Civil Investigative Demand (CID) Targeting Import Duty Violations Under Section 301
The Justice Department is Using Civil Investigative Demands (CIDs) to Target Attempts to Avoid Section 301 Import Duties
CID Targeting Import Duty Violations Team Lead
Former DOJ Trial Attorney
CID Targeting Import Duty Violations Team
Former HSI Special Agent
Under Section 301 of the Trade Act of 1974, the Office of the United States Trade Representative (USTR) has the authority to impose duties (or tariffs) on Chinese trade. These duties are specifically intended to counter alleged unfair trade practices related to the enforcement (or lack thereof) of intellectual property rights in China. The federal government strictly enforces compliance with the Section 301 import duties, and customs violations under Section 301 can expose individuals and organizations to substantial penalties.
Recently, we have been made aware of the U.S. Department of Justice (DOJ) using civil investigative demands to target import duty violations under Section 301.
If you have received a civil investigative demand targeting import duty violations under Section 301, it is important that you engage experienced federal defense counsel promptly. Responding to a CID from the DOJ requires a cautious, informed, and strategic approach. If you are at risk of facing penalties for violating Section 301, you will need effective legal representation as well. While DOJ investigations involving CIDs are (by definition) civil in nature, if the DOJ secures evidence of an apparent willful attempt to avoid paying Section 301 tariffs, you could end up facing criminal liability.
Understanding Your Section 301 Civil Investigative Demand (CID)
The CID is a powerful weapon in the DOJ’s law enforcement arsenal. By issuing CIDs, the DOJ can compel individuals and organizations to produce documents and provide testimony in support of its trade law enforcement efforts in civil cases. However, issuing a CID does not preclude the DOJ from pursuing criminal charges; and, if records or statements secured through a CID indicate that criminal prosecution is warranted, the DOJ can—and will—seek an indictment.
We are aware of the DOJ issuing CIDs to target alleged violations of Section 301 of the Trade Act of 1974. One recent example states, in part:
“The purpose of this demand is to investigate allegations that [the target] has imported items with falsified country of origin in an attempt to avoid payment of Section 301 Duties imposed on such imports, which may be a violation of the False Claims Act, 31 U.S.C. Sections 3729-3733.”
The False Claims Act (FCA) prohibits individuals and organizations from knowingly submitting a “false or fraudulent” claim to the federal government. This includes falsely representing the obligation (or lack thereof) to pay import duties under Section 301. While most FCA cases are civil in nature—and while CIDs specifically target alleged civil violations—alleged violations of the False Claims Act can also lead to criminal prosecution in some cases.
With this in mind, if you have received a CID alleging customs fraud or other noncompliance with Section 301, you need to be very careful. While you must respond to the CID, you must also be very careful when doing so. You should read the CID thoroughly, paying particular attention to the deadlines you need to meet, and then you should consult with a federal defense lawyer who has experience handling CID responses as soon as possible.
Responding to a CID from the U.S. Department of Justice
At Oberheiden P.C., we have extensive experience helping clients respond to CIDs from the DOJ. Several of our senior attorneys also have prior experience conducting both civil and criminal investigations (including through the use of CIDs) as federal prosecutors and trial attorneys.
Once you engage our defense team to represent you, we will be able to provide advice and representation including:
- Analyzing Your Civil Investigative Demand (CID) – Our attorneys can thoroughly evaluate the CID to assess the allegations against you and advise you regarding your next steps.
- Evaluating the DOJ’s Allegations Against You Related to Section 301 Tariffs – Our attorneys can also evaluate the DOJ’s allegations that you have violated Section 301 to determine whether the DOJ will be able to substantiate FCA allegations in court.
- Assessing Your Risk and Defense Options – Based on our assessment of the allegations against you, we can then provide an assessment of your risk and the defense options you have available.
- Asserting Your Privileges and Challenging the CID as Warranted – You do not have to provide any privileged records or information in response to the DOJ’s CID. Our attorneys may also be able to challenge the validity of the CID, either in whole or in part.
