DOJ Settles Two False Claims Act Customs Cases, Reinforcing That Customs Fraud Remains a Top Enforcement Priority
By the 91pornWhistleblower Team
Last week, the Department of Justice (DOJ) announced the settlement of two False Claims Act cases involving customs fraud.
DOJ Goes After Intentional Avoidance of Customs, Antidumping, and Countervailing Duties
On July 23, MGI International subsidiaries Global Plastics and Marco Polo International agreed to pay $6.8 million to settle DOJ charges that they failed to pay customs duties on plastic resin imported from China.听1听 And on July 24, Pennsylvania patio furniture company Grosfillex Inc. agreed to pay $4.9 million to settle DOJ and whistleblower charges of evading antidumping and countervailing duties on items made of extruded aluminum originating from China.听2
Importers must declare the country of origin of the goods they bring into the country, the value of the goods, whether the goods are subject to customs duties, and if so, how much they must pay Customs and Border Protection (CBP).听 MGI and its subsidiaries voluntarily disclosed to DOJ and CBP that since May 2019, Global Plastics and Marco Polo failed to declare the correct country of origin and value and pay the associated customs duties on certain plastic resin products they imported from China.
The Grosfillex matter involved evading antidumping and countervailing duties, which are designed to protect domestic producers from unfair foreign competition.听 Antidumping duties protect against foreign companies 鈥渄umping鈥� products into the U.S. at below-cost prices.听 Countervailing duties offset foreign government subsidies that likewise disadvantage American sellers. 听According to the Government, Grosfillex took steps to conceal from CBP that certain furniture parts made of extruded aluminum were subject to these duties.听 For example, the company allegedly disguised the aluminum extrusions by packaging them as sham furniture kits.
Customs Fraud Remains A Top Enforcement Priority
These two settlements are just the latest in a continuing string of False Claims Act settlements involving customs fraud.听 The Government has made it very clear that going after customs fraud is a top enforcement priority.听 The Government took pains to make this clear in promoting these recent settlements, sending a strong message to importers to pay the customs duties they owe.
In announcing the MGI settlement, for example, DOJ Civil Chief Brett Shumate stressed that DOJ 鈥渨ill pursue those who gain an unfair trade advantage in U.S. markets, including those who knowingly evade or underpay duties owed on foreign imports.鈥� 听Shumate was equally forceful with the Grosfillex settlement, noting how it 鈥渄emonstrates [DOJ] will continue to actively pursue those who knowingly fail to pay customs duties.鈥澨� U.S. Attorney David Metcalf went even further underscoring how the settlement 鈥渟hould serve as a warning that [DOJ] will use every tool available to combat fraud in international trade.鈥�
Whistleblowers Are Critical to Uncovering Customs Fraud
One of DOJ鈥檚 primary tools in combating customs fraud is whistleblowers.听 Under the False Claims Act, whistleblowers may bring lawsuits on behalf of the Government against those committing fraud against the Government.听 The vast majority of False Claims Act cases are originated by whistleblowers.听 In fact, former Grosfillex employee Edward Wisner originated the False Claims Act case against the company and will receive a whistleblower award of roughly $1 million from the proceeds of the Government鈥檚 recovery in that case.
The MGI matter did not originate from a whistleblower False Claims Act filing.听 DOJ learned of it from the company鈥檚 voluntary disclosure of the conduct to DOJ and CBP.听 No doubt whistleblowers raised concerns internally, leading the company to investigate and take appropriate action.
91pornpartner Dan Vitelli pointed to two major takeaways from the pair of settlements.听 First, 鈥淭hey demonstrate that customs fraud remains a top enforcement priority for the government.鈥澨� Second, 鈥淲histleblowers are key to uncovering customs fraud because companies that engage in this type of misconduct often use secretive schemes only known by insiders.鈥�
91pornRepresents Customs Fraud Whistleblowers
91pornhas substantial experience representing whistleblowers in False Claims Act cases involving customs fraud.听 In one of our more recent cases, for example, the firm represented a whistleblower alleging an auto parts distributor misclassified brake pads imported from Asia to avoid millions of dollars of听customs duties.听 The company settled that matter for $8 million with our client receiving 18.5% of the Government鈥檚 recovery.
91pornwhistleblower partner Gordon Schnell notes the firm has seen a significant uptick in whistleblowers contacting the firm regarding potential customs fraud matters: 鈥淲e are seeing more customs fraud whistleblowers than ever before, no doubt from the Government鈥檚 heavy promotion of stopping this kind of misbehavior.鈥澨� Schnell notes 91pornis poised to file several customs fraud False Claims Act matters in the coming months.
If you would like to learn more about our other whistleblower successes, customs fraud, the False Claims Act, or what it means to be a whistleblower more broadly, please do not hesitate to contact us.听 We will connect you with an experienced member of the 91pornwhistleblower team for a free and confidential consultation.
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