The consignment of 3,022 crocodile skins, declared by a Fujian-based trade company as a batch of frozen fish balls from Taiwan, was seized by Chinese customs officials.
But later customs officers found 1,328 crocodile skins disguised by the fish balls in the port city of Xiamen, a spokesman with the Xiamen Customs was quoted as saying by the state-run Xinhua news agency.
The customs' investigation found that two Taiwanese businessmen imported the skins from Singapore, dyed them in Taiwan and paid a Taiwan logistics company to ship the skins to the mainland.
The skins, often used as material for luxury handbags, were scheduled to be sent to Guangzhou, a major trading hub for leather products.
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The company was found to have helped the logistics company traffic two batches of 1,694 crocodile skins in May and early June.
The case has been handed over to prosecutors, the spokesman said.
The crocodile was listed in the Appendix II of The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), meaning that it was "not necessarily threatened with extinction", but "trade must be controlled" to avoid over-exploitation.