The U.S. Court of Appeals for the Ninth Circuit has affirmed a $26 million jury verdict against an importer for knowingly submitting false customs declarations to avoid paying antidumping duties of nearly 200 percent on welded outlets imported from China. A competitor brought this suit as a relator under the False Claims Act, alleging that the importer falsely claimed its products were not subject to antidumping duties and misclassified them as steel couplings rather than welded outlets.
The Department of Commerce had previously ruled that the importer’s products fell within the scope of a longstanding antidumping duty order on carbon steel butt-weld pipe fittings. That ruling was upheld by both the Court of International Trade and the Federal Circuit. Nevertheless, the importer argued that it lacked the scienter (intent or knowledge of wrongdoing) required under the FCA because, at the time of importation, it was objectively reasonable to believe its products were not covered by the order.
The court rejected this “objective reasonableness” defense, citing a 2023 decision by the Supreme Court holding that FCA scienter is based on a specific defendant’s actual knowledge and belief, not what a hypothetical reasonable person might have believed. The court emphasized that even if the antidumping duty order was ambiguous, the importer could still be liable if it acted with deliberate ignorance or reckless disregard—standards met in this case by evidence that the importer failed to investigate its duty obligations despite clear indicators and the ease with which the relevant order and prior rulings could have been found.
The court also clarified that while the FCA “undoubtedly overlaps” with 19 USC 1592, which authorizes the U.S. government to recover duties and impose penalties for material false statements or omissions in connection with import transactions, the two statutes may operate concurrently. The court explained that the FCA complements rather than conflicts with § 1592 because only the government can bring cases under the latter statute while the FCA lets private whistleblowers sue when the government doesn’t act directly. The court added that Congress has not designated § 1592 as the exclusive remedy for customs fraud and in fact amended the FCA to ensure it encompasses obligations to pay the government, including customs duties.
Copyright © 2025 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.