June 15, 2023. The United States Department of Justice settled criminal and civil actions against a South Korean clothing manufacturer for customs fraud. Under the terms of the settlement, the apparel manufacturer paid over $2 million to resolve civil allegations and a criminal fine of $250,000. Under the qui tam provision of the False Claims Act, a whistleblower reported this fraud scheme and will receive 18% or $369,000 of the settlement.
Anyclo International pled guilty to evading customs duties on clothing and apparel that it manufactured abroad and imported into the United States. The South Korean company admitted to perpetrating a double invoicing scheme, where it generated two invoices for the same. An accurate invoice was provided to U.S. purchasers, and a false invoice that undervalued goods was given to its customs broker, who transmitted that information to Customs & Border Protection (CBP). This fraudulent activity allowed Anyclo to drastically underpay customs duties that it owed based on the true value of those goods. Anyclo’s evasion of customs duties encompassed an approximately seven-year period.
Falsifying the value or quantity of imported goods can violate the False Claims Act. CBP relies on insiders and whistleblowers to report customs and tariffs fraud, as tariffs are increasingly used as a policy tool of the U.S. Government. Anyclo International’s admission of evading customs duties and subsequent hefty fines and penalties should remind all companies of their obligations under U.S. law. Companies need to comply with customs laws and regulations when engaging in international trade to avoid severe repercussions. Implementing internal controls, conducting routine audits, and complying with full disclosure to customs authorities can go a long way in preventing fraudulent activities. Negative consequences outstrip any short-term gain obtained by evading customs duties, as shown in the Anyclo International case. The False Claims Act is significant enforcement tool in the logistics industry, and whistleblowers who see something and say something can be rewarded for reporting wrongdoing.
If you would like to report customs and tariffs fraud, you can contact Jon Tycko of Tycko & Zavareei LLP. You can also go to Tycko & Zavareei LLP’s website for whistleblowers to learn more at www.fraudfighters.net.