Customs fraud undermines fair trade and costs the U.S. government billions in lost revenue annually. Importers who engage in fraudulent practices to evade tariffs and duties gain an unfair advantage over honest competitors, ultimately harming the U.S. economy. Due to the sheer volume of goods entering the country, U.S. Customs and Border Protection (CBP) relies heavily on self-reporting by importers, making it difficult to detect these schemes without insider information.
If you have knowledge of customs fraud or import duty evasion, now is the time to act. Through the False Claims Act (FCA), you can report these illegal activities and play a crucial role in combating import fraud by filing a qui tam lawsuit. If your case leads to a successful prosecution, you may also be entitled to a portion of the recovered funds. By partnering with customs fraud whistleblower attorney Mark A. Strauss, you can navigate the complexities of qui tam lawsuits under the False Claims Act with confidence.
Contact Mark A. Strauss Law today for a free, confidential consultation and take the first step toward holding fraudulent importers accountable. Fraud is their game, integrity is yours.
Understanding Customs Fraud
Customs fraud occurs when importers intentionally misrepresent the nature, value, or origin of goods to reduce or avoid tariffs and duties. These deceptive practices deprive the U.S. government of vital revenue and disrupt fair competition. With CBP able to inspect only a small percentage of shipments, fraudulent importers exploit the system to gain an unfair advantage.
The Role of Whistleblowers in Import Fraud Cases
Whistleblowers are crucial in uncovering customs fraud. Insiders, such as employees of import companies or logistics firms, often have access to the knowledge and evidence needed to expose these schemes. The False Claims Act incentivizes whistleblowers – also known as relators – by offering financial rewards and protection against retaliation, empowering them to take legal action with the support of an experienced customs fraud lawyer.
What are the Most Common Types of Customs Fraud?
Customs fraud takes many forms, with dishonest importers employing various schemes to evade the duties and tariffs they owe. Below are some of the most common types of customs fraud that whistleblowers may encounter.
Transshipment
Transshipment involves routing goods through a third country to misrepresent their true origin. By falsely claiming that products originate from a country with lower tariffs or one not subject to anti-dumping and countervailing duties, importers can significantly reduce the duties they owe. This practice not only cheats the government out of revenue but also undermines trade protections designed to support U.S. industries.
An example comes from the Tai Shan Golden Gain Aluminum Products case. There, in response to the imposition of U.S. antidumping and countervailing duties that made it impossible to profitably import aluminum extrusion products from China, the defendants transshipped the goods instead through Malaysia, repacking and remarking them to disguise their country of origin. A trade consultant working in the industry discovered the fraud and filed a qui tam lawsuit. The defendants paid $4.5 million to settle the claims.
Misclassification of Goods
Misclassification occurs when importers deliberately classify goods under incorrect HTS codes to lower the duties they are required to pay. The HTS, known as the Harmonized Tariff Schedule, is a standardized system used by the United States to classify import goods and lists the applicable tariffs and duties that apply to them. An importer might label high-tariff goods (such as wooden furniture) as low-tariff goods (such as metal furniture) to reduce duties owed to the government. This fraud not only results in lost revenue for the government but also distorts market competition by giving fraudulent importers an unfair price advantage.
In the AmeriSource case, for example, the defendant submitted incorrect HTS codes labeling small diameter graphite electrodes (devices used in steel production) as larger diameter electrodes to circumvent heightened antidumping duties that had been imposed on the former. The defendants paid $3 million to resolve the qui tam claims which had been brought by a business rival.
Undervaluation
Undervaluation fraud involves declaring a lower value for imported goods than their actual worth. Importers may use falsified invoices or other deceptive means to understate the value, thereby reducing the amount of duty they must pay. This practice is one of the most common forms of customs fraud and can be difficult to detect without insider knowledge.
In the Motives Inc. case, for example, the defendants disguised the true value of imports by presenting false invoices to CBP reflecting only a portion of the purchase price. The parties used a separate second set of invoices – misleadingly referred to as “debit notes” – that reflected the true prices, but which were not disclosed to CBP. The defendants paid $13.4 million to the Government to settle the qui tam whistleblower claims.
Fraud is their game.
Integrity is yours.
Important Legal Concepts in Customs Fraud Whistleblower Lawsuits
How Customs Fraud Whistleblower Lawsuits Work
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Integrity is yours.
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Whistleblower Practices
- False Claims Act/Whistleblower Lawsuits
- Import Duty Evasion & Customs Fraud
- COVID-19 Relief Fraud
- Healthcare Fraud
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- Grant Fraud
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