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AD Duty Evasion Case Brought Under False Claims Act Dismissed

Thursday, March 28, 2013
By Shawn McCausland
Sandler, Travis & Rosenberg Trade Report

The U.S. District Court for the District of Columbia dismissed March 22 a case filed by an anonymous private citizen alleging violations of the False Claims Act by several major retailers. The plaintiff argued that to avoid antidumping duties on pencils manufactured in China (currently set at 114.9%) these retailers knowingly purchased such pencils from suppliers in other countries and then falsely declared on entry documents that the pencils originated in Hong Kong, Malaysia, Indonesia, Taiwan and/or Vietnam.

The FCA prohibits false or fraudulent claims for payment to the federal government and permits civil actions based on such claims to be brought by private individuals acting on behalf of the government (relators) based on their knowledge of fraud committed against the government. Courts may not hear such qui tam suits based on allegations or transactions that have been publicly disclosed in some way, including via the news media or administrative reports, unless the person bringing the action is an original source of the information.

In this case, the court states, the essential elements underlying the relator’s fraud allegation are both based on publicly disclosed information. Charges of misrepresentation of country of origin are based on shipping data obtained from reports published by a company that compiles manifest information submitted to U.S. Customs and Border Protection by all shippers. These reports are accessible to the public on a Web site, which qualifies as “news media,” and the manifest information is available to public subscribers through CBP’s Automated Manifest System, which can be characterized as an administrative report. The relator also bases its assertion that the pencils were made in China on characteristics described in reports produced by the U.S. International Trade Commission.

Finally, the court states, the relator does not qualify as an original source of the information at issue. The relator asserts that he learned of the alleged fraud through talking with industry insiders, analyzing trade data and hiring investigators overseas, but “these kinds of communications do not qualify him as an ‘original source’ for purposes of the public disclosure bar.”

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