Customs Fraud

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:

1. 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.
2. 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.
3. 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.

Settlements of FCA Cases Involving International Trade

• Centric Parts agreed to pay $8 million to resolve False Claims Act and Tariff Act violations related to underpaying customs duties on imported brake pads.
• Blue Furniture Solutions, LLC paid more than $5.2 million to resolve False Claims Act violations related to evading customs duties and fees on furniture imported from China. The company falsely labeled its products on invoices and packing lists to avoid paying anti-dumping duties and customs fees.
• Green Bag Co., Inc. paid $500,000 to settle claims that it violated the False Claims Act by using false invoices to underpay its customs duties.
• R. Laurence Co, Inc., Aluminum Products Inc., and Waterfall Group LLC agreed to pay over $3 million to settle claims that they engaged in schemes to evade customs duties on imports of aluminum from China.
• Toyo Ink paid $45 million to settle allegations that it evaded paying duties on products containing carbazole violet pigment 23 from China and India, declaring the country of origin as Japan or Mexico. The whistleblower case was brought by a competitor which became aware of the scheme.
• Basset Mirror Company paid $10.5 million to settle an FCA case which asserted that it masked the type of furniture it imported from China in order to avoid duties.
• Otterbox paid $4.3 million to settle an FCA case alleging that it did not place correct values on the imported products to evade duties.

Who Might Be A Whistleblower?

Company Employees

Employees working for the offending company may have the detailed information and evidence required to bring forward a False Claims Act case.

Competitors

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.

Others

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.

Our Team

With over 40 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $6.0 billion to federal and state agencies, with whistleblower recovery shares as high as 50%. They are ready to help if you have evidence of customs fraud.

Please call (866) 343-5070 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.