How many miles of pipelines are in the United States? No one knows for sure. Some estimate there is 1.2 million miles of water mains in the United States, much of that constructed from steel. And many of those steel pipes are ancient meaning they need immediate replacement. Add in another 2.4 million miles of energy pipelines and it’s easy to see how much steel we use just for pipes.
Well, replacing those steel pipes just got more expensive. The U.S. Department of Commerce this month published new tariffs on steel pipes imported from South Korea. In 2017, the United States was the largest importer of piping from South Korea, bringing in 1.6 million tons of steel pipe (2.4 billion pounds).
The Commerce Department has now set initial duties of between 26% and 59% against several Korean steel pipe exporters. After review of those tariffs, the government posted its determination on February 9th. According to the determination, the agency said:
“As a result of this review, we preliminarily determine the following weighted-average dumping margins for the period December 1, 2016, through November 30, 2017:
Exporter/ Producer Dumping Margin (Percent)
NEXTEEL Co., Ltd. 59.09
SeAH Steel Corporation 26.47
AJU Besteel Co., Ltd. 41.53
BDP International, Inc. 41.53
Daewoo International Corporation 41.53
Dongbu Incheon Steel Co. 41.53
Dongbu Steel Co., Ltd. 41.53
Dongkuk Steel Mill 41.53
Dong Yang Steel Pipe 41.53
EEW Korea Co., Ltd. 41.53
Husteel Co., Ltd. 41.53
Hyundai RB Co. Ltd. 41.53
Hyundai Steel Company/Hyundai HYSCO 41.53
Kelly Pipe Co., LLC. 41.53
Keonwoo Metals Co., Ltd. 41.53
Kolon Global Corp. 41.53
Korea Cast Iron Pipe Ind. Co., Ltd. 41.53
Kurvers Piping Italy S.R.L. 41.53
MSTEEL Co., Ltd. 41.53
Miju Steel MFG Co., Ltd. 41.53
Poongsan Valinox (Valtimet Division) 41.53
POSCO Daewoo 41.53
R&R Trading Co. Ltd. 41.53
Sam Kang M&T Co., Ltd. 41.53
Sin Sung Metal Co., Ltd. 41.53
SK Networks 41.53
Soon-Hong Trading Company 41.53
Steel Flower Co., Ltd. 41.53
TGS Pipe 41.53
Tokyo Engineering Korea Ltd 41.53”
The tariffs were set pursuant to the Commerce Department’s authority under the Tariff Act.
What is the Tariff Act?
Tariff laws have been on the books in the United States since at least 1828. As we entered the early stages of the Great Depression in 1930, Congress decided the best way to protect American factory workers and farmers was to stop cheap foreign goods from flooding our markets. They did that through the Tariff Act of 1930 which placed import duties on many foreign goods imported into the country.
The Act contains an “anti-dumping” provision. Under the Act, U.S. industries may petition the government for relief from imports that are sold in the United States at less than fair value (“anti dumping”) or which benefit from subsidies provided through foreign government programs. The Commerce Department can investigate and determine whether illegal dumping or subsidizing exists and, if so, set a tariff on those goods.
What Do the New Anti Dumping Tariffs Mean?
In simple terms, the price of steel pipes will likely increase. The price of piping was artificially low because the Commerce Department determined that South Korea was dumping its products here at below cost. While some might think that is good for consumers, Congress and the administration feel otherwise.
The Commerce Department believes that some countries sell products in the United States at an artificially low price. Over time, those low prices cause the domestic producers to go bankrupt. Once the U.S. suppliers are gone, the companies engaged in the dumping can dramatically increase their prices with little fear of competition. (Not everyone agrees with the government but current law allows Commerce to establish anti-dumping duties.)
With steel pipes, prices will probably increase dramatically. U.S. steel pipe manufacturers are the net winners. They can compete on equal footing with their South Korean counterparts. Consumers, however, will pay more.
