U.S. Attorney Announces $1 Million Settlement Of Civil Fraud Lawsuit Against Trading Company For Underpaying Customs Duties On Imported Footwear
Damian Williams, the United States Attorney for the Southern District of New York, AnnMarie R. Highsmith, the Executive Assistant Commissioner for U.S. Customs and Border Protection’s (“CBP”) Office of Trade, Francis J. Russo, the Director of CBP Field Operations New York, and Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced that the United States has filed and settled a civil lawsuit against Samsung C&T America, Inc. (“SCTA”), a global trading and investment company that is a U.S. subsidiary of the Korean conglomerate Samsung C&T Corporation. Among other things, SCTA imports and sells footwear manufactured overseas in partnership with other companies. SCTA performs services in connection with the importation and sale of footwear, including financing, transportation, warehousing, and distribution. The settlement resolves claims brought by the United States that between May 2016 and December 2018, SCTA violated the False Claims Act by misclassifying imported footwear under the Harmonized Tariff Schedule (“HTS”) and by not paying the full amount of customs duties owed.
Under the settlement agreement approved by U.S. District Judge Paul G. Gardephe, SCTA will pay a total of $1 million to the United States. As a part of the settlement agreement, SCTA also made admissions regarding certain conduct alleged in the Government’s Complaint. Specifically, SCTA admitted that it misclassified certain imported footwear on entry documents filed with CBP and, in some instances, underpaid customs duties on the footwear. SCTA further admitted that it had reason to know that certain documents provided to its customs brokers inaccurately described the construction and materials of the imported footwear and that SCTA failed to verify the accuracy of this information before providing it to its customs brokers.
U.S. Attorney Damian Williams said: “SCTA improperly avoided paying the full customs duties owed to the United States by misclassifying certain footwear that it imported and thereby reducing the duty rate applied. This Office is committed to combatting customs fraud by holding companies accountable when they misclassify goods and evade paying their legally required duties.”
CBP Executive Assistant Commissioner AnnMarie R. Highsmith said: “Misclassification and avoiding the payment of lawful duties on imported goods is a serious matter. This practice allows entities to import goods without paying the U.S. Government the lawful amount of duties owed, creating an unfair advantage over law-abiding American businesses. I am glad that we were able to work with our federal partners to reach a satisfactory settlement to recover these funds.”
CBP Director of Field Operations Francis J. Russo said: “U.S. Customs and Border Protection demonstrated its tenacity once again in preventing the circumvention of the payment of proper duties. This was a total team effort by CBP import specialists and regulatory auditors, HSI investigators, and the U.S. Attorney’s Office for the Southern District of New York to uncover SCTA’s misclassification of goods, which shortchanged the United States government of the proper amount of customs duties owed.”
HSI Special Agent in Charge Ivan J. Arvelo said: “For two and a half years, Samsung C&T America, Inc. submitted false information to the United States Government, misclassified imported goods, and underpaid customs duties. As this settlement proves, HSI, along with our law enforcement partners, will hold accountable organizations that engage in improper trade practices and deny our government of vital revenues.”
As alleged in the Complaint filed in Manhattan federal court:
From May 2016 through December 2018 (the “Relevant Period”), SCTA, in conjunction with a business partner, imported footwear manufactured overseas, including from manufacturers in China and Vietnam, into the United States. The tariff classifications for footwear depend on the characteristics of the footwear, including the footwear’s materials, its construction, and its intended use. Depending on the classification of the footwear, the duties owed vary significantly.
During the Relevant Period, SCTA, as the importer of record for certain customs entries referenced in the Government’s Complaint, violated the False Claims Act by misclassifying certain footwear under the HTS and by causing entry summary forms to be presented to CBP that SCTA knew or had reason to know contained false classifications. SCTA provided its customs brokers with documentation and information, including invoices, that (i) misclassified the footwear under the HTS, and/or (ii) contained inaccurate information concerning the materials and construction of the footwear. Accordingly, in many instances, the footwear was entered at a lower duty rate than would have been applicable had the footwear been properly classified. As a result of the misclassifications, SCTA avoided paying the full amount of the customs duties owed.
In the settlement agreement, SCTA admitted, acknowledged, and accepted responsibility for the following conduct:
- As the United States importer of record, SCTA was responsible for paying the customs duties owed on the footwear at issue and providing accurate documents to CBP to allow CBP to assess customs duties applicable to the footwear.
- SCTA and its business partner provided SCTA’s customs brokers with invoices and other documents and information that purportedly reflected the tariff classification of the footwear under the HTS, as well as the corresponding materials and construction of the footwear. SCTA knew that its customs brokers would rely on the documents and information to prepare the entry summaries submitted to CBP, which required classifying the footwear under the HTS, determining the applicable duty rates, and calculating the amount of the customs duties owed on the footwear.
- SCTA had reason to know that certain documents provided to its customs brokers, including invoices, inaccurately stated the materials and construction of the footwear at issue. SCTA failed to verify the accuracy of this information before providing it to its customs brokers. As a result, SCTA materially misreported the classification of the footwear under the HTS and misrepresented the true materials and construction of the footwear.
- SCTA, through its customs brokers, misclassified the footwear at issue on the associated entry documents filed with CBP and, in many instances, underpaid customs duties on the footwear.
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In connection with the filing of the lawsuit and settlement, the Government intervened in a whistleblower lawsuit that had been previously filed under seal pursuant to the False Claims Act.
Mr. Williams thanked CBP and HSI for their assistance and support with the case.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Samuel Dolinger is in charge of the case.