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Whistleblowers and customs fraud – reporting evasion of antidumping or countervailing duties

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Individuals looking to report companies that evade antidumping or countervailing duties (AD/CVD) through fraud should be aware of the avenues available to whistleblowers and the significant rewards whistleblowers may receive.

Bad actors, including both foreign exporters and domestic importers, may try to circumvent AD/CVD duties by falsifying customs forms or transshipping finished products through a country that is not the target of an AD/CVD order. These illegal actions often avoid customs duties in the short term, but expose companies to potentially severe financial penalties 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.

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.

Whistleblowers who report AD/CVD violations through the False Claims Act can recover substantial sums for the government while earning what can be sizeable whistleblower rewards.

The False Claims Act, the US government’s primary tool for fighting fraud, provides financial incentives to individuals who file what are known as “qui tam” lawsuits on behalf of the US against companies that are defrauding the government, such as those that knowingly evade customs duties.

Companies that violate the False Claims Act may be liable for damages up to three times 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.

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.

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 are thinking about reporting suspected customs fraud should consider consulting with an experienced whistleblower attorney to discuss their options and make sure they are protected.

About Phillips & Cohen

Phillips & Cohen LLP is the most successful law firm representing whistleblowers, with recoveries from our cases totaling over $12.3 billion. We have been recognized on such lists as the “Hot List of Plaintiffs’ Attorneys” (National Law Journal), “500 Leading Lawyers in America” (Lawdragon) and “Best Lawyers” (US News and World Report). Our attorneys and cases are regularly reported on in The New York Times, The Wall Street Journal and other news publications. The firm’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.

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