Whistleblowers and Steel Pipe Tariffs
A few U.S. companies will figure out a way to continue import cheap steel pipes and illegally circumvent the tariffs.
How? Some companies will transship the goods to make it appear the pipes are coming from a country not subject to the steel tariffs. In the typical transshipping case, the steel pipe would go from South Korea to Country X where a new label would show the piping was manufactured in Country X and then would be shipped to the United States. Customs sees a container coming from Germany, for example, and has no reason to investigate.
Another version of the tariff evasion scheme is to just change the shipping documents to fool customs officials. Without thousands of containers arriving in U.S. ports daily, U.S. Customs and Border Patrol can only inspect a tiny fraction of shipments. Because all steel pipes look alike, even if a shipment was inspected, it would be difficult for a Customs officer to determine whether or not a shipping document was accurate.
We have already seen several cases where companies have violated the Buy American Act by importing cheap Chinese and Turkish steel for U.S. government construction projects. (For more on the Buy American Act and the availability of cash whistleblower rewards for those violations, visit our Buy American whistleblower page.)
When a company lies on customs forms about the country of origin or the contents of a shipment, whistleblower rewards may be available under the False Claims Act. This law allows whistleblowers to collect up between 15% and 30% or whatever is collected from wrongdoers. And companies that fail to properly pay anti-dumping duties are subject to high fines and triple tariffs amounts.
High fines and triple tariffs mean that cheating Uncle Sam can get expensive. And the more expensive cheating becomes, the higher the rewards for whistleblowers.
Whether it is the U.S. importer or a conspiracy involving an importer and a Korean steel company, anyone who facilitates importing steel pipes without proper tariffs can be prosecuted.
How to Do I Collect a Whistleblower Reward for Tariff Evasion?
Collecting an award means filing a claim under the False Claims Act in federal court. To do that, you need a lawyer. (You can’t file a False Claims Act case pro se or without a lawyer.)
Cases are investigated by the Justice Department. While under investigation the complaint remains secret. Ultimately the government can intervene, allow the whistleblower’s lawyer to prosecute the claim or ask the court to dismiss the case. When that decision is made, the case becomes unsealed meaning it is public.
To obtain the reward, you generally must be the first to file and have inside information.
Schargin v. LDR Industries – Anti Dumping Tariffs on Chinese Steel Pipes
In 2018, the federal court dismissed a whistleblower case filed under the False Claims Act. In that case, the whistleblower claimed that LDR Industries was importing steel pipes from China without paying proper duties. His complaint was filed in November 2014.
Previously the same whistleblower tipped off Customs and Border Patrol about the same conduct in 2012. Working off his initial tip in 2012, the government assessed penalties against the company of $38.8 million dollars.
[Unfortunately, the whistleblower in this case didn’t get a dime. He waited too long before filing his formal claim with the court. The False Claims Act contains a “government action bar” that says you can’t get an award if the government is already taking action on the matter. This serves as an important reminder of why reporting wrongdoing through hotlines or waiting too long to file a formal complaint often results in no reward.]
Although the whistleblower lost, the important takeaway is that whistleblowers are eligible for rewards when they report foreign exporters and U.S. importers that fail to pay proper tariffs on foreign steel pipes.
A federal appeals court in another case in 2016 ruled that whistleblowers can paid when companies import certain goods that are unmarked or improperly marked. (A separate tariff statute says unmarked goods are subject to a 10% tariff.) The 2016 case involved millions of pounds of steel pipe fittings
Seeking Steel Pipes Whistleblowers
If you have original information about a company or companies importing goods without proper payment of customs duties, call us. Our whistleblower lawyers have helped folks like you claim over $100 million in rewards. You could be next.
All inquiries are protected by the attorney – client privilege and kept confidential. Cases are handled on a contingent fee basis meaning you owe us nothing if we don’t collect money for you.
For more information, visit our Customs Duty Whistleblower page. Ready to see if you have a case? Contact us online, by email or by phone at 414-704-6731.