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Ford Settles Customs Fraud Case for $365 Million

In one of the largest customs duties settlements in recent history, Ford Motor Company has agreed to pay $365 million to the federal government to settle allegations the company installed “sham” rear seats to avoid paying higher customs duties.  Avoidance of customs duties harms competition in the American marketplace and holding accountable companies that do so is an important law enforcement priority.

According to the U.S. Department of Justice (DOJ) allegations in the Ford case, from April 2009 to March 2013, Ford installed fake rear seats and other temporary features in hundreds of thousands of cargo vans imported from Turkey in order to classify the vans as passenger vehicles, a violation of the Tariff Act of 1930.  By misclassifying the vehicles, Ford was able to avoid paying the 25% duty rate applicable to cargo vehicles and instead, paid a duty rate of just 2.5%.  After clearing customs, the cargo vans were stripped of the rear seats and returned to their original purpose – two-seat cargo vans, according to DOJ.

Principal Deputy Assistant Attorney General Brian M. Boynton, head DOJ’s Civil Division said, “Importers have an obligation to truthfully declare the nature of their products and pay the duties that are owed. …The government will not permit companies to evade duties by adding sham features to their products and then misclassifying them.”

Although the Ford case is not a whistleblower case, whistleblowers can be instrumental in uncovering and reporting customs fraud, as was the case in Phillips & Cohen’s Linde GmbH lawsuit, which produced one of the largest recoveries resulting from a whistleblower case alleging the avoidance of customs duties. In that case, Linde GmbH and its North American subsidiary agreed to pay $22.8 million to settle allegations the multinational company evaded US customs duties on materials it bought and imported to build chemical and natural gas plants.

The lawsuit alleged Linde GmbH avoided paying the required customs duties by submitting invoices and entry forms to CBP that falsely identified imported goods by using incorrect tariff codes (Harmonized Tariff Schedule) to assess duties.  In one example, the lawsuit alleged that Linde described stainless steel pipes as carbon steel pipes which have a lower tariff duty, saving the company millions of dollars.  Linde GmbH also failed to report raw materials and components, called assists, that it provided to manufacturers to make imported goods. The assists added value to the imported goods and are required to be reported on customs forms.

Whistleblowers with inside knowledge can be instrumental in uncovering customs fraud.  If you know of customs fraud and would like to talk to an experienced whistleblower attorney, contact Phillips & Cohen.

Phillips & Cohen is the most successful law firm representing whistleblowers, with recoveries for the government from its cases totaling over $13 billion.  The firm’s partners include the former first head of the SEC Office of the Whistleblower, the former director of the CFTC’s Whistleblower Office and numerous attorneys with decades of experience representing whistleblowers.

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