Anti-Dumping & Countervailing Duties Fraud
FRAUD IN THE GLOBAL TRADE ECONOMY
In today’s global economy, trading with companies from other countries is unavoidable. International trade provides a larger marketplace for consumers, and competition which allows the best products to rise to the top. When foreign entities cheat the market, it hurts U.S. companies in the same industry. This occurs when foreign manufacturers sell goods below fair market value to the U.S. In some cases, companies act alone. In other cases, foreign governments offer assistance and subsidies to companies in their country, allowing companies to abuse the assistance and flood the U.S. market with low cost products. The U.S. has laws in place to offset these trade practices, namely by placing a duty, or tax, on imported goods.
Foreign companies, foreign exporters, and U.S. importers who don’t pay those duties are committing fraud against the U.S. Government. Those who report fraud might be eligible for compensation. If you suspect a company is involved in anti-dumping or countervailing duties fraud, contact the government contractor fraud attorneys at Price Armstrong at (205) 208-9588 for a free consultation to determine the best path forward for your individual circumstances.
WHAT ARE ANTI-DUMPING AND COUNTERVAILING DUTIES?
Anti-dumping and countervailing duties are taxes that the U.S. government places on importers when they suspect a company is selling products under fair market value. This allows domestic manufacturers to compete with low cost goods shipped in from other countries, especially China.
Members of the World Trade Organization (WTO) must report government subsidies given to domestic manufacturers. However, since China joined the WTO, they have not complied. This causes tension for those who trade with China, including the U.S. Members of the WTO complain about China’s lack of transparency, giving their companies an advantage as they overproduce goods and dump them into the global market.
As of February 2019, the U.S. government has been investigating anti-dumping and countervailing fraud activities in steel imported from China, Canada and Mexico. The Commerce Department alleges 44 Canadian subsidy programs, 26 Chinese subsidy programs, and 19 Mexican subsidy programs for steel production, ultimately hurting the U.S. steel industry. These are just some of the many ongoing investigations.
The Tariff Act of 1930, also referred to as the Smoot-Hawley Tariff Act, gave the legal justification to place duties on imports to protect businesses and industries in the United States. The law addresses both anti-dumping and countervailing; under Smoot-Hawley, the presence of the following conditions allow for the imposition of anti-dumping or countervailing duties:
- The country of origin must be a member of the WTO, subject to agreements about subsidies.
- Products imported from one of the WTO member countries must “materially injure” or present a threat to the associated industry in the United States.
- A government commission will investigate WTO members and foreign companies who attempt to engage in unfair trade practices by flooding the market with low cost goods
The U.S. calculates anti-dumping duties at the company level, with the intention of bridging the gap between low foreign manufacturer prices and a higher fair market value. The U.S. determines countervailing duties at a government level; the duties typically match the government subsidy, tax break, or assistance to equalize the cost of imported goods with domestic goods in the United States.
The U.S. government has implemented other protectionist policies besides tariffs to protect U.S. companies from those who try to sell goods below fair market value in the United States. Import quotas are one of those policies. Some administrations have set a maximum number for units allowed to enter the U.S. market. In the 1980s, the Reagan administration implemented a quota on the import of Japanese automobiles, and an international Multifiber Agreement set quotas for the textile industry during the last quarter of the 20th century. Non-tariff requirements also make dumping products in the U.S. market more difficult. For example, requiring companies to put a “Made in XXXXX” label on their goods.
DETECTING COMPANIES WHO COMMIT FRAUD
Domestic importers can commit customs fraud in relationship to anti-dumping regulations in three major ways:
- Falsifying the required country of origin marking
- Falsifying the classification of goods
- Failing to pay required duties
One common indicator of anti-dumping fraud is separate records. Companies trying to commit fraud might keep separate books for customs agents and for business, so it appears they are following all the rules. Customs and border protection agents and company employees involved in importation of goods can double check the country of origin found on labels and paperwork and make sure they match shipping manifests. One common strategy used by fraudsters is routing merchandise through a different country and claiming that country as their origin to avoid paying required duties. Verifying the country of origin might require some digging to uncover rerouting practices.
