Another Customs-Related Qui Tam Action

We are writing to let you know about a second settlement stemming from a False Claims Action (FCA) case that we brought to your attention back in 2013.

If you recall, the U.S. Department of Justice (DOJ) announced in November 2013 that an Ohio-based company had agreed to pay $1.1 million to resolve allegations that it intentionally filed false customs declarations to avoid the payment of antidumping duties (ADD) and countervailing duties (CVD) on Chinese-origin aluminum extrusions.  In that announcement, DOJ named 4 other companies and 2 individuals against which it was pursuing claims for similar violations.

Last week, DOJ announced that 3 of the 4 companies named in its November 2013 announcement had agreed to pay more than $3 million to resolve allegations that they made false declarations to U.S. Customs to avoid paying ADD and CVD on Chinese-origin aluminum extrusions (the defendants agreed to pay $2,300,000, $650,000 and $100,000 respectively).  As with the Ohio-based company, the 3 defendants were alleged to have transshipped Chinese-origin extrusions through Malaysia to hide the true country of origin (China) and to avoid the payment of ADD and CVD upon importation into the United States.  A copy of DOJ’s press release can be found here.

There are a few key take-a-ways from this case.

First, this settlement further underscores the government’s commitment to prosecute duty evasion (particularly, once it is brought to their attention). In announcing this settlement, U.S. Attorney A. Lee Bentley III reiterated that “importers who used fraud to avoid paying [ADD and CVD] duties gain an unfair business advantage over competitors who abide by the rules.”   Commissioner R. Gil Kerlikowske echoed the U.S. Attorney’s statements by reiterating that U.S. Customs works diligently with DOJ to “aggressively pursue duty evasion.”

Second, and notwithstanding the foregoing, the government seems willing to settle these cases for a lot less than they otherwise could.  This case appears to have involved fraud/intentional acts.  The civil liability for such acts alone would be likely be several times the agreed-up settlement amounts.

Finally, given the fact that the underlying complaint was originally filed back in April 2011 (i.e., nearly 4 years ago), companies named in FCA complaints (or otherwise subject to FCA investigations) can face years of lengthy, expensive and exhausting litigation.

Given the increasing number of these qui tam cases, all companies should review their internal controls (and processes for reporting issues of non-compliance with such controls) to ensure they are working effectively.  We have significant experience advising companies on how to test and improve trade-related internal controls in a cost-effective manner and would be happy to discuss that experience with you.

We hope this is helpful.  If you have any questions, or would like to discuss these issues further, please let us know.

Best regards,

Ted

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