US sanctions Cayman company for human rights abuses on fishing vessels

The US Treasury Department’s Office of Foreign Asset Control (OFAC) on Friday sanctioned two Chinese individuals, Li Zhenyu and Xinrong Zhuo, and a network of companies they control, including Cayman-registered Pingtan Marine Enterprise, for human rights abuses and illegal fishing.

NASDAQ-listed Pingtan Marine (PME) operates a large fleet of nearly 100 fishing vessels and reefers through its subsidiary, China-based Pingtan Fishing, and its affiliated company, Fuzhou Honglong Ocean Fishing (Honglong), along with roughly 2,000 crewmembers.

Illegal fishing

The Treasury said the company’s vessels had been involved in serious human rights abuses, illegal fishing and other illegal activity in Indonesia, East Timor, and Ecuador.

This included the 2017 seizure of a Honglong-owned vessel and the arrest and imprisonment of the vessel’s crew after the Ecuadorian Navy found it had illegally transshipped more than 6,600 shark carcasses, some from endangered species, through the waters of the protected Galapagos Marine Reserve.

The Treasury said illegal fishing is often associated with distant water fishing, adding that China has the largest such fleet in the world. In 2021, Pingtan Fishing received a $19 million subsidy from the Chinese government as an incentive to develop its distant water fishing industry.

In 2016, an Indonesian court ordered a moratorium on Pingtan’s fishing activities and had affiliated vessels in Indonesia impounded following allegations against a related company that included human rights abuse.

Physical abuse

The Treasury said, crew members, already enduring miserable conditions, overwork, and extreme isolation aboard Pingtan Fishing-owned vessels, have reported instances of physical violence and forced labour.

“In one case, after crew members reportedly contacted their families for the first time in seven months and learned they had not been paid, a crew member’s request to leave the ship was denied and food was withheld for three days.

“Crews that had completed their contracts, but who were forced to continue working for months in light of COVID restrictions, learned only later that they were never paid at all. Still others reported physical abuse.”

The Treasury added, “On another ship, a grossly negligent response to an accident contributed to the death of a crew member after it took over two weeks to get the seriously injured crew member to see a doctor aboard another ship.”

In another case, crew members on one ship had only learned of the global pandemic in May 2020, after they arrived in port for the first time in over a year.

NASDAQ-listed company sanctioned

OFAC designated PME’s founder, chairman, and CEO, Xinrong Zhuo, for having engaged in human rights abuses. It also designated a string of related BVI, Hong Kong and Chinese companies.

OFAC declared 125 vessels in which Pingtan Fishing and Honglong have an interest blocked property.

Actions needed to wind down any transactions involving these vessels are allowed until 9 March, 2023.

In addition, OFAC has licensed US persons to divest debt and equity listed by Pingtan on the NASDAQ stock exchange to non-US persons until 9 March, 2023.

It is the first time the Treasury has designated an entity listed on the NASDAQ stock exchange.

Dead sailors dumped at sea

The other sanctioned company is Dalian Ocean Fishing (DOF), which owns and operates 32 fishing vessels.

According to the US Treasury, one of the company’s fishing vessels, LONG XING 629, went to sea in February 2019 with a crew of 24, operating in the Pacific Ocean until April 2020.

While the LONG XING 629 was licensed to catch tuna during its voyage, it also was reportedly engaged in illegal shark finning, taking over 700kg of fins, including from endangered sharks.

The Treasury said, “After 13 months without a port visit, with average workdays lasting 18 hours and living off expired food and brown desalinated seawater, five crew members had died; at-sea refuelling and transshipments of fish to refrigerated cargo vessels known as ‘reefers’ allowed the ship to operate without interruption. The bodies of three crew members who died at sea were dumped into the ocean rather than repatriated home.

“When the surviving crew members returned home, they were diagnosed with malnutrition and received only a fraction of their promised pay. They have since described deceptive recruiting practices, the confiscation of identity documents, punishing work, and physical abuse.”

Subsequent investigation had found similar abuses occurred across Dalian’s fleet, with widespread reports of physical assault, malnutrition, overwork, withheld pay, and five more crew member deaths.

Based on their contracts, crew members who left the ship would forfeit their salaries while still owing the recruiting fees they had agreed to pay out of future earnings, leading to the potential for intergenerational debt bondage, the Treasury said.

Other vessels stayed at sea for more than two years without a port visit, meaning no access to the outside world or any way to let others know of the oppressive conditions. Through all of this, DOF received almost $8 million annually in PRC government subsidies encouraging distant water fishing, the statement added.

The sanctions were issued under an executive order implementing the Magnitsky Act, which targets human rights abuses and corruption around the world.

In June 2022, US President Joe Biden issued the Memorandum on Combating Illegal, Unreported, and Unregulated Fishing and Associated Labor Abuses, stating that illegal, unreported and unregulated fishing and associated labor abuses threaten the livelihoods and human rights of fishers around the world and undermine U.S. economic competitiveness, national security, and fishery sustainability.