Key Takeaways
- Anti-dumping and countervailing duties (AD/CVD) are tariffs imposed to counteract unfair trade practices, such as foreign goods sold below cost or benefiting from government subsidies.
- Companies evade these duties through various methods, including misrepresenting country of origin (transshipment), misclassifying goods, undervaluation, and splitting shipments.
- Whistleblowers are crucial for exposing AD/CVD fraud and can be eligible for substantial financial rewards, often 15% to 30% of the government’s recovery, plus protections, particularly under the False Claims Act.
Introduction to Antidumping and Countervailing Duties (AD/CVD)
Anti-dumping and countervailing duties (AD/CVD) are additional tariffs imposed to counteract unfair trade practices, specifically when foreign goods are sold below cost (dumping) or benefit from foreign government subsidies. If you know of companies evading these duties, you may be eligible for a whistleblower award.
What Are Anti-Dumping and Countervailing Duties (AD/CVD)?
- Anti-dumping duties (ADD) are tariffs imposed when foreign goods are sold in the U.S. below their fair value (“dumping”). This protects domestic industries from unfairly priced imports.
- Countervailing duties (CVD) are tariffs on imported goods that have received unfair government subsidies in their country of origin. These duties aim to offset that advantage.
The Role of Whistleblowers in Exposing Customs Fraud
Bad actors, including both foreign exporters and domestic importers, often attempt to circumvent anti-dumping and countervailing duties. This can involve falsifying customs forms, misclassifying goods, or transshipping finished products through a country not subject to an AD/CVD order. While these illegal actions may avoid duties in the short term, they expose companies to severe financial penalties and legal repercussions if discovered.
AD/CVD orders are meant to level the playing field for US companies when foreign governments provide subsidies to companies that export their goods to the US or when foreign industries sell, or “dump,” their products in the US below cost, thereby avoiding tariffs.
Customs fraud schemes can be difficult to detect without company or industry insiders. To encourage whistleblowers to speak up, the US government has laws and systems that incentivize, protect and facilitate reporting, including the False Claims Act, the Enforce and Protect Act, and a system that accepts anonymous allegations electronically, known as e-Allegations.
Examples of Anti-Dumping and Countervailing Duties
Companies often use fraudulent schemes to evade AD/CVD. These illicit practices harm the U.S. government and domestic industries.
Common evasion methods include:
- Misrepresenting Country of Origin (Transshipment): Falsely rerouting goods through a third country to avoid applicable AD/CVD.
- Misclassification of Goods: Intentionally mislabeling products on customs forms to get a lower or zero duty rate.
- Undervaluation or Quantity Manipulation: Underreporting the true value or count of goods on customs documents to reduce duties owed.
Reporting Antidumping & Countervailing Duties Fraud Through the False Claims Act
Whistleblowers who report anti-dumping and countervailing duty violations through the False Claims Act (FCA) can recover substantial sums for the government while earning compensation for their efforts
The False Claims Act stands as the US government’s most potent tool for combating customs duties fraud, such as AD/CVD. It specifically incentivizes private citizens, known as “relators,” to file what are called “qui tam” lawsuits on behalf of the United States. These lawsuits target companies that are defrauding the government.
Companies that violate the False Claims Act may be liable for up to three times (treble damages) the government’s losses, plus substantial penalties.
Whistleblowers who report under the False Claims Act may be eligible for a reward of 15 percent to 30 percent of the government’s recovery, plus attorney’s fees. The law also provides protections against retaliation.
Real-World Impact: Whistleblower Success Against Anti-Dumping Duty Evasion
Employees who handle customs paperwork are often in the best position to spot this type of fraud, but others, including industry insiders and competitors, may also come across suspected customs or AD/CVD violations.
For example, an online furniture retailer filed a qui tam lawsuit against several competitors in the furniture industry whom she alleged were not paying antidumping duties. The whistleblower lawsuit alleged that the companies knowingly made false statements on customs declarations about bedroom furniture imported from China, reclassifying the imported goods as non-bedroom furniture to avoid paying antidumping duties.
During the time of the alleged conduct, wooden bedroom furniture from China was subject to a 216 percent antidumping duty, while non-bedroom furniture was not subject to any antidumping duty.
Two furniture companies, Bassett Mirror Co. and Z Gallerie LLC, paid the government a total of $25 million to settle the whistleblower case, with the whistleblower receiving over $4 million for her efforts.
Legal Considerations and Protecting Customs Fraud Whistleblowers
US Customs and Border Protection (CBP) offers other avenues for reporting fraud, including the Enforce and Protect Act and its e-Allegations portal. In some instances, individuals who report through these mechanisms may be entitled to a reward, but unlike the False Claims Act, which has no cap on awards, rewards through CBP are limited.
Individuals who have concerns about suspected customs fraud should consider consulting with an experienced whistleblower attorney to discuss their options and make sure they are protected.
Phillips & Cohen LLP: Your Partner in Reporting AD/CVD Fraud
Phillips & Cohen is widely recognized as the most successful law firm representing whistleblowers, assisting those with information about various frauds, including anti-dumping and countervailing duty evasion. Recoveries from our cases total over $13 billion, and we have been recognized for our work by numerous national awards. Our attorneys and cases have been featured in The New York Times, The Wall Street Journal, the Financial Times, and other leading news media. Three of our cases were even highlighted in the CBS series, “Whistleblower.”
Phillips & Cohen’s roster includes former federal prosecutors, the first head of the SEC Office of the Whistleblower, a former deputy administrator of the Centers for Medicare and Medicaid Services, the author of a leading treatise on the False Claims Act, and attorneys with decades of experience representing whistleblowers.
If you have information regarding AD/CVD evasion or other customs fraud, contact us for a confidential case review.