Any discrepancies found surrounding the country of origin might be a simple mistake, but there is a good chance it is an indication of fraud. The same applies to the classification of goods. Some companies might classify goods into different types of products to avoid paying the required tariffs—this is especially common with clothing and food items. Companies might also misreport the weight of products to avoid paying duties, so double-checking the weight on customs documents against the actual weight of packages might also indicate fraud.
PROTECTION & BENEFITS FOR ANTI-DUMPING & COUNTERVAILING DUTIES FRAUD WHISTLEBLOWERS
FCA provides a qui tam provision, allowing whistleblowers to file a lawsuit against those who commit pricing fraud on behalf of the government. When customs fraud occurs during international trade, current and former employees have valuable information for qui tam cases that can help hold companies who commit fraudulent practices accountable.
Choosing to speak out about anti-dumping and countervailing duties fraud requires courage, which whistleblower laws reward with protection and compensation. Under the FCA, a whistleblower can report corporate fraud and have their identity sealed during the government’s investigation into the allegations. Federal laws also protect whistleblowers from retaliation; those companies who terminate whistleblowers are required to reinstate employees, give them double back pay plus interest, and compensate them for attorney fees. Finally, the FCA compensates whistle blowers for up to 30 percent of any monies recovered by the government in a qui tam case.
SUCCESSFUL ANTI-DUMPING & COUNTERVAILING WHISTLEBLOWER LAWSUITS
Unfortunately, anti-dumping and countervailing duty investigations are not uncommon. The United States International Trade Commission (USITC) maintains a list of current investigations, including their current phase. The Department of Justice estimates whistleblower lawsuits recovered more than two billion dollars for the U.S. government in 2018, with a little more than $300 million going to whistleblowers.
Some recent investigations include acetone from Belgium, Korea, Saudi Arabia, Singapore, South Africa, and Spain; ceramic tile products from China; and alloy steel products from Japan. Two recent whistleblower lawsuits resulting in the recovery of millions of dollars under FCA include:
- Virginia’s Basset Mirror Company agreed to pay $10,500,000 in a lawsuit after falsifying customs declarations to avoid paying anti-dumping duties on wooden bedroom furniture from China.
- A Georgia textile importer, American Dawn, agrees to pay $2,338, 879 after they misclassified goods to pay lower duties.
GET THE HELP YOU NEED FROM A FRAUD WHISTLEBLOWER LAWYER
Anti-dumping and countervailing fraud harms entire companies and entire industries. Those who suspect a company of these type of fraudulent actions have a duty to report illegal trade activity. If you were involved in the fraud, you might face criminal charges if someone else files a report before you do. In any case, hiring an attorney is in your best interest. Not only can a lawyer guide you through the reporting process, but he can ensure you receive any compensation from recovery under the FCA that might be due to you. Additionally, you have limited time to take action under the FCA. Failure to file before the statute of limitations runs out or before others file a whistleblower claim might prevent you from receiving compensation.
The experienced legal team at Price Armstrong has represented whistleblowers in multiple types of cases under the False Claims Act, resulting in the recovery of millions of dollars for the government and their clients. Price Armstrong attorneys remain committed to protecting their clients and aggressively pursuing the best outcome for an individual case. If you suspect a company you work for or a competitor has committed customs fraud or been involved in illegal trade practices, contact the skilled anti-dumping and countervailing duties fraud attorneys at Price Armstrong for a free consultation to determine the best path forward for your situation.
CONTACT US FOR A FREE CASE EVALUATION
If you have evidence of anti-dumping or countervailing duties fraud, contact the attorneys at Price Armstrong. We can help you seek justice and protect your rights throughout the process. We represent clients nationwide with offices in Birmingham, AL, Tallahassee, FL and Albany, GA. Call us today at 205-208-1288 for a free initial consultation and review of your case. Let us fight for you – call now!