Customs and Duties Fraud

Pursuant to the Commerce Clause of the U.S. Constitution, Congress has the power “to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”  The first of these powers is referred to as the Foreign Commerce Clause.  This includes the power to regulate imports and exports, including the placement of duties and customs on certain goods of foreign nations brought into the United States under circumstances that are economically unfair or corrupt.

The U.S. Department of Commerce is charged with enforcing the laws, rules and regulations of commerce, and it assesses anti-dumping and countervailing duties on foreign products entering the United States when appropriate.  The anti-dumping and countervailing duties are designed to protect United States businesses by offsetting unfair foreign pricing and government subsidies. The duties are collected by U.S. Customs, an agency of the Department of Homeland Security. The import duties vary depending on a product’s country of origin, which is identified by determining the last country in which the product underwent a substantial transformation.

Unscrupulous foreign companies have been known to misrepresent the country of origin on documents presented to U.S. Customs to avoid paying duties, particularly anti-dumping and countervailing duties, which are intended to level the playing field for American businesses.  When such conduct occurs, it may give rise to liability under the False Claims Act.

Real World Examples of Recent Customs and Duties Fraud False Claims Act Cases:

  • 2013: Japanese-based Toyo Inc. and various affiliated companies agreed to pay $45 million to settle claims that they violated the False Claims Act by knowingly failing to pay anti-dumping and countervailing duties that were assessed by the U.S. Department of Commerce. Specifically, the government alleged that Toyo Inc. misrepresented Japan and Mexico as the countries of origin for certain of Toyo’s imports, rather than China and India which were the company’s sources for raw material of the imports. There were no duties on imports of raw material from Japan or Mexico, but such imports from China and India were subject to the import duties.  The case was brought by the president of a domestic producer of the raw material.  The whistleblower received more than $7,875,000 as his share of the government’s recovery.

For a free consultation about a potential Customs and Duties fraud case, other FCA fraud, or other potential whistleblower case, please call us or click here to submit your information.