Evasion of Section 301 tariffs is a growing area of customs fraud, undermining domestic industry and depriving the government of a crucial source of revenue. Whistleblowers play an essential role in exposing such fraud under the False Claims Act, a federal law that allows private individuals to sue on behalf of the government for fraud and earn financial rewards. Mark A. Strauss Law represents customs fraud whistleblowers with information about import duty evasion, helping them pursue justice and receive compensation for their efforts.
Understanding Section 301 Tariffs
Section 301 tariffs, introduced under the Trade Act of 1974, are used by the U.S. to address unfair trade practices by other countries. Recently these tariffs have largely focused on Chinese imports. These section 301 tariffs were first imposed against China in 2018, applying duties of up to 25% on more than $300 billion in goods. The tariffs cover a wide range of products, including those in the manufacturing, technology, and energy sectors. While these tariffs are often mentioned in relation to China, they also affect imports from numerous other countries across a variety of industries.
Some companies have responded by shifting production outside of China or paying the tariffs. However, others have resorted to illegal methods to avoid paying these duties, which constitutes customs fraud and exposes them to liability under the False Claims Act.
Common Methods of Section 301 Tariff Evasion
Section 301 tariff evasion typically involves fraudulent schemes that mislead U.S. Customs and Border Protection (CBP) about the origin, value, or classification of goods. The most common methods include:
Transshipment Schemes
Transshipment is one of the most common ways importers evade Section 301 tariffs. Goods made in China are routed through third countries, such as Vietnam, Thailand, or Malaysia, and falsely relabeled as originating from these countries. In some cases, minimal processing or assembly is conducted in these countries to support a false claim of substantial transformation, further hiding the goods’ true origin.
Misclassification of Goods
Importers may also misclassify goods under the Harmonized Tariff Schedule (HTS) to avoid higher tariffs. By using incorrect HTS codes, importers can claim that their goods are of another type that is exempt from Section 301 tariffs, defrauding the U.S. government.
Undervaluing Goods
Another method involves undervaluing goods by providing falsified invoices or documents to CBP. This reduces the duties owed on the goods and is often part of a broader scheme involving dual invoicing, where the true value is hidden from U.S. authorities.
Evasion of Section 301 Tariffs Under the False Claims Act
The False Claims Act (FCA) is a key legal tool for addressing customs fraud, including Section 301 tariff evasion. When importers provide false information to CBP, such as inaccurate country-of-origin details or incorrect HTS coding, they violate 31 U.S. Code § 3729(a)(1)(G), also known as the FCA’s “reverse false claims” provision. This provision holds companies accountable for knowingly avoiding their financial obligations to the government, including payment of import duties and tariffs.
Whistleblowers who have insider knowledge of these practices can file a qui tam lawsuit under the FCA, helping the government recover lost revenue. In return, whistleblowers may receive a portion of the recovered funds as a financial reward.
Recent Settlements in Section 301 Tariff Evasion Cases
Recent enforcement actions highlight the growing attention the Department of Justice (DOJ) is giving to Section 301 tariff fraud. In late 2023, three significant settlements were announced, each involving whistleblower claims under the FCA:
King Kong Tools: This $1.9 million settlement involved a whistleblower who alleged that the company falsely claimed Chinese-made tools were produced in Germany. The whistleblower received $286,861.
Dallco Marketing: In a $2.5 million settlement, whistleblowers exposed underreporting of the value of Chinese imports. They were awarded $500,000.
Homestar North America: A $798,334 settlement resolved allegations that the company had undervalued its Chinese imports, with the whistleblower receiving $151,683.
These settlements demonstrate how whistleblowers are key to uncovering tariff evasion schemes. Given that CBP inspects less than 1% of containers entering the U.S., whistleblower reports are often the only way such import fraud is exposed.
Why Whistleblowers Are Essential in Combating Section 301 Tariff Evasion
Whistleblowers play a critical role in holding companies accountable for Section 301 tariff evasion. Their inside knowledge helps ensure that fraudulent practices are exposed, protecting U.S. taxpayers and businesses that follow the law. Whistleblowers can be employees, industry experts, or even competitors with evidence of a rival’s fraudulent conduct.
Under the False Claims Act, whistleblowers can earn between 15-30% of the government’s recovery in successful cases. This financial incentive, combined with the chance to stop illegal practices, makes whistleblowing a powerful tool in the fight against customs fraud.
How Mark Strauss Can Help Whistleblowers
At Mark A. Strauss Law, we are dedicated to helping whistleblowers expose customs fraud, including Section 301 tariff evasion. With extensive experience in False Claims Act cases and complex civil litigation, we provide the legal guidance and support needed to bring a successful qui tam lawsuit. Whether you are an industry insider, a competitor, or an employee with information about tariff evasion, we offer free consultations to evaluate your case and help you pursue justice. All communications with Mark A. Strauss are confidential and protected by attorney-client privilege.
Contact Mark A. Strauss Law PLLC for Whistleblower Representation
If you have knowledge of companies evading Section 301 tariffs or engaging in customs fraud, contact Mark A. Strauss Law for a free, confidential consultation. Whistleblowers can earn substantial financial rewards while helping the government enforce trade laws. Remember that you must file a qui tam lawsuit to receive compensation – reporting the fraud directly to the government is not enough. Contact Mark A. Strauss Law to get started today.
Fraud is their game. Integrity is yours.
Fraud is their game.
Integrity is yours.
Free Consultation
No Fee Unless We Win!
Call or Text Now
Practices
Whistleblower Practices
- False Claims Act/Whistleblower Lawsuits
- Import Duty Evasion & Customs Fraud
- COVID-19 Relief Fraud
- Healthcare Fraud
- Government Contracting & Procurement Fraud
- Grant Fraud
- Federal Credit Assistance Fraud
- Securities Law Violations & the SEC Whistleblower Program
- Tax Fraud & the IRS and New York State Whistleblower Programs
- State False Claims Acts
