Illegal Transshipping/False Country of Origin — Help Us Help You Get Rich

Earlier this year, “Univar USA Inc. paid  U.S. $62.5 Million to Resolve Allegations that it Evaded $36 Million in Antidumping Duties on Imported Chinese Saccharin.”  My law firm profited handsomely from this case because we brought it to the government’s attention and then assisted on it.

The United States Department of Justice describes this case and the $62.5 million  payment as follows:

Univar USA Inc. (Univar), a subsidiary of Univar Inc., of Downers Grove, Illinois, has agreed to pay the United States $62.5 million to settle allegations under the customs penalty statute that it was grossly negligent or negligent when it imported 36 shipments of transshipped saccharin between 2007 and 2012. The saccharin was manufactured in China and transshipped through Taiwan to evade a 329 percent antidumping duty that applied to saccharin from China.  The antidumping duty was a remedial measure in response to injury sustained by the domestic saccharin industry by reason of dumping of Chinese saccharin. The transshipment resulted in the evasion of approximately $36 million in antidumping duties.

“Transshipment of merchandise through third countries to evade antidumping duties undermines the integrity of our trade laws and puts domestic manufacturers at risk from unfairly traded merchandise,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “We enforce our laws against importers who fail to take all reasonable steps to vet their suppliers and determine the true country of origin of their merchandise.” 

The settlement resolves a lawsuit brought in the United States Court of International Trade seeking recovery of unpaid antidumping duties and penalties under 19 U.S.C. § 1592 totaling $84 million plus interest. In that action, the government alleged that Univar was grossly negligent or negligent in failing to determine that its supplier in Taiwan was not a manufacturer but, instead, imported saccharin into Taiwan from China for transshipment to the United States. This is the largest recovery under section 1592 ever reached in the Court of International Trade.

“We are committed to ensuring the laws that protect legitimate trade and US domestic industry, including anti-dumping and countervailing duties laws, are vigorously enforced,” said CBP’s Office of Trade Executive Assistant Commissioner Brenda Smith. “And to that end, we applaud the agencies that came together to settle this case.”

“I applaud the outcome of this investigation and commend the efforts of the special agents and CBP personnel who worked so diligently on this,” said Homeland Security Investigations (HSI) Executive Associate Director Derek Benner. “This is a tremendous example of the agencies’ collaborative commitment to enforce the trade laws of the United States.”

The settlement announced today was the result of an investigation by the U.S. Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), and the Commercial Litigation Branch of the Justice Department’s Civil Division.  The investigating ICE agent was Special Agent Patrick C. Deas. The case was handled by Commercial Litigation Branch Attorneys Patricia M. McCarthy, Stephen C. Tosini and Reta E. Bezak, and CBP Assistant Chief Counsel Currita C. Waddy.

I will be blunt. I am writing about the Univar case and emphasizing the dollars involved in it — to repeat, $62.5 million — because our international trade law team/international litigation team want more cases involving illegal transshipping and you should be extremely interested in coming to us with such cases because you can make more money off these cases than we do! The monetary rewards for companies that pursue these cases can be huge. Put another way, your company can greatly profit from retaining our law firm to pursue an illegal transshipping case. And not only do you profit monetarily, you can also knock out a competitor’s illegal activity that has been allowing it to reduce its prices. You essentially win twice.

And here’s the thing: a ton of illegal transshipping is happening right now by companies seeking to avoid US tariffs and anti-dumping/countervailing duties being slapped on Chinese products. Just in the past year, massive antidumping/countervailing duties have been imposed on the following products, among others:

The full list of products currently subject to antidumping duties is long, and the spreadsheet listing them can be found here.

It is not uncommon for AD/CVD duties to exceed 100% of the value of the product, which is why companies have so much incentive to illegally avoid them and why our law firm (and the government) has so much incentive to pursue claims against these companies operating illegally.

Back in July, in How To Get Rich From Your Competitor’s Illegal Transshipping: Moiety and the False Claims Act we wrote about some of the illegal transshipping we were seeing:

My law firm’s international trade lawyers are being bombarded these days by companies (mostly U.S. importers) contacting us about competitor companies gaining cost advantages by illegally transshipping their products. I recently was forwarded an email from a U.S. importer client that had been sent to the client from a Chinese chemical producer/exporter, essentially telling my client the following:

  1. Buy my chemical product, which is covered by a US antidumping (“AD”) order.
  2. But don’t worry about that antidumping order, because if you buy this product from me you can avoid having to pay the massive duty the United States has imposed on this product coming from China.
  3. You can avoid this massive duty because I ship my product through Taiwan, where it is labelled as a Taiwan product and there is no duty on this product if it comes from Taiwan. No problems.

My importer client was angry because it knew transshipping and it knew it could find himself criminally liable for such a scheme. Most importantly, it also knew that some of its competitors would buy this product, import it into the United States illegally and perhaps get away with having done so, at least for a time. My client was angry because it knew that these illegal importations would give some of its competitors short-term cost and pricing advantages.

In another situation, several importers contacted me for help in “getting around” trade orders, including antidumping orders and Section 301 tariffs. I had to patiently explain to them what was legal and what was not.

Many Chinese companies are telling their U.S. importers they will just label their products with Hong Kong or Singapore or Taiwan or Vietnam country of origin stickers as though doing that is perfectly legal. That is not legal and these sort of import games constitute civil and criminal violations of U.S. law and they can and often do lead to enormous financial penalties and even prison time.

Section 3730 of the False Claims Act (“FCA”) provides for a private right of action, which means that a private person (or company) can pursue its own claims on behalf of the US government. The private party, called a relator, can be a competitor, such as a US importer or foreign producer, or an insider, such as a secretary or a filing clerk. The relator files a copy of the complaint and written disclosure of all material evidence and information possessed in confidence in the Federal District Court to show that certain US importers and/or foreign producers/exporters have committed fraud on the US government by transshipping products to avoid paying tariffs or duties. The complaint is brought on behalf of the United States and the Department of Justice. The complaint and the evidence supporting the complaint are not served on the defendants; they are instead served on the U.S. government, which has 60 days to determine whether or not to intervene in the case.

If the government chooses to intervene and prosecute the action, the private party will be entitled to 15 to 25 percent of any recovery.  If the government decides not to prosecute the case and the private party goes forward with its own case, the private party will be entitled to 25 to 30 percent of any recovery.

Relators can become very rich from False Claims Act cases involving illegal transshipping. If you are aware of anyone illegally transshipping products to the United States you should contact us to see about turning that to your financial advantage.

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