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 an investigation by DOJ into the allegations made in the case.

In this case, the whistleblowers will receive $500,000 as part of the settlement.

A Customs Attorney Can Help Implement Compliant Valuation Practices

In this case, the parties involved were knowingly and willfully perpetrating a fraud to lower their duties liability. However, undervaluing (even if not knowing and willful) is still a serious violation of U.S. Customs laws.

All importers should have robust compliance measures in place to ensure they are valuing imports properly. The process should be periodically re-evaluated to ensure it is up to date with the latest CBP rulings and guidance.

A customs attorney can help you value specific goods, but also help you set up a system to ensure compliance going forward.

Diaz Trade Law has significant experience in a broad range of import compliance matters, including customs valuation. Contact us at info@diaztradelaw.com or call us at 305-456-3830.

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