 Court Affirms False Claims Act Penalty Against Importer for Customs Fraud |
Source |
American Shipper |
Post Date |
06/27/2025 |
|
The U.S. Court of Appeals for the Ninth Circuit has affirmed a $26 million jury verdict againstan importer for knowingly submitting false customs declarations to avoid payingantidumping duties of nearly 200 percent on welded outlets imported from China.
A competitor brought this suit as a relator under the FalseClaims Act, alleging that the importer falsely claimed its products were notsubject to antidumping duties and misclassified them as steel couplings ratherthan welded outlets.
The Department of Commerce had previously ruled that theimporter? products fell within the scope of a longstanding antidumping dutyorder on carbon steel butt-weld pipe fittings. That ruling was upheld by boththe Court of International Trade and the Federal Circuit. Nevertheless, theimporter argued that it lacked the scienter (intent or knowledge of wrongdoing)required under the FCA because, at the time of importation, it was objectivelyreasonable to believe its products were not covered by the order.
The court rejected this ?bjective reasonableness?defense,citing a 2023 decision by the Supreme Court holding that FCA scienter is basedon a specific defant? actual knowledge and belief, not what a hypotheticalreasonable person might have believed. The court emphasized that even if theantidumping duty order was ambiguous, the importer could still be liable if itacted with deliberate ignorance or reckless disregard?tandards met in thiscase by evidence that the importer failed to investigate its duty obligationsdespite clear indicators and the ease with which the relevant order and priorrulings could have been found.
The court alsoclarified that while the FCA ?ndoubtedly overlaps?with 19 USC 1592, whichauthorizes the U.S. government to recover duties and impose penalties formaterial false statements or omissions in connection with import transactions,the two statutes may operate concurrently. The court explained that the FCAcomplements rather than conflicts with ?1592 because only the government canbring cases under the latter statute while the FCA lets private whistleblowerssue when the government doesn? act directly. The court added that Congress hasnot designated ?1592 as the exclusive remedy for customs fraud and in factamed the FCA to ensure it encompasses obligations to pay the government,including customs duties.
|
|
|
|
