U.S. Department of Justice Files Two Civil Suits Alleging Fraudulent Evasion of over $40 Million in Antidumping Duties

News & Insights
Aug 10, 2015

The U.S. Department of Justice (Justice) recently filed two different civil suits at the U.S. Court of International Trade (CIT) seeking to recover millions of dollars in antidumping duties alleged to have been fraudulently evaded. In both cases, Justice alleges a pattern of activities undertaken by importers designed to undermine the effectiveness of antidumping duty orders imposed on Chinese-origin imports.

In United States v. Toth, Court No. 15-00206, Justice filed a complaint on July 31, 2015 alleging that between May 2004 and May 2005 a Pennsylvania company and its principal imported thirteen (13) shipments of crawfish tail meat falsely claimed to be “langostino” in order to evade a 223.01 antidumping duty cash deposit rate. By falsely describing the merchandise as duty free “langostino,” Justice alleges that the importer ultimately evaded payment of $2,896,230.87 in antidumping duties.

The Pennsylvania company had obtained a bond from a surety company, XL Specialty Insurance Co., in relation to its importing activities. However, because bonding requirements on U.S. importers are minimal, even with the surety paying its full obligation under the bond issued ($50,000), the vast majority of the duties owed remains unpaid.

In 2009, Justice had filed a civil suit against the Pennsylvania company and its principal alleging that the duty evasion was the result of negligence. That suit was dismissed voluntarily without prejudice as while the case “was pending, new evidence became available that demonstrated that Mr. Toth and LBS had knowingly misrepresented to CBP that the 13 subject entries of crawfish were langostino.” Among other pieces of evidence, Justice submitted deposition testimony and a sworn declaration from the importer’s principal in a separate federal district court litigation involving a commercial dispute. This evidence established the importer’s close familiarity with trade in crawfish and led U.S. Customs and Border Protection (CBP) to conclude that the misclassification of the entries was fraudulent.

Justice’s complaint alleges that the importer’s principal should be held personally liable for the actions of the importer and seeks the recovery of $3.3 million in a civil penalty and $2.8 million in lost revenue.In United States v. Univar USA Inc., Court No. 12-00215, Justice filed a complaint on August 6, 2015 alleging that between 2007 and 2012, Univar USA Inc., a subsidiary of Univar Inc., imported thirty-six (36) entries of saccharin from China falsely claimed to have originated in Taiwan in order to evade an antidumping duty cash deposit rate in excess of 329 percent. Justice’s complaint asserts that “[b]efore issuance of the antidumping duty order, Univar USA imported saccharin from China, but after issuance of the order, Univar began seeking sources of imported saccharin from countries other than China.” The importer is alleged to have begun importing saccharin from Taiwan in 2004, leading the domestic producer of saccharin, PMC Specialties Group, Inc., to question the importer’s source of supply. A purchaser and, separately, a reseller of saccharin expressed their belief to the importer that the merchandise sourced from Taiwan had, in fact, been manufactured in China.

Moreover, in 2009, the Orthodox Union raised concerns with the importer after the importer’s supplier refused to grant access to the manufacturing facility “to perform routine kosher inspections.” In February 2010, U.S. Immigration and Customs Enforcement notified the importer that it was under investigation for importing transshipped Chinese saccharin. According to the complaint, “[d]espite this notice that it was under investigation by the Federal Government, Univar USA took no action to determine the country of origin of its imported saccharin for more than two more years, and it continued to purchase and import saccharin exported by Lung Huang from Taiwan until 2012.”

In July 2014, CBP issued a pre-penalty notice to the importer proposing to assess a penalty of $47,888,851.00 and seeking a recovery of $36,088,718.03 in lost revenue. The importer filed a petition for mitigation with CBP, which was denied, and in February 2015, the agency issued an amended penalty notice requesting the same amount of funds but further developing the factual circumstances underlying the demand. As no portion of the penalties or duties demanded has been paid, Justice has filed suit to recover the funds.

Tags: Evasion