A recent series of settlements in False Claims Act (FCA) cases and a large fine imposed by a California District court demonstrate the importance of complying with the Customs and Border Protection (CBP) importation regulations. FCA cases are filed by “whistleblowers”, on behalf of the United States, charging any person with making a false claim to the federal government. The whistleblower, called the relator, receives a portion of any agreed settlement.

In Georgia, an importer of tools will pay $1.9 million to settle FCA allegations that it was falsely labelling its tools as “made in Germany” when, in fact, the tools were made in China. The settlement states that tools manufactured in China were sent to Germany for some additional processing and were then commingled with tools that had no additional processing done in Germany. All the items were then claimed to be of German origin upon importation into the U.S., thus avoiding the payment of Section 301 duties of 25%  assessed on certain imports of Chinese origin.

In Texas, in another FCA settlement, an importer of industrial products, along with two Chinese companies and two individuals, agreed to pay $2.5 million to resolve allegations that they were undervaluing imported goods. Commercial invoices were submitted to CBP at time of entry for the items in question showing values that were lower than the actual values and agreed prices. Invoices showing the true higher values were then sent by the Chinese suppliers to the importer at a later time. This resulted in the loss of revenue for CBP in the form of underpaid customs duties and other fees.

Finally, in California, in another double-invoicing scheme, a clothing wholesale company was fined $4 million, ordered to pay $6,390,781 in restitution, and placed on probation for five years for undervaluing imported garments in a scheme to avoid paying millions of dollars in customs duties. In this case as well, a false lower valued commercial invoice was submitted to CBP at time of entry, and a true higher value invoice was then sent later to the importer by the Chinese supplier resulting in the underpayment of duties and fees.