While some enforcement areas have taken a pause this year, False Claims Act enforcement—especially around customs duties—is moving and likely to get busier.

Just last week the U.S. Department of Justice filed a complaint against Barco Uniforms Inc. and its web of suppliers, alleging they violated the False Claims Act (“FCA”) by underpaying customs duties using a double-invoicing scheme.  Specifically, DOJ alleges that Barco engaged in a long-running scheme to undervalue imports from China by presenting a second (false) set of invoices to the government.  According to the complaint, a third-party auditor also alerted Barco that it needed to review its duty calculations and pricing arrangements, but Barco carried on.

By undervaluing imports, a company can pay less in customs duties but find itself sued under the FCA for making “reverse false claims”—false statements to avoid paying the government as opposed to false statements to obtain payment from the government. That means treble damages and penalties for every “false” entry.

The case was brought under the FCA’s whistleblower provisions by a former Barco employee. The government has now intervened and taken over the case. This is not a one-off: Customs and Border Protection and DOJ have made it increasingly clear they are very interested in customs enforcement as a revenue and compliance tool.  Potential whistleblowers therefore have huge financial incentives to report noncompliant companies to the government.  That means:

• If your company imports goods, you need to make sure your declared values are the real values.
• Neither “everyone does it” nor “we are being unfairly singled out” is a valid legal defense.
• Failing to heed the warnings of auditors can help a potential whistleblower (and the government) build a scienter case against you.