I am writing to let you know about another customs-related qui tam action.
Last week, the U.S. Department of Justice announced that an Ohio-based company had agreed to pay $1.1 million to resolve allegations that it had intentionally filed false customs declarations to avoid the payment of antidumping and countervailing duties on Chinese-origin aluminum extrusions. The announcement states that DOJ is also pursuing claims against 4 other companies and two individuals for similar violations. A copy of DOJ’s press release can be found here.
The defendants are alleged to have transshipped Chinese-origin aluminum extrusions through Malaysia to hide the true country of origin (China) and avoid the payment of ADD/CVD upon importation into the United States (as many of you know, aluminum extrusions from China are subject to ADD/CVD rates of well over 100%).
The case was originally filed by a whistleblower under the qui tam provisions of the False Claims act. The whistleblower (known as the “relator” under the False Claims Act) is entitled to a meaningful portion of any recovery from this action (including the $1.1 million collected thus far).
This case is part of a larger trend we have been seeing develop over the last couple of years – namely, that private parties are increasingly turning to the False Claims Act to address potential trade compliance violations by others (e.g., competitors, employers, etc.). In addition to the obvious financial incentives (again, whistleblowers under the False Claims Act are entitled to a meaningful percentage of any recovery the government makes as a result of the case), government enforcement efforts in this area are viewed as increasingly resource-constrained, inefficient and/or ineffective. In contrast, local U.S. Attorney Offices are showing strong interest in prosecuting these types of violations (particularly those involving government procurement, such as “buy America” violations, and antidumping/countervailing duty issues). We expect to see this trend continue for some time.
The rise of private party-initiated trade compliance actions should incentivize all companies to review their internal controls over this area and ensure that they are working effectively. Otherwise, companies may find themselves embroiled in expensive enforcement actions, like those described above and below. Similarly, if you are aware of non-compliance by others that is unfairly tilting the playing field (e.g., a competitor not paying antidumping/countervailing duties rightfully owed, or misstating the origin of their products, to get a competitive advantage), there are steps you can take to address it, even if the responsible government agency has not done so.
We hope that this is helpful. We have significant experience advising clients on how to test (and improve, when necessary) trade-related internal controls. We also are advising several clients on how best to address potential non-compliance by competitors/others. If you have any questions, or if you would like to discuss these issues further, please let us know.