U.S. Department of Justice (DOJ)

ICYMI: Commerce, Treasury, and Justice Issue Compliance Note on Obligations of Foreign-Based Persons to Comply with U.S. Export Laws

On March 6, 2024, the Department of Commerce, Department of the Treasury, and Department of Justice issued a tri-seal compliance note titled: “Obligations of foreign-based persons to comply with U.S. sanctions and export control laws.”

The note:

  1. Highlights the applicability of U.S. sanctions and export control laws to persons and entities located abroad;
  2. Outlines the enforcement mechanisms that are available for the U.S. government to hold non-U.S. persons accountable for violations of such laws; and
  3. Provides an overview of compliance considerations for non-U.S. companies and compliance measures to help mitigate their risk

Applicability of U.S. Sanctions and Export Control Laws to Foreign-Based Persons

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions, primarily against foreign jurisdictions but also against individuals and entities such as traffickers and terrorists.

The following persons/entities must comply with OFAC regulations:

  • U.S. citizens and permanent resident aliens
  • All persons within the United States
  • All U.S.-incorporated entities and their foreign branches

In certain sanctions programs, foreign entities owned or controlled by U.S. persons also must comply with applicable restrictions – such as engaging in a transaction with the government of Iran. Certain sanctions programs also require foreign persons in possession of U.S.-origin goods to comply.

Non-U.S. persons are also subject to certain OFAC prohibitions. For example, non-U.S. persons are prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as engaging in conduct that evades U.S. sanctions.

Applicability of U.S. Export Control Laws

The compliance […]

ICYMI: U.S. & Chinese Companies Fined $2.5 Million for Underpaying Customs Duties, Whistleblowers to Receive $500,000

Earlier this month, the U.S. Attorney for the Northern District of Texas announced that a Dallas-based importer, two individuals, and two Chinese companies agreed to pay $2.5 million to resolve allegations that they failed to pay customs duties on imports.

Underpaying Through Duplicate Invoices

ADCO, a Dallas-based importer of industrial products, the company owner Raymond E. Davis, customs broker Calvin Chang, and Chinese companies Xiamen Atlantis MFC Co., Ltd. and Xiamen Taft Medical Co., Ltd conspired to underreport the value of goods they were importing.

The scheme involved falsifying invoices with low values for goods ADCO was importing from China. The company used a separate set of invoices that contained the correct value of goods to ensure that ADCO paid its suppliers the actual value of the goods.

In investigating the scheme, the U.S. Attorney’s Office and CBP’s Consumer Products and Mass Merchandising Center of Excellence and Expertise reviewed over 1,000 import entry lines.

Qui Tam Lawsuit

The settlement with the government resolved a “qui tam” lawsuit filed under the False Claims Act (FCA). A qui tam lawsuit is one that is brought by a private citizen or company against a defendant or defendants that owe money to the government.

When a qui tam lawsuit is successful, the party that initiated the case—called a “relator”—is entitled to a substantial monetary reward, ranging between 15% and 30% of the amount recovered for the government.  A qui tam lawsuit also engages the U.S. Department of Justice (“DOJ”) in the case, and typically results in the opening of […]

DOC, Treasury, DOJ, State, and DHS Issue Joint Compliance Note: Know Your Cargo

On December 11, 2023, the U.S. Departments of Commerce, State, Justice, Treasury and Homeland Security published a joint Quint-Seal Compliance Note, “Know Your Cargo: Reinforcing Best Practices to Ensure the Safe and Compliant Transport of Goods in Maritime and Other Forms of Transportation.”

The agencies highlight the increasingly complex nature of global supply chains and opportunities for nefarious actors to evade export control laws and U.S. sanctions. The note also highlights the responsibility of individuals and entities participating in the global transport of goods to assess their risk profile and implement compliance programs.

Potential Indicators of Efforts to Evade Sanctions and Export Controls

The note directs companies involved in funding and facilitating the transport of cargo to be aware of these practices that may suggest export control or sanctions evasion: 

  • Manipulating location or identification data
  • Falsifying cargo and vessel documents
  • Ship-to-ship transfers
  • Voyage irregularities and use of abnormal shipping routes
  • Frequent registration changes” that evade national provisions; and
  • Complex ownership or management

Recommended Compliance Practices

The note recommends that individuals and entities who participate in maritime and other transportation industries should implement and strengthen compliance controls as necessary, especially when operating in high-risk areas or when dealing with entities who demonstrate suspicious behavior. A non-exhaustive list of compliance practices includes:

  • Institutionalizing sanctions and export control programs
  • Establish location monitoring best practices and contractual requirements
  • Know your customer
  • Exercise supply chain due diligence
  • Industry information sharing

The note also encourages individuals and companies to report suspicious behavior to the relevant U.S. authorities.

Recent Activity to Combat the […]

Can A False Claims Act Qui Tam Case, Alleging Customs Fraud, Be Filed And Pursued Anonymously?

Co-authored by:
Jonathan Tycko – Tycko & Zavareei LLP
Jennifer Diaz – Diaz Trade Law

Introduction

A company you work for, or maybe a competing company, is committing customs fraud.  The company is lying about the value of the products it is importing, using improper HTS codes to avoid duties, or importing products that have been transshipped to evade tariffs.  What can you do about it?  One option is to file what is known as a “qui tam” lawsuit under the federal False Claims Act.  A qui tam lawsuit is one that is brought by a private citizen or company against defendant that owe money to the government.  When a qui tam lawsuit is successful, the party that initiated the case—called a “relator”—is entitled to a substantial monetary reward, ranging between 15% and 30% of the amount recovered for the government.  A qui tam lawsuit has another major advantage: it engages the U.S. Department of Justice (“DOJ”) in the case, and typically results in the opening of an investigation by DOJ into the allegations made in the case.  So, a qui tam lawsuit is a means of bringing allegations of customs fraud to the attention of the government, and triggering a serious inquiry by the government into those allegations.

False Claims Act qui tam cases can be complicated, and many factors go into whether such a case can be successful.  In this article, we do not address the substance of the cases themselves.  Instead, we address a question we are commonly asked […]

Customs and Trade Law Weekly Snapshot

Here is a recap of the latest customs and international trade law news:

 

 

 

 

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