In late February, Pennsylvania-based Ameri-Source International, Inc., and three other related companies, agreed to pay $3 million to settle a qui tam lawsuit brought by the Department of Justice (“DOJ”) involving Ameri-Source’s alleged failure to abide by so-called antidumping duties. The lawsuit alleged that Ameri-Source and the other companies violated the False Claims Act (“FSA”) by evading their antidumping duties as it relates to several shipments of small-diameter graphite electrodes originating from China.
An antidumping duty is an additional duty imposed on companies like Ameri-Source by the U.S. Customs and Boarder Protection (“CBP”), which seeks to protect American manufacturers from massive quantities of cheaper foreign imports from being “dumped” into the U.S. market. Oftentimes, importers, in an attempt to avoid these antidumping duties, will intentionally mislabel their products as another item that does not require payment of the antidumping duty. Here, Ameri-Source was alleged to have misclassified the diameter of graphite electrodes in order to avoid having to pay antidumping duties on the electrodes.
Ameri-Source Agrees to Pay $3 Million
In a press release, the DOJ said the specific electrodes at issue have been subject to antidumping duties since 2008. “This settlement shows that the Department of Justice is committed to pursuing claims against anyone involved in a scheme to seek an unfair advantage in U.S. markets by evading duties on imported goods, including the individuals who run the companies and knowingly participate in such schemes,” Principal Deputy Assistant Attorney General Benjamin C. Mizer said.
The case against Ameri-Source was originally brought by whistleblower Graphite Electrode Sales, Inc. in 2013. However, it was not until February 2016 that the U.S. government announced its intention to intervene in the lawsuit. For their efforts to blow the whistle on Ameri-Source and others, Graphite Electrode Sales, Inc. will receive nearly $500,000 as their share of the settlement.
Ameri-Source Pleads Guilty to Related Criminal Charges
In addition to the qui tam lawsuit, Ameri-Source and its owners, Ajay Goel and Thomas Diener, were charged criminally as a result of their alleged conspiracy to misrepresent the graphite electrodes as part of the duty-evasion scheme. Ameri-Source pled guilty to those charges, and the judge ruled that Ameri-Source must pay an additional $250,000 for their criminal liability. The judge applied the $3 million civil penalty to the $2 million plus in antidumping duties Ameri-Source avoided through its alleged scheme.
“We are committed to protecting U.S. jobs and industries from those who seek an unfair advantage in the U.S. marketplace,” U.S. Attorney David J. Hickton said in a statement. “This office’s aggressive criminal and civil enforcement efforts to combat and prosecute the evasive practices of both the corporations and individuals who perpetrated this scheme demonstrate our resolve to ensure a level playing field for all.”
“Antidumping duties level the playing field for U.S. manufacturers,” said CBP Commissioner R. Gil Kerlikowske. “This is a prime example of how U.S. Customs and Border Protection partners with the Department of Justice, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE HSI) and the U.S. Department of Commerce to enforce antidumping duty laws.”
“This settlement underscores one of HSI’s primary efforts, which is to ensure a level playing field for companies engaged in legitimate trade and commerce with the United States,” said Special Agent in Charge John Kelleghan of Homeland Security Investigations (HSI) Philadelphia. “HSI special agents will continue to protect the revenue of the United States and aggressively investigate individuals and companies who attempt to operate outside our laws and regulations.”
“The Department of Commerce Office of Inspector General is dedicated to supporting bureaus such as the International Trade Administration in protecting the U.S. economy from the type of criminal activity disclosed in this case,” said Special Agent in Charge Duane E. Townsend of the U.S. Department of Commerce Office of Inspector General. “We greatly appreciate the cooperation and efforts of HSI and the U.S. Attorney’s Office that resulted in this agreement.”
Not Your Usual Qui Tam Lawsuit
The Ameri-Source case differs from the usual qui tam lawsuit in two ways. First, while it is somewhat odd for a qui tam lawsuit to be brought by a company’s competitor, there is no prohibition against such a practice in the FCA. As this case aptly demonstrates, often it is other companies within the same industry, including competitors, which are usually best-situated to learn about and uncover suspected customs fraud. Second, most qui tam lawsuits are initiated against companies that falsely claim federal funds. However, in this case, Ameri-Source was alleged to have avoided paying funds to the federal government. Even still, the FCA’s qui tam provisions state that if an importer evades paying any types of duties, then it can be held liable. By law, the responsibility to properly label and declare an import falls upon the “importer of record”, not the CBP, due in part to the practicality of such a task. Since the burden of classification falls upon the importer, this type of duty-evasion is another prolific example of a violation of the FCA.
* Photo cred.: wgnflag.com