is around $4.5m.

The plaintiffs’ attorneys said they applied to Ningbo Middle Court to stop Gunvor’s claim for a further payment of $3.6m.

"Gunvor has appeared in the Chinese proceedings to challenge the allegations of fraud," the lawyers told the Singapore court.

This article has been amended since publication to reflect the fact that cargo receiver Beihai Xinan Petrochemical was not the customer of Gunvor.