Customs fraud occurs when a company that is importing products into the United States dishonestly reduces or avoids paying customs duties on the imported products.
A “tariff” is the technical term for a special duty rate imposed on a category or goods imported into the United States. Tariffs fraud is any attempt by a company that is importing products or goods into the United States to avoid the payment of the duty rate imposed by a tariff.
A customs duty is any tax imposed on cross-border goods being imported or exported. The tax, or tariff, placed on these goods is collected by the government and used to help protect the country’s economy and local industries while controlling the flow of goods.
The most common types of customs violations are:
The United States Customs & Border Protection (CBP) uses what is known as the “harmonized tariff schedule” to enforce customs duties set by the Department of Commerce. The custom duties process works by an honor system of sorts, with importers relaying the classification and valuation of goods to CBP, who then inspect and verify a small percentage of imports. It is because of this process that whistleblowers play a crucial role in uncovering customs fraud.
It’s difficult for customs authorities to identify fraud for a number of reasons, including:
Customs fraud penalties are often expressed as fines, imprisonment, forfeiture, or liquidation. These penalties occur when an exporter attempts to defraud the government by evading the appropriate tariffs placed on the goods.
If you have information on customs or tariff fraud, it is important to immediately contact a reputable qui tam attorney who can help walk you through the whistleblowing process. By coming forward as a customs fraud whistleblower, you are helping protect the domestic economy and may also be entitled to a substantial whistleblower reward, which is typically 15-30% of the amount recovered on behalf of the government.
A qui tam case is a lawsuit brought by a private person on behalf of the government under the federal False Claims Act or similar state laws. Under the False Claims Act, the private person who brings the lawsuit is known as a “relator.” If the government recovers money as a result of the qui tam lawsuit, then the relator is rewarded with a share of the recovered money which is usually between 15% and 30%. The rest goes to the government.
The False Claims Act is specifically designed to encourage whistleblowers to come forward and report fraud, as well as pursue qui tam whistleblower cases on behalf of the government.
A successful qui tam whistleblower is entitled to a minimum of 15% of the total recovery and can obtain as much as 30% of the recovery in some circumstances. In many cases, qui tam relators have received awards of millions of dollars as a result of their right to share in the recovery. In addition to the potential monetary reward, many qui tam whistleblowers are motivated by patriotism and a strong desire for fairness and justice. These whistleblowers are true heroes who take on risks and burdens for the good of their country and fellow taxpayers.
Generally, anyone who has non-public information that a company or individual has violated the False Claims Act may blow the whistle by bringing a qui tam lawsuit. Claims have been brought by employees, former employees, customers, competitors, and others who have obtained independent information about fraud against the government.
If you learn of customs fraud from the news media, or other public sources of information, you generally cannot bring a qui tam lawsuit based on that information. This is because of the “public disclosure bar” that is part of the False Claims Act. However, under the case law interpreting the public disclosure bar, a whistleblower who uses publicly-available data or information as part of a broader effect to uncover a fraud may still be able to bring a successful case, as long as the fraud itself has not previously been made public.
When a qui tam lawsuit is filed by a customs fraud whistleblower, it is initially kept “under seal.” This means that only the government is informed of the lawsuit. During the time that the lawsuit is “under seal,” the government has an opportunity to investigate the qui tam whistleblower’s allegations. The government, if it chooses, can then “intervene” in the lawsuit. This means that the government’s own attorneys from the Department of Justice will become involved in litigating the claims. Generally, intervention is a positive development for the whistleblower, because intervention brings all of the resources and prestige of the government to the case. If the government decides not to intervene, however, the qui tam relator may still choose to continue the case without the government’s assistance.
Yes. A group of whistleblowers may jointly bring a False Claims Act qui tam case. In some cases, this may be beneficial because different people may have different information that, when combined, powerfully prove the allegations of customs fraud.
The False Claims Act has a “first to file” rule. This means that only the first qui tam relator (or group of relators acting together) to bring a lawsuit arising out of a particular customs fraud scheme will be entitled to share in the monetary reward. For this reason, once you decide to move forward with a qui tam case under the False Claims Act, it can be important to prepare and file the lawsuit quickly.
Yes. Subject to some exceptions, a qui tam case under the False Claims Act must be brought within six (6) years of when the customs fraud occurred. But if you have knowledge of fraud against the government and are considering a qui tam action, you should not delay. If you wait too long, you may lose your right to obtain a whistleblower’s award. If someone else discloses the fraud or brings another qui tam action before you do, then you may lose your chance for an award.