- Preparing Your Response to the DOJ’s CID – We can assist you with preparing and submitting a compliant response to the DOJ’s CID, including both compiling responsive (and non-privileged) documents and preparing you to testify.
These steps (among others) are critical for making informed decisions about how to respond to a CID from the DOJ alleging violations of Section 301. Since the DOJ’s investigation is ongoing, you need to respond promptly. In addition to assisting with your response to the CID, our attorneys can also interface with federal authorities on your behalf, and we can work to begin steering the DOJ’s investigation toward a favorable resolution that avoids civil liability or criminal charges.
Risks of Failing to Comply with a CID
If you have received a CID alleging that you have falsified the country of origin of Chinese imports or committed other violations of Section 301 of the Trade Act of 1974, you have a legal obligation to respond. Failure to respond to a CID from the DOJ can have serious consequences—including being held in contempt of court (which is a federal criminal offense). This is true regardless of the merits of the DOJ’s investigation.
Risks of Facing Charges for Violating Section 301
At the same time, being found in violation of Section 301 has serious consequences as well. In civil enforcement cases under the False Claims Act, individuals and organizations can face substantial fines. Since these civil penalties apply on a “per violation” basis, they can easily climb into the hundreds of thousands, millions, or even tens of millions of dollars. In criminal enforcement cases under the FCA, targeted individuals can face both fines and federal imprisonment.
FAQs: What To Know if You Received a CID Alleging Import Duty Violations Under Section 301
What is a Civil Investigative Demand (CID)?
A civil investigative demand (CID) is a legally enforceable request for information from a federal law enforcement agency such as the U.S. Department of Justice (DOJ). A CID can request documents, written responses, oral testimony, or all of the above. The DOJ and other law enforcement agencies use CIDs to target a wide range of offenses, including violations of the import duty requirements under Section 301 of the Trade Act of 1974.
What is a Section 301 Duty?
Section 301 of the Trade Act of 1974 allows the Office of the United States Trade Representative (USTR) to impose customs duties on certain imported goods from China. Importers must pay these duties in order to remain in compliance with federal customs laws. If an importer does not pay the Section 301 duty when required, this can trigger a government investigation under the False Claims Act—which can potentially lead to civil or criminal penalties.
Do I Need to Respond to a CID from the Justice Department?
Yes, if you have received a CID from the Justice Department alleging an import duty violation under Section 301, you need to respond. If you don’t, you could be held in contempt (and sentenced to fines and prison time) regardless of whether the FCA allegations are warranted.
At the same time, however, you need to be extremely careful when crafting your response. Justice Department investigations can present serious risks, and you will need to respond (and defend yourself) effectively in order to avoid unnecessary consequences.
How Do I Respond to a CID from the Justice Department?
Responding to a CID from the Justice Department requires a cautious but efficient approach. Meeting the deadline to respond can be challenging, and inadvertently disclosing incriminating information could expose you to serious federal charges. While you have an obligation to respond, you are also entitled to assert all privileges that apply, and you may be able to challenge the CID on various grounds.
Do I Need a Lawyer if I Received a CID Alleging Falsified Country of Origin?
Given the challenges and enforcement risks involved in responding to a CID alleging falsified country of origin (or other import duty violations under Section 301), engaging experienced defense counsel is strongly recommended. If you have received a CID from the DOJ, we strongly encourage you to speak with a federal defense lawyer at Oberheiden P.C. as soon as possible.
Speak with a Federal Defense Attorney at Oberheiden P.C. in Strict Confidence Today
Have you received a civil investigative demand (CID) alleging noncompliance with the import duty requirements under Section 301? If so, we can help, but it is important that you contact us promptly. To speak with a senior federal defense attorney at Oberheiden P.C. in strict confidence as soon as possible, call 888-680-1745 or get in touch online today.
