Customs Fraud Cases present unique challenges to developing and presenting viable False Claims Act Qui Tam Cases.
“What types of Customs Fraud Cases are suitable for qui tam actions?” The three most common are
(1) falsifying country of origin certificates and labels or mismarking goods (either to evade/minimize import taxes, duties, tariffs and anti-dumping penalties or circumvent US import quotas), often done in conjunction with “transshipping” the goods first to a country that can import them into the United States on more favorable terms,
(2) falsely claiming that goods coming into the United States will not formally enter the commerce of the United States but instead will be transshipped in-bond to another country (for example, Mexico), and
(3) under-reporting the declared “total entry value” of imported goods on entry documents, such as the Entry Summary (CPB Form 7501) and Inward Manifest (CBP Form 7533), and presenting false commercial invoices in support of such false statements. “What types of goods are being imported unlawfully into the United States?” Common categories include clothing, apparel and textiles (often from China), fasteners, produce and seafood, grey market prescription drugs and cigarettes, and other consumer products. “Who are potential targets of Customs Fraud?” These would include: manufacturers, licensed customs brokers, shippers, warehouse operators, wholesalers, retailers and other importers.
US Customs Fraud
“What are the greatest challenges to successful Customs Fraud cases?” There are two main ones. First, there has to be a valid legal theory of liability. It needs to be couched in terms of a “reverse false claim” under the False Claims Act. This means there must be a pre-existing obligation owed to the United States at the time the false claim is presented or the false statement is made. Second, if one is going to include US-based defendants (such as brokers, shippers and warehousers, and most importantly, large wholesalers, retailers and other importers), it is imperative to get solid evidence that the targets’ key employees knew about the unlawful Customs Fraud practices while they were occurring. Often it takes an insider –or access to an insider– to get this kind of evidence.
