Customs and Tariffs Fraud
Goods imported into the United States are often subject to taxes (also called tariffs). Because the United States Customs and Border Patrol (CBP) cannot inspect and verify every shipment of goods into the United States, the government relies on importers to accurately report the type, value, and country of origin for the goods imported into the United States. Unscrupulous importers often resort to fraud and deception to reduce their tariff obligations.
Customs fraud is the fraudulent attempt to reduce or avoid tariffs. This type of fraud is actionable under the False Claims Act through its “reverse false claims” provisions, which impose liability on anyone who “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money property to the Government.”
Common Types of Customs Fraud
Custom duties are based on the declared value of the imported goods. Unscrupulous importers avoid paying the full amount due by declaring a value that is significantly lower than the actual value of the goods.
Transshipment and Re-labeling
Transshipment involves the shipment of goods from the country of origin to an intermediary country before the goods arrived in the United States. Transshipment is legal as long as the appropriate country of origin is accurately disclosed to the CBP. However, when transshipment and relabeling is used to disguise the country of origin, the practice is illegal and actionable under the False Claims Act.
Through a complex and sometimes political process, the United States Department of Commerce sets the duty rates based on certain product schedules. Some importers use improper tariff and product codes to fraudulently misclassify goods as those with lower tariffs.
Structuring occurs when an importer breaks a shipment into multiple shipments of lower value to reduce the tariff obligation. Breaking up larger shipments into smaller shipments can enable an importer to fraudulently claim that each shipment falls below the limit necessary to trigger the tariff obligation.