The U.S. Department of Commerce enforces laws and regulations related to the importation of goods into the country. Foreign products entering the U.S. may be subject to import duties and tariffs. Import duties and tariffs are imposed on foreign made goods to encourage support of the domestic market. However, the government does not have enough resources to properly examine the millions of containers that enter the U.S. each day. As a result, customs fraud is on the rise.
The information provided by whistleblowers is critical in pursuing these customs fraud cases. Whistleblowers may have information about customs fraud schemes such as trans-shipping, misidentifying the country of origin, or manipulating shipments to avoid customs duties.
Import duties and tariffs may vary depending of the product’s country of origin. The product’s country of origin is defined as the last country in which the product underwent a substantial modification. Corrupt foreign businesses will misrepresent the country of origin on documents presented to U.S. Customs to avoid paying duties, especially the anti-dumping and countervailing duties.
Anti-dumping and countervailing duties are intended to level the playing field for American businesses by preventing foreign manufacturers from unfairly undercutting the prices of domestic manufacturers.
Common Tariff Evasion Schemes
Companies seeking to evade duties or tariffs typically engage in the following schemes:
- Misclassification of imported goods. Companies misrepresent the kind of goods being imported. Such as, an electronics company designating the parts as light components when they are really components for cell phones.
- Trans-shipping and re-labeling. Some products carry larger tariffs than others. Many products from China are being transshipped to other nations and relabeled to conceal their true country of origin.
- Misrepresenting the country of origin. Import duties are different for every country. For example, in one case a company had to pay $45 million to settle False Claims Act violations related to misrepresenting the country of origin on imports. The company misrepresented the country of origin on its imports to show Japan and Mexico instead of the correct origins of China and India. There were no import duties on materials from Japan or Mexico, but imports from China and India were subject to the duties.
Who Might Be A Whistleblower?
Employees working for the offending company may have the detailed information and evidence required to bring forward a False Claims Act case.
Whistleblowers can fight back against unfair practices by coming forward with valuable insider information regarding their competitor’s fraudulent schemes to avoid anti-dumping/countervailing duties. Filing an FCA complaint against a competitor levels the playing field so everyone is abiding by the same rules.
Anyone may observe questionable behaviors or practices, such as mislabeled shipping containers or bills of lading that are consistently inaccurate.
If you are aware of fraudulent business practices or schemes related to customs fraud by your employer or a competitor, please contact our whistleblower attorneys for more information about your protections and pursuing a potential case.
With over 30 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $5.4 billion to federal and state agencies, with whistleblower recovery shares as high as 49%. They are ready to help if you have evidence of customs fraud.
Please call (866) 401-5971 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower. Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.