February 3, 2023

False Claims Act: Customs Fraud

On January 30, the United States Attorney’s Office released a statement announcing that International Vitamin Corporation (“IVC”), a leading importer of dietary supplements agreed to settle one of the largest cases ever involving customs fraud under the False Claims Act. IVC will pay the United States government a whopping $22.8 million dollars to resolve claims that for years, it defrauded the U.S. by misclassifying its products under the Harmonized Tariff Schedule. The Harmonized Tariff Schedule sets out the tariff rates and statistical categories for all goods imported into the United States. IVC misclassified its products to avoid paying customs duties, which are charges levied on goods when they cross international borders. The purpose of this charge is to protect U.S. industries, economies, and businesses from international competitors. The United States government further alleged in its complaint that even when IVC finally corrected the longstanding misclassifications of its products, it still failed to pay back duties owed to the U.S.

IVC is a United States Company that imports and sells its vitamins and other nutritional supplements from China. The whistleblower, a former accountant of IVC reported that from 2015 to 2019, IVC engaged in a systematic effort to evade customs duties owed to the United States by materially misrepresenting its products as “duty-free.” As a result of the whistleblower’s initiative, they will receive and handsome and well-deserved $4.5 million reward.

Companies that defraud the U.S. government by not paying customs and duties create an unfair advantage for themselves in the market and cause economic harm to their competitors. This type of fraud harms all Americans, particularly American workers. Customs fraud is a significant problem that remains to impact our economy. The U.S. imports hundreds of billions of dollars in goods each month, making it almost impossible for it to police these imports alone. Whistleblowers, both domestic and abroad, play a key role in upholding the government’s enforcement of tariff and import laws and maintaining fairness in our markets and economy.

The False Claims Act remains one of the most powerful tools at the government’s disposal to combat fraudulent systems and schemes perpetrated against it. To report custom fraud, it is crucial to gather as much information as possible about the fraudulent incident. Start by documenting the details of the fraud, including the date, time, and location of the incident.

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