In a record-setting customs fraud case, the Department of Justice (DOJ) announced that Ceratizit USA LLC has agreed to pay $54.4 million to resolve allegations that it violated the False Claims Act by evading U.S. customs duties. The resolution represents the largest-ever settlement of a customs duties evasion case under the False Claims Act (FCA).
When companies import goods into the United States for sale, they are often required to pay customs or import duties. Customs fraud occurs when an importer engages in fraudulent conduct to reduce or evade those legally owed duties. The government has increasingly relied on the False Claims Act to address such schemes, particularly where false statements or omissions deprive the United States of revenue.
According to the government, Ceratizit—an importer of tungsten carbide rods used in the production of metalworking tools—engaged in three distinct forms of unlawful customs fraud.
First, the government alleged that Ceratizit falsely declared that imported tungsten carbide rods were manufactured in Taiwan, despite knowing that the products were actually made in China. The company allegedly transshipped the Chinese-manufactured rods through Taiwan and then into the United States in order to avoid paying Section 301 tariffs applicable to Chinese-origin goods.
Second, the government alleged that Ceratizit knowingly misclassified tungsten carbide products on official import documentation, thereby reducing the customs duties owed at the time of importation.
Third, the government alleged that Ceratizit failed to properly mark its imported rods with their country of origin and did not pay the required marking duties, further depriving the United States of lawfully owed revenue.
More Large Settlements Are Likely to Follow
As customs duties take on increased importance in national trade and national security policy, companies may face growing incentives to cut import costs through fraudulent means. The federal government has signaled that it intends to take these violations seriously. As Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division stated:
This settlement once again demonstrates that the Department of Justice will zealously pursue those who seek an unfair advantage in U.S. markets by evading customs duties.
We agree—and this case also highlights the critical role whistleblowers play in enforcing customs laws. As we have previously discussed, recent developments in FCA jurisprudence have reaffirmed that customs fraud can trigger False Claims Act liability, and that whistleblowers are essential to uncovering these schemes. The $9.75 million relator award in this case further underscores the government’s commitment to rewarding individuals who provide meaningful assistance in exposing customs fraud.
If you have questions about customs fraud, our guide may provide helpful answers. If you have insider knowledge that could assist the government in uncovering customs violations, we invite you to contact us for a free and confidential consultation. We have both the experience and the commitment to help.