On December 11, 2020, U.S. Customs and Border Protection (CBP), through the U.S. Department of Justice, filed a civil action in the U.S. Court of International Trade (“CIT”) in New York, United States v. Winland International, Inc. et al.  The government alleges false statement to avoid paying the correct antidumping (“AD”) rates and instead declaring inappropriate combination rates apply, as well as undervaluation of the goods, certain types of tires.  Fourteen individuals, as well as the company are named in the civil case at the CIT.  The press release of the U.S. Department of Justice states that the alleged violations total at least $6.5 million in lost import duty deposits.

Simultaneously with the filing of the civil action, the United States District Court for the Southern District of Texas in Houston unsealed an indictment against many of the same individuals.  In the criminal case in Texas the government alleges conspiracy to commit wire fraud, wire fraud, and entry of the good by means of false statements.  Eight individuals were indicted in Houston.   Those indicted included both residents of the states of Texas and California, and residents of China.  In addition to possible jail time, the Justice Department has stated that it will seek forfeiture of all property, real or personal, which constitutes or is derived from the proceeds traceable to such offenses.

The allegations in the complaint and in the indictment are straightforward issues of fraud and false statements for the purpose of not paying the correct antidumping duty deposits.  The alleged scheme was to misrepresent the true source of the tires being imported into the United States, claiming the tires were from factories and/or exporters which had a relatively low dumping deposit rate, rather than the actual sources (other factories or exporters) which had much higher rates.   Use of false invoices or other false representations are alleged.  The result of the alleged scheme was that the companies involved did not have to pay the higher dumping deposit duties upon the entry of the tires into the United States.

The full details of alleged violations of law will be revealed only during the course of cases being prosecuted in the courts.  However, this type of case plainly is a priority of CBP and Justice as they address evasion, which hurts both U.S. domestic industries and importers acting in accordance with the law.  We expect more of these cases in the near future, which was the message of the Justice Department’s press release:  “The Civil Division, through the Department of Justice’s Trade Fraud Task Force (TFTF), will continue to partner with U.S. law enforcement agencies and U.S. Attorneys’ Offices to aggressively investigate and pursue individuals and companies who attempt to evade U.S. customs laws and target the U.S. manufacturing base with unfair trade practices,” said Acting Assistant Attorney General Jeffery Bossert Clark. “We recognize the importance of ensuring that U.S. manufacturers are competing on a level playing field.”

The fact that the government was able to obtain an indictment and was able to provide detailed knowledge of the transactions at issue appears to indicate that companies or individuals who are confident of their ability to hide such schemes may be mistaken.

Husch Blackwell’s International Trade and Supply Chain team works extensively in these types of matters and encourages those who may have questions or concerns to please contact Jeffrey S. Neeley and Nithya Nagarajan.