Chinese prosecutor charges Vacon

Vacon announced on 19 March 2010 that the Chinese customs had started an investigation at Vacon’s Suzhou factory into the customs clearance procedures applied by Vacon in China during the period 2005-2010.

Vacon has recently on 7 January 2011 been informed that the Chinese prosecuting authority has decided to bring charges in the matter against Vacon’s Chinese subsidiary, against two of its employees and against certain transport companies used by Vacon. The Chinese prosecuting authority considers that Vacon’s Chinese subsidiary has imported components with the wrong customs tariff classification. The authorities consider that the company is therefore guilty of smuggling by not having paid the appropriate customs duties.

Vacon has carried out its own internal investigation into the matter and as a result the company has for the time being relieved of their duties the two employees of Vacon’s Chinese subsidiary who have been charged in the matter. Vacon has also reported the offence to the local police authorities so that they can investigate the activities of the two employees more thoroughly.

The prosecutor is demanding from Vacon a compensation of EUR 3.2 million for unpaid customs duties. Earlier, at the request of the Chinese customs, Vacon has already paid a bond of approximately EUR 2.8 million as security. Vacon has now entered the claim for EUR 3.2 million stated in the charges in the result as a provision for the fourth quarter of 2010. The provision does not affect Vacon’s market guidance for 2010.

The court proceedings now starting do not affect the daily operations of the Chinese subsidiary or the service received by its customers in any way.

"It has always been and will always be Vacon’s explicit policy in its global operations to comply with both local and international legislation, rules and regulations. And precisely for that reason it is also the wish and in the interest of Vacon that this matter is investigated thoroughly," says Vacon’s CEO Vesa Laisi.

Vacon is not commenting on the charges due to pending court proceedings but will look into the charges and announce further information on the matter and its potential implications on Vacon after the legal proceedings have been completed. According to preliminary information, the legal proceedings are expected to be completed during the first half of 2011.