Another Customs-Related Qui Tam Action

Dear Friends,

We are writing to let you know about the settlement of a False Claims Act (“FCA”) case, involving the payment of antidumping duties on imports of wooden bedroom furniture.

Earlier this week, the U.S. Department of Justice (“DOJ”) announced that a U.S. furniture company (and its general partner) (“the Company”), agreed to pay $15 million to settle allegations that it knowingly evaded the payment of antidumping duties on wooden bedroom furniture from China.  The underlying complaint alleged that between 2009 and 2012, the Company purposefully misclassified bedroom furniture as office furniture (and other types of furniture not subject to antidumping duties), and falsified invoices and other documents in order to import the Chinese-manufactured furniture without raising a flag with U.S. Customs and Border Protection (“CBP”).  A copy of the DOJ’s press release is found here.

This case is important for a couple of reasons.

First, the case is part of a growing trend of private parties initiating their own trade enforcement actions.  Here, this suit was initiated by a U.S. competitor.  After being underbid on several large-scale contracts, the competitor launched its own investigation (which included attending tradeshows, pretending to be an client, and engaging in email correspondences discussing how antidumping duties could be avoided on purchases, etc.).  The competitor handed all of the evidence it gathered over to the DOJ, and was awarded $2.25 million as its share of the settlement.

Second, this settlement displays the government’s continued willingness to prosecute trade compliance violations under the FCA.  In announcing this settlement, the U.S. Attorney stated that “companies that cheat by fraudulently mislabeling their imports undermine U.S. manufacturers and others that obey the rules, and hurt consumers and taxpayers”.  Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the DOJ’s Civil Division, echoed the U.S. Attorney’s statement and declared that “[the DOJ] will zealously pursue those who seek an unfair advantage in U.S. markets by evading duties owed on goods imported into [the U.S.]”.  Although, as noted previously, one wonders if the government really collected as much as it could/should have here (particularly, given that intentional actions appear to have been involved here).

The increase in the number of private party-initiated trade compliance FCA actions, coupled with increased enforcement by the government agencies involved, should provide significant incentive for companies to review their internal controls — particularly with respect to antidumping and countervailing duty issues — and ensure that they are working effectively.   Otherwise, companies may find themselves embroiled in expensive enforcement actions, like the one described above.  Similarly, if you are aware of non-compliance by others that is unfairly tilting the playing field (e.g., a competitor not paying antidumping duties rightfully owed to get a competitive advantage), there are steps you can take to address it, even if the responsible agency has not done so.

We hope that this is helpful.  If you have any questions about this case, or if you would like to discuss the issues raised here further, please let us know.

Best regards,
Ted

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