Companies that import goods into the United States are required to accurately declare information on those goods to the government and pay the appropriate amount of import duties (tariffs) owed on them.
Misrepresenting imported goods allows companies to pay less tariffs than required, giving them an unfair price advantage over honest competitors.
Tariff/duty fraud also deprives the government of revenue, harms domestic producers and workers, undermines trade policy, and can cause negative consumer and environmental externalities.
Types of tariff and duty fraud that commonly lead to whistleblower claims are explained below. Whistleblowers with knowledge of tariff fraud may be eligible for a substantial award if the information they provide leads to the successful prosecution of law breakers.
Misclassification of Goods
Import duties are based on the type of product being imported to the United States, with tax rates determined by the Harmonized Tariff Schedule of the United States (HTS). When products are imported, the importer must provide the correct tariff classification so that accurate duties can be imposed. Companies can lower the amount of custom duties owed by purposefully entering false tariff classification information.
Misrepresenting the Country of Origin
Customs duties are a significant source of U.S. Government revenue, but a lack of manpower and resources makes ensuring compliance with customs laws difficult.
Tariff rates for imported goods are also based on the product’s country of origin. Claiming that a product hails from one country with lower tariff rates, when in fact the product hails from a country with higher tariff rates, allows companies to avoid paying duties.
Often, misrepresenting a product’s country of origin is done to avoid anti-dumping and countervailing duties.
Undervaluation of Goods
Another factor that influences import taxes is the value of the goods being imported. When companies intentionally undervalue imports, they underpay their duty obligations in order to boost their profit margins.
Have information about Tariff and Duty Fraud?
Whistleblower claims under the False Claims Act—which provide for triple damages and other penalties—are a powerful customs duties enforcement mechanism. For their part in helping to expose tariff fraud schemes, whistleblowers who bring a “qui tam” lawsuit and recover money owed to the government are entitled to an award of between 15% and 30% of the amount recovered.
If you have evidence of customs fraud and are interested in blowing the whistle, you can discuss your case for free with our attorneys.