Tariff and customs fraud occur when importers do not pay the required duties, or tariffs, on goods that they bring into the country. In addition to depriving the government of revenue, this form of fraud gives companies an unfair advantage over competitors and undermines the nation’s trade policy. However, of the millions of containers that enter the country every year, customs inspectors are only capable of inspecting a tiny fraction.
Whistleblowers play an important role in uncovering tariff and customs fraud, and they can be rewarded for doing so. Putting together a strong case is essential to exposing these schemes and making sure you earn the highest reward possible. Let the team at Newman & Shapiro help.
Types Of Tariff And Customs Fraud
Unscrupulous importers have devised numerous ways to skirt the nation’s tariff laws and regulations. Those include:
Misstating the country of origin. The tariff rate that is imposed on an imported good often depends on its country of origin. Claiming that a good comes from a country with lower tariffs allows companies to pay less than they should. Some tariffs are known as anti-dumping, which means they are intended to keep certain countries from dumping products on the market at below cost. Without these duties, domestic companies may be put out of business, which would allow the dumping country to then raise their prices significantly. A related tariff, known as countervailing, is imposed on imports believed to be subsidized by a foreign country.
These forms of fraud are usually accomplished by transshipping, whereby products are sent from the country of origin to another country and finally to the United States. Importers may also use altered paperwork to misrepresent the actual country of origin.
Misclassification of goods. Tariff rates also depend on the type of good that is being brought into the country. There is a standardized classification system known as the Harmonized Tariff Schedule or HTS, that is used to determine the rates imposed. Companies attempt to circumvent the HTS by incorrectly misstating the nature or characteristics of the goods. By cheating on the duties owed, these companies can sell their products for less than competitors who pay the tariffs.
The most common ways to misclassify goods are by mislabeling them or using incorrect codes on receipts and bills of lading.
Undervaluation of goods. The value of the goods being imported will affect the ultimate tariff that is paid on it. Intentionally misstating the value of goods results in a lower tariff and, therefore, an unfair market advantage. Sometimes companies do this by keeping two sets of invoices: one that is presented to the government in order to calculate the duty, and the other that states the actual value of the goods. Numerous other methods exist for undervaluing goods.
Split shipments. Importers sometimes attempt to artificially lower the dollar value of the goods they bring in by splitting them into multiple shipments. Splitting products into multiple shipments helps dishonest companies underpay or even avoid tariffs.
The Importance Of Whistleblowers
The enormous volume of goods brought into the United States makes it exceptionally difficult for U.S. Customs and Border Protection to screen shipments that evade or improperly minimize tariffs. On top of that, agents are more often looking for drugs, weapons, and similar contraband. The methods that companies use to cheat on tariffs are not easily discernible to customs agents.
Those who are in the best position to report tariff and customs fraud are the individuals who work for the importers. They could work a number of positions in the supply chain, in shipment, or for the importers’ customers. Some whistleblowers are competitors who have evidence that a company is cheating the system. There’s no requirement for a whistleblower to be an American citizen to submit a claim and be eligible for a reward. But it is important to build a convincing case.
I Have Evidence Of Tariff And Customs Fraud; Now What?
If you have evidence that someone is violating U.S. customs and tariff laws, you may be able to file a complaint on behalf of the government under the False Claims Act. These complaints are known as qui tam lawsuits. Where filed properly, they allow the whistleblower – also known as a relator – to claim between 15% and 30% of funds recovered by the government.
Not all information is sufficient to file a qui tam lawsuit. For example, the whistleblower must have non-public information; if the government already knows about it, then it doesn’t count. Qui tam claims are also not like ordinary lawsuits. There are unique substantive and procedural requirements that, if not followed, could invalidate your claim and your ability to recover a reward.
Some whistleblowers worry that exposing tariff and customs fraud could jeopardize their jobs or careers. Fortunately, the False Claims Act provides strong protections against employer retaliation. These protections make it illegal to terminate, demote, harass, or otherwise punish relators.
Those with knowledge about customs and tariff fraud should speak with an experienced whistleblower attorney. The right attorney will know how to comply with the technical requirements of qui tam lawsuits and will help protect the whistleblower against retaliation. A knowledgeable attorney will also understand customs law and how to draft a complaint that will get the government’s attention.
Because tariff violations subject companies to both civil and criminal penalties, the amount of money recovered by the government (a portion of which the whistleblower may be entitled to) could be substantial. A skilled whistleblower lawyer will know how to negotiate the maximum reward.
Contact Our Tariff And Customs Fraud Whistleblower Attorney
Tariff and customs fraud cheats the government, hurts honest companies, and unnecessarily costs consumers. Newman & Shapiro helps expose it and protects the rights and interests of whistleblowers. If you have evidence that someone is violating U.S. tariff laws, contact us today to get started on your case.