The jury is out on President -elect Trump. As I write this, the whistleblower bar is in turmoil. Will Trump support big pharma’s efforts to gut the False Claims Act? Will he repeal Dodd Frank (the law that brought us the SEC Whistleblower Program)? His transition team says that he will.
Unions, small businesses, minority groups, veterans… everyone is wondering what the next administration will bring. It’s been 8 years since we had a change of power in the White House and that causes everyone to wonder. It’s hard to predict anything at this point but one group that should do very well are whistleblowers with information about customs duties evasion and other schemes to avoid tariffs.
Like most countries, the U.S. has a complex and far scheme on import duties. Congress passes these tariffs and duties to protect American businesses. The goal isn’t to make American consumers pay more, rather we want to protect American jobs and industries.
Common Customs Duties Evasion Schemes
Some countries actively encourage “dumping” of goods at below market prices. They flood the market with cheap goods. The prices they charge aren’t sustainable but with the support of foreign governments, they can keep prices low enough and for long enough to cause businesses in the U.S. to fail. Once there is no more competition, they can charge whatever they want. Consumers lose in the long run. American workers lose their jobs. And U.S. businesses close.
Tariff schemes often try to disguise the country of origin. Let’s say that the U.S. has imposed a duty (tax) on metal pipe made in China but not on pipe made in Japan. Some fraudsters will mislabel their pipe as being made in a country without a duty. Sophisticated fraudsters will actually transship their product from one country to another and then to the U.S. in an effort to fool customs agents who often inspect shipments coming into the United States.
A variation of the above scheme is to misclassify the price of the products coming into the United States. A customs duty or tariff are often like a sales tax, they are based on a percentage of the price of the product. A 10% tariff on steel pipe, to use our example above, would yield a $100,000 tariff if the value of the pipe was $1 million. If the pipe is only being sold for $500,000, however, the tariff drops to $50,000.
Some dishonest companies and importers use two sets of invoices to fool customs officials.
A third type of customs duties fraud involves mislabeling the product itself. Once again using our steel pipe example, let’s say that steel pipe from China has a tariff but cast iron pipe does not. Some people will simply mislabel the product to avoid tariffs.
How does any of this affect President – elect Trump?
During the campaign, Trump made many statements expressing concern with some of our trade treaties such as NAFTA. He also expressed his disdain for foreign goods causing the loss of U.S. jobs. Although there are no concrete proposals from the administration yet, we fully expect that whistleblowers with inside information about customs violations will do well under the new administration.
False Claims Act and Whistleblower Awards
The federal False Claims Act has been on the books since the American Civil War. It allows ordinary Americans* with inside information about fraud involving federal funds or programs to receive awards for their information. [* Non U.S. citizens are also eligible for awards although the law’s anti-retaliation provisions may be not be enforceable in a foreign country involving a foreign company.]
Awards range from 15% to 30% of the amount recovered by the government. Because the law allows for punitive (triple) damages, awards can quickly grow in size. Obtaining an award involves filing a sealed lawsuit in a federal district court. The whistleblower lawyers at MahanyLaw will help you investigate the claim, file the lawsuit and prosecute the case if necessary. No legal fees are due unless we first recover money for you.
Any change in administration brings a certain level of anxiety. Whistleblowers with information about customs evasion have little to worry about, however. (See our cornerstone content on customs fraud and whistleblower awards by using the link above.
MahanyLaw – America’s Whistleblower Lawyers