Customs fine a company from Pirelli´s holding US$20 million for overstating value of imports to get dollars

Pirelli licenseer Prometeon allegedly faked its customs numbers to get hold of cheap dollars, and tried to disguise the maneuver by going via its Italian sister company.

The Argentine government slapped Prometeon, a licensee of the Milan-based tire manufacturer Pirelli, with a US$20 million fine on Thursday for over-declaring the value of its imports by that sum.

According to an investigation by Argentina’s tax and customs authorities, from 2020 to 2022, Prometeon regularly sent tires to Argentina from Brazil but channeled the business through its sister company in Milan, Italy.

Customs agents found that the Argentine arm of the business was declaring the value of imports at up to three times the amount its supplier was declaring to Brazilian customs, but Prometeon’s Italian sister company did not add value to the product.

Authorities believe the price markup aimed to get US dollars at the cheap official rate, which companies can buy from the Central Bank to pay for imports. Customs said the fraud was “deeply harmful for the country’s economy at the current juncture,” referring to the US dollar reserve scarcity the Central Bank is facing.

The documented cost for the operations was some US$86 million, and the difference with the actual amount was US$19,907,094, a 30% over-invoice. Customs notified the company yesterday that they will have to face a penalty of the same amount.

Prometeon, established in 2017 as a spin-off from Pirelli according to its official website, currently produces and markets Pirelli-branded industrial tires. Both companies are currently subsidiaries of the China National Chemical Corporation (ChemChina), a Chinese state-owned holding company. According to the government’s gazette, Prometeon’s Argentine branch was created in 2017 with Pirelli as its sole shareholder.

Prometeon has told local media that it denies the allegations and does not intend to pay the fine. Sources close to the matter say that although Prometeon belongs to the same group as Pirelli, the fine was not applied to the Milan-based company directly.

Customs General Director, Guillermo Michel, said that his office’s task “is taking care of the dollars to support the local production and Argentine jobs.”

Over-declaring the value of imports can also allow companies to evade exchange restrictions and transfer money out of the country. “We are not going to allow irregular mechanisms to be used to covertly wire money overseas,” Michel added. Carlos Castagneto, head of the AFIP tax authority, said that they will increase the company’s income tax accordingly.

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