On April 20, 2022, at our Customs Committee meeting, Christopher Hyner from King & Spalding gave us a summary of the various Customs-related provisions in the COMPETES Act Bill (HR 4521).

 

On June 7, 2022, the CITBA Customs Committee hosted a panel of experts on the use of the False Claims Act in the trade arena. Panelists included Brittney R. Powell from Fox Rothschild LLP, Stephen Tosini from the Department of Justice, and J. Michael Taylor from King & Spalding LLP. Jill A. Cramer from Mowry & Grimson moderated the panel.

 

As we learned from the panel, the False Claims Act (“FCA”) was enacted in 1863 by a Congress concerned that suppliers of goods to the Union Army during the Civil War were defrauding the Army. Today, the FCA continues to be a tool in combating fraud against the government. The law includes a qui tam provision that allows “relators” to file an action on behalf of the government and receive a portion of any recovered damages. In the trade context, because of the severity of certain duties, a portion of recovered damages can be significant.

 

The most common trade-related FCA claims concern issues such as the misrepresentation of the country of origin of merchandise, undervaluation, and misclassification. Relators tend to be either company insiders (whistleblowers) or competitors. Over the last four years, it is estimated that roughly 75 customs-related FCA claims were brought. Since 2012, the U.S. Government has collected roughly $130 million in trade-related FCA settlements or judgments. This compares to the estimated $5.6 billion in FCA judgments and settlements collected last year alone and 598 new qui tam actions filed – most of which involve healthcare.



It is estimated that the USG intervenes in roughly 22 percent of FCA cases and nearly every case settles. It is settled law that customs duties are “cognizable damages” and falls within the FCA. The USG will often decline to take on an FCA case and declining to do so is not necessarily indicative of the strength of the evidence. Rather, it may be an assessment that the relator has the legal counsel and resources to take the case themselves. Additional considerations are that the penalties provision pursuant to section 1592 may be easier to establish under the lower negligence standard. The FCA, however, generally garners a better recovery due to the domestic value cap of section 1592.

 

There were great participant questions that invoked questions about whether the Enforce and Protect Act was a better avenue. Generally, the standard for initiating an investigation is lower under EAPA and there is consensus that the provision allows for more circumstantial evidence. And if a competitor wants to stop a behavior, EAPA may be a more effective avenue given the statutory deadlines provided. But if a monetary remedy is sought, EAPA may not be the best avenue.

 

There was discussion as to whether if you were the originator of information to CBP in EAPA there may be some success in subsequent FCA claim, but that is an open question. The Ninth Circuit has mentioned that there may be some offset if there are parallel cases occurring.

WOULD YOU LIKE TO JOIN THE CUSTOMS COMMITTEE? The Customs Committee is open to any CITBA Member who would like to join! We meet quarterly (July, October, January, & April) around lunch time to give us all a chance to stay in the “know” on current customs events. Each meeting starts with a short informal presentation giving us a “heads-up” about interesting current customs matters. We will then open the meeting for discussion, questions, or anything else that occurs organically. We hope you will join us! If you would like to join and receive updates regarding meeting times and logistics, please make sure to “join” the Customs Committee through the CITBA.org website. All meeting details and links will be communicated through the website platform.

(1)   Forced Labor Guidance Hot Off the Press: 

a.      CBP guidance (published 6/13/22): Uyghur Forced Labor Prevention Act U.S. Customs and Border Protection Operational Guidance for Importers (cbp.gov) 

b.   DHS guidance (published 6/17/22): Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China (dhs.gov)

 

(2)   Valuation Encyclopedia is now Current (published 6/7/22): Customs Valuation Encyclopedia 1980-2021 | U.S. Customs and Border Protection (cbp.gov)