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March 11, 2015 Customs Fraud

Aluminum Importers Agree to Settle False Claims Act Allegations Involving Duties Evasion

Three U.S.-based importers of aluminum products, including California-based C.R. Laurence Co. Inc., Florida-based Southeastern Aluminum Products Inc., and Texas-based Waterfall Group LLC have agreed to pay a total of $3 million to settle allegations of evading proper customs payments for the importation of aluminum extrusions from China. Companies that cheat the government out of customs duties are considered in violation of the False Claims Act, which imposes up to triple damages for each violation.

According to a recent press release issued by the Department of Justice, the three companies all sell aluminum shower doors containing aluminum extrusions manufactured and sold in the People’s Republic of China. Upon receiving each import, each Company is required to pay a certain amount to the United States.

The evasion scheme was originally exposed by a whistleblower and former employee of one of the companies. Due to his willingness to come forward, the whistleblower is set to receive $555,100 as a reward.

Details of the case against the aluminum importers

In order to understand the nature of the importers’ wrongdoing, it may help to explore some of the underlying foreign import regulations applicable to aluminum products. Since 2010, the federal government has assessed two customs fees on aluminum products originating from China. These fees are known as “antidumping duties” and “counterveiling duties.” While not every import faces these fees, many products originating from China are subject to these additional costs.

The reason for the fees is to level the playing field between cheap, foreign-made products and similar products manufactured domestically. In other words, the federal government is trying to prevent nations like China from “dumping” their products on the U.S. market, thereby preventing domestic manufacturers from having a chance in the market. “Counterveiling duties” are assessed on certain foreign products to offset subsidies offered by foreign nations for importing to the United States.

In today’s case, the importers involved uncovered a perceived loophole in the assessment of these duties and attempted to circumvent the regulations in order to decrease their expenses and increase profit. According to allegations, these importers sought to evade duties — which are assessed on imports from China — by “trans-shipping” their goods from China to Malaysia to the United States. The importers believed that customs officials would be fooled by the import from Malaysia and the fees would thereby be avoided. Unlike China, imports from the nation of Malaysia are not subject to these duties, and the importers found it more economical to transship from there than to pay the fees.

Government’s comments

The U.S. Department of Customs and Border Patrol, which works tirelessly to protect our shores, commented, “Antidumping and countervailing duties are critical to ensure fair competition for U.S. manufacturers….U.S. Customs and Border Protection works diligently with the Department of Justice, U.S. Immigration and Customs Enforcement, Homeland Security Investigations, and the U.S. Department of Commerce to aggressively pursue duty evasion.”

Likewise, the U.S. Attorney’s Office for the Middle District of Florida commented, stating, “Countervailing and antidumping duties are designed to provide a level playing field between companies that purchase products domestically and those that import products from countries which subsidize their production….Importers who use fraud to avoid paying these duties gain an unfair business advantage over competitors who abide by the rules.  This settlement reaffirms our commitment to ensuring that business competition remains fair in our district.”

Contact Berger Montague today

If you are aware of possible fraudulent business practices occurring at your place of employment, we encourage you to contact Berger Montague for a confidential consultation and review of your claims.