June 25, 2025. An important decision was issued Monday, June 23, 2025, out of the U.S. Court of Appeals for the Ninth Circuit, in a customs duty evasion case brought under the False Claims Act. In the case of Island Industries v. Sigma Corporation, the plaintiff, a competitor of the defendant who brought the case as a qui tam relator, alleged that the defendant had evaded antidumping duties on certain pipe fittings that the defendant imported into the United States. At trial, the jury found against the defendant, and that the defendant owed approximately $8 million in unpaid duties (which would be automatically tripled under the False Claims Act). On appeal, the Court of Appeals held:
1. Qui tam cases under the False Claims Act that allege evasion of customs duties are properly brought in federal district courts, and not in the Court of International Trade.
2. That the government may seek penalties against an importer that evades duties under 19 U.S.C. § 1592 does not preclude the government, or a private qui tam plaintiff, from also seeking damages and penalties under the False Claims Act, 31 U.S.C. § 3729. An importer that evades duties is subject to potential liability under both laws.
3. Liability under the “reverse false claims” provision of the False Claims Act requires that the defendant have had an “obligation” to pay money to the government. Defendant argued that it had no “obligation” to pay the antidumping duties at issue because the amount of duties owed was not fixed until the end of the liquidation process. The court rejected that argument, holding that an importer has an obligation, within the meaning of the False Claims Act, to pay antidumping duties at time of importation, even if the amount owed is not fixed until later.
4. On the issue of scienter (i.e., the importer’s “knowledge”), the defendant argued that it could not be held liable because it did not know about the relevant antidumping order at the time it imported the products. The court rejected that argument, holding that the evidence was sufficient to show that the defendant had acted “with either deliberate indifference or reckless disregard for the truth when it declared on customs forms that it did not owe antidumping duties on [the imported products].” The court reasoned that an importer has an obligation to make reasonable inquiry as to what duties are owed and cannot evade False Claims Act liability by failing to make those inquiries. In the customs context this means that, in a False Claims Act case, an importer is presumed to know about existing antidumping orders or other customs obligations. Ignorance will not be a defense, even to treble damages and penalties.
The Ninth Circuit covers the West Coast states, and thus some of the busiest ports in the country. This decision is a significant win for customs enforcement, and for whistleblowers who bring qui tam cases under the False Claims Act.
Tycko & Zavareei LLP attorneys Jonathan Tycko and Jaclyn Tayabji filed an amicus brief in this appeal on behalf of The Anti-Fraud Coalition, an organization that supports whistleblowers and advocates for the False Claims Act.
If you would like to report customs fraud, you can contact attorneys at Tycko & Zavareei LLP. Visit Tycko & Zavareei LLP’s website for whistleblowers to learn more at www.fraudfighters.net.