The Trump administration has signaled it intends to use the False Claims Act to go after companies that evade customs duties, including any new tariffs the administration imposes as part of its trade agenda.
In a February speech before the Federal Bar Association’s annual qui tam conference, U.S. Department of Justice’s then-Deputy Assistant Attorney General for the Commercial Litigation Branch, Michael Granston, said the Trump administration intends to “aggressively” use the False Claims Act as a tool to achieve government efficiency and root out waste, fraud, and abuse, including by pursuing importers that take steps to avoid paying proper customs duties.
DOJ Joins Whistleblower Lawsuit Against Barco Uniforms
Last month, the administration used its authority to join a whistleblower lawsuit filed against Barco Uniforms Inc. and owners and operators Kenny and David Chan and other affiliates controlled by the Chans. The lawsuit alleges the entities and Chans violated the False Claims Act by knowingly underpaying customs duties owed on imported clothing. Barco Uniforms sells clothing for restaurants and healthcare providers.
“Those who import and sell foreign-made goods in the United States must comply with all trade laws,” said Acting Assistant Attorney General Yaakov M. Roth of the Justice Department’s Civil Division. “The Department will hold accountable parties who evade or underpay duties owed on imported merchandise.”
Importance of Whistleblowers in Customs Fraud Cases
Whistleblowers play an important role in rooting out fraud against the government, especially customs fraud. In the case against Barco Uniforms, the former director of product commercialization at Barco Uniforms originally filed the lawsuit under the qui tam or whistleblower provisions of the False Claims Act. The False Claims Act permits private parties to file suit on behalf of the United States for violations of the False Claims Act and to share in any financial recovery. The act allows the United States to intervene and take over responsibility for the lawsuit, as it has done in the Barco Uniforms case.
Whistleblowers with inside knowledge of customs fraud can bring a lawsuit on behalf of the government under the False Claims Act’s qui tam provisions if they know of an individual or entity who is failing to pay customs duties or misrepresenting the value or nature of the goods imported to avoid or reduce the customs duties owed. Qui tam whistleblowers are eligible to receive between 15 and 30% of the government’s recovery.
Ford’s $365M Customs Fraud Settlement Cited as Example
During FY 2024, settlements and judgments under the False Claims Act exceeded $2.9 billion. This figure includes a $365 million customs fraud settlement announced in March 2024 with Ford Motor Company. The lawsuit against Ford had alleged that the company avoided higher customs duties by misclassifying cargo vans as passenger vehicles by installing sham rear seats in vehicles that were purportedly never intended to move passengers. The lawsuit asserts that Ford installed these rear seats to avoid a 25% duty rate on cargo vehicles, higher than the 2.5% duty rate Ford had paid on the vehicles.
Phillips & Cohen’s Role in Fighting Customs Fraud
Phillips & Cohen has been instrumental in bringing False Claims Act lawsuits to return money to the federal government lost to customs fraud. In 2020, Phillips & Cohen announced a settlement with Linde GmbH and its North American subsidiary for $22.8 million for allegedly evading US customs duties on materials it bought and imported to build chemical and natural gas plants. At the time, the Linde case was among the largest False Claims Act settlements involving customs fraud.
If you suspect customs fraud and would like to speak to an experienced whistleblower attorney, contact Phillips & Cohen for a confidential review of your case.