Customs and Tariff Fraud can be False Claims Act Cases With Large Rewards for Whistleblowers
The FDA and customs agents try to track goods imported into the U.S. to make sure that they are allowed to be shipped here and also that the importers pay the appropriate customs duties and tariffs. However, government resources are not enough to examine the 25 million containers that enter the U.S. and the amount of fraud to evade U.S. Tariffs is on the rise. Whistleblowers, whose employers or competitors are violating the law by evading the tariffs, may bring lawsuits under the False Claims Act, which allows them to receive up to 30% of what the government recovers, if the information leads to a settlement or successful trial.
The Law Offices of Jeffrey A. Newman handle many customs fraud cases, including for individuals living outside the U.S. who are aware of U.S. customs violations. The U.S. government relies on whistleblowers to reveal the facts which show schemes such as trans-shipping, misidentifying the country of origin or manipulating the shipments to evade customs duties.Fraudulent Schemes to Evade Tariffs
Here are some examples of the kinds of fraud that are being used to evade our tariffs:
- Misclassification of imported goods. Here, the companies misrepresent the kind of goods or characteristics of the goods being imported. For example, a furniture company in China importing bedroom furniture, might say that the furniture is made for living rooms or for the kitchen, which areas don’t have a large tariff. Or an electronics company might designate the parts as light components when they are really made for cell phones.
- Trans-shipping and re-labeling. Certain products imported into the U.S. carry larger tariffs. Chinese steel, for example, carries a large tariff. One Chinese company set up a factory in Mexico, shipped the steel there, re-molded it into pallets and drove them from the factory into Texas to try to evade the taxes as Mexico has the benefits of NAFTA.
Whistleblowers working for the offending companies or for a competitor have the detailed inside information required to bring forward a False Claims Act case. Also, those companies selling products or services to the government of the United States must generally sell products made in the U.S. When the companies sell products made outside the U.S. in violation with their agreement with the government, this too may be a False Claims Act case.More on the False Claims Act and International Trade
The Federal False Claims Act (FCA) prohibits anyone from defrauding the government on the material terms of its receipt of government moneys. Most whistleblowers are either competitors or employees of the offending companies or individuals. Companies seeking to evade tariffs generally engage in the following schemes:
- Misrepresenting the country of origin to avoid duties and import quotas.
- Transshipping products to other nations to avoid duties by re-labeling the products before shipment to the U.S.
- Misclassifying goods under the tariff code to lower the amount of tariffs paid.
- Basco Manufacturing paid $1.1 million to settle allegations it engaged in transshipping by declaring Malaysia the country of origin in order to avoid antidumping duties imported 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.
If your employer or competitor is importing products and evading payment of tariffs, contact the Law Offices of Jeffrey A. Newman & Associates at 1-800-682-7157 (no cost for initial review).