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California Company Convicted in Textile Duty Evasion Scheme

Wednesday, June 26, 2013
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Attorney for the Southern District of California announced recently that a California company and its owner have been convicted of running a scheme to evade customs duties on more than $30 million in Chinese-made wearing apparel. According to a press release, evidence presented at trial showed that the company’s owner hired a group of San Diego-based businessmen and logistics professionals to initiate shipments of merchandise from ports in China to the Port of Long Beach. When the goods arrived, the man and his conspirators would ensure that the merchandise was classified as in-bond; i.e., transiting U.S. territory to Mexico. However, the merchandise was instead diverted to warehouses in the Los Angeles area, after which it was sold at a lower price than competing goods by virtue of having been imported effectively duty-free. As part of the scheme, the conspirators falsified customs documentation and database entries, even going so far as to forge special perforation marks found on particular customs filings.

Both the company and its owner were charged with one count of conspiring to defraud the U.S., two counts of importing goods by means of false statements and one count of conspiring to launder money. Maximum penalties for these charges include a $250,000 fine and five years in prison, a $250,000 fine and two years in prison and a $500,000 fine (or twice the amount of the laundered money) and 20 years in prison, respectively.

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