Certain foreign products entering the United States are subject to import duties and tariffs. Duties and tariffs are designed to encourage support of the domestic market and to offset unfair subsidies some foreign manufacturers receive from their governments. Unfortunately, some companies devise schemes to avoid paying tariffs and duties to gain an advantage over other businesses. In an article published by Global Trade Magazine, Baron & Budd Shareholder Andrew Miller discusses the importance of tariffs and customs duties to the U.S. economy and how customs fraud can impact its stability.

Identifying Customs Fraud

Companies use various fraudulent schemes to avoid paying customs duties and tariffs. Some of the most common schemes include:

1. Misrepresenting Country of Origin – A product’s country of origin is one of the primary factors that determines the amount of duties or tariffs owed. Some companies lie about the country of origin of their goods in order to avoid paying higher duties and tariffs.
2. Misclassification of Products – A product’s duty or tariff rate is also determined by what type of product it is. Some companies misclassify their products, using a different “HTS code” to take advantage of a lower duty or tariff rate. For example, a company might describe its imported goods as “light components” instead of “cell phone components.”
3. Relabeling or transshipping – Sometimes, companies will relabel a container to outright lie about its country of origin. In other circumstances, companies will ship a product from its country of origin to another country before importing it to the United States, misrepresenting that it is a product of the intermediary country.
4. Reduction in Value – Duties and tariffs are assessed based on the entire value of a product, including all manufacturing and engineering costs. Some companies will fraudulently exclude these costs from the values they report to Customs & Border Protection (CBP) to incur lower duties and tariffs. Some companies may also outright lie about the values of their products, pretending that their goods are less valuable than they are. Companies commonly use double-invoicing schemes to hide the true value of their products.

How Whistleblowers Can Help

With millions of containers entering the United States every day, the government does not have the resources to monitor every shipment. The government relies on whistleblowers to step up and play a vital role in the enforcement of our customs laws.

Whistleblowers can report customs fraud by filing a case under the federal False Claims Act (FCA). The FCA allows a private citizen or company to file a case on behalf of the government. Employees of a company committing fraud, competitors of a company committing fraud, or other individuals working closely with the importation of goods may have information about customs fraud schemes. Whistleblower lawsuits deter unfair practices and help level the playing field so everyone follows the same rules. In addition, they help recover funds that American taxpayers have been cheated out of.

Whistleblowers who file a lawsuit under the FCA can receive 15% to 30% of the money recovered in the case. They are also protected from retaliation by their employers.

Whistleblower lawsuits can be extremely powerful tools, with enormous benefits to both the whistleblowers who file the suits and the taxpayers on whose behalf they are filed. In a recent case, for example, a whistleblower filed a suit alleging that Toyo Ink fraudulently avoided paying antidumping and countervailing duties by lying that its products were substantially transformed in Japan and Mexico, where they were shipped after being manufactured in China. Toyo Ink paid more than $45 million to resolve the allegations, and the whistleblower received nearly $8 million.

The most important step in filing a whistleblower lawsuit is to seek the assistance of an experienced whistleblower attorney. The attorneys at Baron & Budd can guide you through every step of the process and help you maximize your chances of sharing in a successful recovery by the government.

Our Team

With more than 30 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $6 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) 845-2164 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.