Background

Six companies were recently convicted of participating in a customs fraud scheme that evaded $1.8 billion in antidumping and countervailing duties on aluminum extrusions from China. Penalties are expected to be announced when the companies are sentenced in December.

According to a press release from the Department of Justice, after the U.S. imposed AD/CV duties on aluminum extrusions from China in 2011, annual reports from Asia’s largest manufacturer of these goods claimed that there was a robust demand for aluminum pallets in the U.S. and that the company was selling such pallets to independent third parties in the U.S. In fact, however, the manufacturer was simply spot-welding aluminum extrusions together to make them appear to be functional pallets and shipping them to U.S. warehouses for stockpiling. The manufacturer then arranged for the construction or acquisition of aluminum melting facilities used to reconfigure the aluminum imported as pallets into a form with commercial value.

The manufacturer sent 2.2 million erstwhile pallets to the U.S. using this scheme, the DOJ said, and falsely reported them as sales in its annual reports to inflate its revenues and deceive investors. The manufacturer and others facilitated this scheme by laundering hundreds of millions of dollars through shell companies to U.S.-based aluminum companies controlled by the manufacturer’s chairman. The funds were then transferred to the manufacturer and the other shell companies as payments for the aluminum.

A federal jury has now convicted four of the warehousing companies involved as well as two aluminum businesses, including one formed to oversee other companies receiving the pallets. A civil forfeiture proceeding against the warehouses has been stayed pending completion of the criminal prosecution, in which the U.S. is seeking the criminal forfeiture of the warehouses and seized aluminum. The Chinese manufacturer, its former president, and others have also been charged but have yet to appear in U.S. court.

For more information on preventing or responding to duty evasion, please contact attorney Kristen Smith at (202) 730-4965.

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