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In my last blog entry, I wrote about a recent decision in which the United
States intervened in a False Claims Act/qui tam lawsuit against a Japanese
company accused of Customs fraud. The suit accuses Toyo Ink of defrauding
U.S. Customs by pretending that its goods came from Japan or Mexico when
the goods really came from India and China. The Department of Commerce
has set higher duties on some goods coming from India and China in an
effort to discourage those countries from dumping their goods into U.S.
markets, while charging very high tariffs for U.S. products bound for
their country. Duties are generally set as a percentage of the value of
the goods. As the Toyo Ink case shows, those percentages may vary depending
on what country the goods came from.

The Toyo Ink case also illustrates the fact that whistleblowers can sue
when companies fail to pay customs duties. When importers try to skip
out on tariffs they owe by defrauding the government, a whistleblower
is entitled to sue on the government’s behalf under the False Claims
Act, and to get a percentage of what he recovers for the government.

The Toyo Ink case involves a company accused of misrepresenting the country
of origin of goods. In that case, the country of origin mattered because
the Commerce Department had set heightened duties for certain countries
trying to bring goods into the United States. In other cases, companies
exporting their goods to the United States may defraud the Government
by pretending they qualify for special, reduced tariffs.

For example, Congress has authorized the President of the United States
to waive the duties altogether for goods being shipped from a few, particular,
third world nations. The “Generalized System of Preference”
(“GSP”) program, see
19 C.F.R. § 10.171, was begun in hopes that the duty breaks would bolster the struggling
or emerging economies of third-world nations. Thus, while a business shipping
Christmas lights from France would pay an 8% duty, a company shipping
the same goods from Indonesia would pay no duty at all.

“Congress enacted the GSP [“Generalized System of Preferences”]
program to extend preferential tariff treatment to the exports of less-developed
countries to encourage economic diversification and export development
within the developing world.”
SDI Technologies Inc. v. United States, 977 F. Supp. 1235 (CIT 1997), quoting S. Rep. No. 93-1298, (1974). Under
the GSP program, certain countries are designated as developing countries,
and goods coming from those countries can enter the United States with
a greatly reduced tariff, or even with no tariff.

Obviously companies that bring goods in through the GSP program get a significant
competitive advantage because they do not have to pay any duty. Lest some
companies be tempted to abuse the program, the regulations set out several,
specific criteria for determining whether a shipment is eligible for GSP status.

In my next legal blog entry, I will discuss the GSP program and how countries
may become liable under the False Claims Act because they have made false
claims that their goods were shipped from beneficiary developing countries.


Lee’s peers have named her a Georgia SuperLawyer every year for two decades.