Chinese couple charged with smuggling a biological pathogen into the U.S.

This is not how research is done. No. If you are conducting research like this legitimately, there are whole sets of safety requirements , safety assessments, monitoring, in and on.

If you mean "was there actual scientific research being done here, not biological warfare" then the answer is yes, according to the article. They were studying this fungi in China, and were bringing samples into the US to continue that research. There's no indication the university was aware of what was going on though, and biosafety protocols were NOT being followed here.

> Could the research have been legitimate?

I assume yes.

> How is this research normally done?

You fill a lot of paperwork and get a lot of authorizations.

> Would that University of Michigan laboratory have the necessary biosafety level or no?

Perhaps. That is part of the details that go in the paperwork, and anyway not every request is aprobed because so some things are too risky.