By Jeffrey A. Newman
The United States customs authorities are well aware that thousands of Chinese and other foreign goods are being illegally shipped into the U.S. in ways designed to evade U.S. customs duties on such things as steel, honey, furniture, clothing, shrimp, catfish and much more. These products are being “transshipped” from China into other nations and re-labeled to hide their actual country of origin. The countries accepting the Chinese products and sending them here include Mexico, Malaysia, Vietnam, Philippines, Sri Lanka, India and others. The injection of these goods into the stream of America commerce without payment of U.S. tariffs harms American businesses and our economy at large.
While U.S. customs laws are strong and can be effective, the process is slow. Now, however, Whistleblower cases filed under The False Claims Act (FCA) are being used by U.S. companies to combat this unfair competition. In addition, the Federal Government is now coming to rely on whistleblowers who report tariff evasion to reveal the details of the fraudulent schemes. U.S. Customs and Border Protection (CBP) knows these illegal activities are ongoing, but they do not know enough about the players and plans to bring actions. However, now many U.S. companies and their C-level employees are becoming aware of the details through their contacts in China and elsewhere and through their own trading partners who are also placed in a weakened position by the schemers who evade US customs laws and sanctions. In addition, the False Claims Act has real teeth in that the Government may seek up to three times the amount the companies have evaded in customs tariffs. This has a great potential for deterrence. The defendants are not just the foreign companies but also the importers when it can be shown that they knew and were therefore complicit in the tariff evasions.