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Clothing Importers to Pay $10 Million to Settle Charges of Under Invoicing

Monday, April 14, 2014
Sandler, Travis & Rosenberg Trade Report

Two New York importers of women’s apparel have agreed to pay $10 million to settle a False Claims Act case alleging that over a nine-year period they purposefully evaded customs duties by undervaluing their shipments. The two companies also agreed to cooperate fully with the federal government in any investigation or enforcement action against other entities and/or individuals involving the conduct at issue in this case.

According to an order of settlement issued April 9 by the U.S. District Court for the Southern District of New York, the two importers acknowledged repeatedly presenting to the federal government commercial invoices for imported women’s apparel that reported less than the actual value. They paid the foreign apparel manufacturers amounts in excess of that recorded on the commercial invoices and paid those higher amounts pursuant to separate invoices referred to a “debit notes.” This scheme led to the under-assessment of millions of dollars in import duties.

A Corporate Crime Reporter article on this case suggests that penalties against other companies engaged in similar conduct could be forthcoming. One of the importers “asserted in its defense that lying about the true value of imported goods was an ‘industry practice,’” the article states, and the attorney for the whistleblower who reported the two importers’ conduct (and who will receive $2.3 million as a result of the settlement) added “that the customs fraud uncovered in [this] case may be only the tip of the iceberg.”

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