When a qui tam case is filed in court, the False Claims Act requires that it be put “under seal,” which means that it is non-public, and is kept secret from the defendant that has been sued. Instead, only the U.S. Department of Justice is informed of the filing of the case. The case remains under seal for as long as it takes for DOJ to investigate the case, a period that, on average, is around 18 months and is often much longer. During the “under seal” period, the whistleblower is anonymous. However, once the investigation is complete, in almost all cases the complaint is unsealed and becomes public, along with the name of the person or company that filed the case. Accordingly, the anonymity offered by the False Claims Act is only temporary.
Not initially. When a qui tam lawsuit is filed in court, it is put “under seal.” This means that it is not public or disclosed to the defendants. Instead, only the government learns of the filing. The government will then investigate the customs fraud claims and decide whether to intervene. If the government intervenes, then the complaint will be served on the defendants and will become public. If the government does not intervene, then the qui tam relator can choose to pursue the case without the government’s assistance, and at that time, the complaint would be served and become public. Either way, in most cases, the defendants you are accusing of fraud will eventually learn of your allegations. The time from filing the complaint until the case comes out from “under seal” is typically a full year and often more, so qui tam relators have anonymity for at least some period of time after they file a whistleblower claim.
The False Claims Act has a whistleblower protection provision. Under that provision, an employer may not discharge, demote, suspend, threaten, harass, or discriminate against an employee for bringing a qui tam case under the False Claims Act. If the employer violates that prohibition, the employee can sue the employer for damages (such as lost wages) and other relief. Thus, the False Claims Act offers protection to an employee who blows the whistle on his or her employer. Most state false claims laws also have these types of anti-retaliation provisions.
For a number of reasons, if you are considering bringing a qui tam lawsuit under the False Claims Act, you should act quickly. If either the government or another qui tam relator discloses the fraud in a lawsuit, you likely will lose your right to a relator’s award. Accordingly, you should consult with a whistleblower attorney to discuss your potential case. An attorney with experience in False Claims Act whistleblower cases can help you through the process of deciding whether to go forward. Your discussions with the attorney will be confidential.
Many attorneys, including the qui tam attorneys at Tycko & Zavareei LLP, will provide you with an initial consultation and advice without requiring you to pay any fees or make any commitments. You should not discuss the matter with anyone other than an attorney, as your discussions with others may not be confidential. Furthermore, you run the risk that someone else will learn of the customs fraud and bring a qui tam lawsuit before you do, thereby undermining your right to a relator’s award.
If you are a current employee of the company or organization that is engaged in customs fraud against the government, you should not communicate with your whistleblower attorney (or anyone else) about the fraud through your office computer, work email, or work telephone. Communications made that way may not be secure and may provide a basis for your employer to take disciplinary action against you. Instead, use a home computer or personal telephone, and if you communicate by email, always use a personal email address.
A customs fraud qui tam lawsuit can take hundreds, or in some cases thousands, of hours of attorneys’ time. If you had to pay the attorneys on an hourly basis, the fees would become prohibitive to most potential qui tam whistleblowers. Fortunately, the qui tam attorneys at Tycko & Zavareei LLP are willing to do so for a “contingency fee,” meaning our attorneys do not charge by the hour for their time. Instead, they agree to accept a percentage of your recovery as their fee and take on the risk that they will not be paid if you do not obtain any recovery. Different whistleblower lawyers may be willing to offer different terms. If you are seriously considering a qui tam lawsuit, you may wish to contact a number of different qui tam law firms and find one that you believe will do excellent work and which will offer you favorable contingency-fee terms.
No. Finding a whistleblower attorney who you believe will effectively and aggressively represent your interests is much more important than finding one who is local. Attorneys who handle False Claims Act qui tam cases routinely work on cases around the country, and not just in the city or state where they have offices. Moreover, for various strategic reasons, the lawsuit might be filed in a city or state other than the one in which you work or live. Where to file the case is an issue that your attorney will analyze. Accordingly, in searching for representation, you should not necessarily limit yourself to lawyers who happen to have offices close to where you work or live. The qui tam attorneys at Tycko & Zavareei LLP routinely represent whistleblowers in cases throughout the United States. For more on how to choose an attorney to represent you in a qui tam case, see our page on Selecting An Attorney.
In almost all jurisdictions, a whistleblower, or qui tam relator, must be represented by an attorney to help him or her bring a False Claims Act case on behalf of the United States.
Some of the most common types of customs violations are:
Yes. When goods are imported into the United States without country-of-origin marks or with false country-of-origin marks, the importer may be liable for so-called “marking duties.” In a landmark case brought by Tycko & Zavareei LLP, the court ruled that “marking duties” can be recovered under the “reverse false claims” provision of the False Claims Act, and the Department of Justice agreed with that position. Accordingly, if you have information that an importer is failing to mark, or is marking improperly, you may be able to blow the whistle through a qui tam lawsuit under the False Claims Act.
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