It was no secret that the Trump administration had an aggressive trade policy with higher tariffs on China, tariffs on steel and aluminum products, new trade agreements, and pulling out of others. Customs duty revenue increased drastically under the Trump administration from $34.6 billion in 2017 to $74.4 billion in 2020. This major increase in revenue for the federal government has left many asking what the priorities will be for the Biden administration when it comes to U.S. trade deals.

Most experts do not expect any drastic changes in the early months of the Biden administration. Biden himself has stated that he will not make any immediate moves on tariffs with China. Some think he will stay tough on trade with China but may ease tariffs with allied countries. It is also presumed that he will make certain exceptions to the Section 232 tariffs on steel and aluminum for imports from certain allies.

These duties and tariffs have not been popular among many importers and foreign exporters. Some of these companies have resorted to fraud to avoid paying what they owe. As a result, the federal government has renewed a commitment to take enforcement action against companies who evade duties owed on imported goods.

Customs duties are implemented in order to level the playing field for U.S. manufacturers. In addition, the money the government collects from these duties goes directly to paying for programs such as veterans’ benefits, education, and infrastructure. When companies scheme to avoid paying the proper duties, they obtain an unfair advantage in the U.S. markets and cheat the federal government and taxpayers. Many companies have found schemes to avoid duties that are easy to pull off and give them a significant advantage over competing manufacturers and importers.

U.S. Customs and Border Protection is responsible for enforcing trade laws, including import compliance and revenue collection. However, CBP has limited resources and can’t possibly check every shipment for compliance. With millions of containers entering the U.S. each day, CBP tries to best allocate its resources to detect the imports at the highest risk of violation, making it easy for many fraudulent schemes to slip through the cracks. Some companies see the low risk of detection as an opportunity to save money by lying on import declarations to avoid paying higher duties.

Importers must declare the value of goods, country of origin, classification of goods, and amount of duties owed. Essentially, the process works on an honor system in which the importer is responsible for making sure the information declared is accurate. However, foreign exporters and U.S. importers have found ways to cheat the system by not accurately reporting information on their customs import declarations. Below are some of the common schemes used to avoid customs duties:

1, Undervaluing goods – Import duties are based on the value of goods as declared by the importer. By undervaluing the price of goods on declarations, importers wrongfully avoid paying the appropriate duties.

2. Misrepresenting country of origin – Shipments imported into the U.S. must be marked with the country of origin. Tariff rates vary by country of origin and certain countries are subject to anti-dumping tariffs and countervailing duties. By disguising the country of origin, importers avoid paying certain tariffs and duties. Most commonly, transshipping is a scheme used to misrepresent the country of origin. Transshipping involves shipping goods to another destination prior to reaching the final point of entry and relabeling to conceal the true country of origin.

3. Misclassifying goods – Import duties are also determined by the classification or category of goods being imported. Importers avoid paying the full amount of customs duties by falsely declaring goods under a different category that is subject to a lower duty.

Since these acts are so easily committed and concealed, customs fraud is often difficult to detect. The federal government relies heavily on whistleblowers to come forward and aid in the undercovering and prosecuting of customs violations. Insiders and competitors are typically in the best position to uncover and report customs fraud.

The False Claims Act (FCA) authorizes individuals to bring a lawsuit on behalf of the federal government and share in the monetary recovery from that lawsuit. Whistleblowers who have evidence of customs fraud may bring a lawsuit under the FCA.

Many people are concerned about reporting their employers or others for committing fraud because they fear retaliation. The FCA ensures whistleblowers are protected from retaliation, such as being fired, demoted, or denied benefits. A whistleblower attorney can help ensure these protections.

Maintaining the integrity of U.S. trade policies is critical to the nation’s economic stability and security. The revenue collected from customs duties belongs to the American people. The federal government, taxpayers, and other U.S. businesses get cheated when dishonest companies scam their way out of paying tariffs and duties. Rooting out these fraudsters is made easier when brave and honest individuals come forward to do what’s right.

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About Andrew Miller

Andrew Miller is a shareholder at Baron & Budd where he represents whistleblowers in qui tam cases. To learn more about whistleblower protections, go to www.becomeawhistleblower.com.