Drawback Fraud Defense

Our International Trade Lawyers Defend US Importers Accused of Drawback Fraud By the Federal Government

Importers accused of drawback fraud can face charges for multiple federal crimes. If you are facing an investigation or criminal prosecution for alleged drawback fraud, you need experienced legal representation. Our lawyers can help you fight to avoid serious penalties.

John W. Sellers — **Attorney John Sellers**
International Trade Team Lead
Former DOJ Trial Attorney

**Glenn Karabeika**
International Trade Team
Former HSI Special Agent

Allegations of drawback fraud under the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) can lead to serious criminal charges. Federal prosecutors are increasingly targeting importers for drawback fraud in customs enforcement cases, and criminal proceedings can expose importers to fines and prison time.

If you are facing criminal penalties related to allegations of drawback fraud, our international trade lawyers can protect you by all means available. We represent importers and other clients in cases involving US Customs and Border Protection CBP), the US Department of Homeland Security Office of Inspector General (DHS OIG), the US Department of Justice (DOJ), and all other federal law enforcement authorities.

Are You At Risk of Facing Criminal Liability for Drawback Fraud?

Drawback fraud allegations can take several different forms. While these allegations can trigger civil penalties in cases involving negligence (or gross negligence), they can also trigger criminal penalties if federal agents find evidence of intent to defraud the United States government.

Some examples of allegations that have the potential to lead to criminal consequences include:

Falsely claiming to export goods that are subject to antidumping or countervailing duties
Falsely claiming to export goods that are subject to ordinary import duties under the Tariff Act
Falsely claiming that an export meets the eligibility requirements for a drawback
Exporting sham or substituted merchandise while falsely claiming that they are high-value imported goods that were subject to substantial duties
Submitting false information to CBP to obtain a refund that is not required to be paid

These allegations can involve violations of various federal statutes and regulations. If you are facing allegations of drawback fraud related to imported merchandise, it is critical to ensure that you have a clear understanding of your compliance exposure—and that you do everything you can to avoid fines, jail time, and any other consequences you may be facing.

False Drawback Claims Can Lead to Serious Federal Charges

At Oberheiden PC, we defend importers and other clients against the full range of federal charges that can flow from allegations of drawback fraud. We represent individuals and companies across the country in investigations and legal proceedings involving:

Bank Fraud

Drawback fraud cases can implicate the federal bank fraud statute (18 USC Section 1344). When importers and other parties engage in fraudulent practices that directly or indirectly involve federally insured financial institutions, they can face up to a $1 million fine and 30 years behind bars.

Conspiracy

The federal conspiracy statute (18 USC Section 371) allows the DOJ to pursue criminal charges against importers and all other parties involved in international supply chains. Section 371 is extremely broad in scope, and convictions in federal court can result in statutory fines and up to five years of federal imprisonment.

Customs Fraud

Customs fraud investigations have become a priority for CBP, the DOJ, and other federal authorities. Under the federal customs fraud statute (19 USC Section 1592), importers and other targets of federal drawback fraud investigations can face monetary penalties up to the value of the imported merchandise involved.

False Claims Act (FCA) Violations

The False Claims Act (FCA) prohibits importers and other businesses from submitting “false or fraudulent claims” to the federal government. In the context of a drawback fraud case, this involves fraudulently claiming a refund that isn’t owed. Obtaining money from the government in violation of the FCA can lead to civil or criminal enforcement depending on the circumstances involved. In civil litigation, importers and other parties can face liability for three times the amount of the government’s losses (plus other penalties). In criminal prosecutions, defendants can face financial penalties and federal imprisonment.

Federal Trade Commission Act (FTCA) Violations

Since duty drawbacks refund up to 99% of paid duties, improperly obtaining drawbacks from the federal government can put importers and other commercial parties at an unfair advantage in the marketplace. As a result, drawback fraud can implicate the Federal Trade Commission Act’s (FTCA) prohibition on unfair trade practices as well—and this can further increase targeted parties’ liability exposure.

Wire Fraud

Since drawback claims must be filed electronically through CBP’s ACE system (with a filing deadline of five years post-importation), fraudulent drawback claims can implicate the federal wire fraud statute (18 USC Section 1343) as well. In a typical case, a conviction under the federal wire fraud statute can carry statutory fines and up to 20 years behind bars.

Combating Drawback Fraud is a Top Priority for CBP and the DOJ

Combating drawback fraud has become a top priority for CBP and the DOJ. Both of these federal authorities are increasingly using artificial intelligence (AI) to rapidly identify and adapt to new fraud techniques, and they are using robust fraud defense and enforcement measures to protect the United States’ bottom line and its reputation for protecting domestic industries.

As a result, defending against allegations of drawback fraud requires an equally robust approach. Effective drawback fraud defense requires clear documentation of compliance across import and export processes, and importers must have comprehensive data related to their transaction histories. Documenting importers’ internal compliance audits helps reduce their customs fraud exposure as well. In all scenarios, having clear compliance documentation on-hand can help facilitate a favorable resolution that avoids going to court—and this is the outcome we pursue for our clients whenever possible.

Once you engage our law firm to represent you, we will begin assessing potential defense strategies immediately. We will review your internal compliance records to evaluate your risk and identify all opportunities to challenge the government’s allegations of fraud. We will then use the available evidence (or lack thereof) to target a resolution that avoids unnecessary and unwarranted liability.

FAQs: Fighting to Avoid Drawback Penalties in Trade Fraud Enforcement Cases

What should I do if I have been accused of customs duty drawback fraud?

If you have been accused of customs duty drawback fraud, you should engage experienced defense counsel immediately. These are high-risk accusations that can lead to civil or criminal charges depending on the circumstances involved. Drawback fraud allegations can take various forms; and, to ensure that you are making informed and strategic decisions about your defense, you need to know the specific allegations against you. Once you engage our law firm, our attorneys will be able to communicate with the appropriate federal authorities on your behalf to gain a clear understanding of the focus and scope of their investigation.

What are some examples of potential defense strategies in drawback fraud cases?

Potential defense strategies in drawback fraud cases range from affirmatively demonstrating compliance to exposing shortcomings in the government’s case. Ultimately, the defenses you have available will depend on the specific type of drawback fraud of which you have been accused and the other circumstances involved in your case. Our attorneys can work quickly to conduct a comprehensive case assessment and advise you regarding how to proceed.

What are the penalties for drawback fraud?

The penalties for drawback fraud can be substantial. As discussed above, these cases can be either civil or criminal in nature—and whether you are facing civil enforcement or criminal prosecution will play a critical role in determining what penalties are on the table. The specific federal statute(s) under which the government is pursuing enforcement will play a critical role as well. Generally, penalties in civil enforcement cases are financial in nature, while criminal prosecution can create exposure to both fines and incarceration.

Should I consider a voluntary disclosure if I improperly received a drawback from CBP?

For importers that have improperly received drawbacks, voluntary disclosures can help limit their liability with CBP and other federal regulators. With that said, importers also need to be very careful when disclosing improper drawbacks to the federal government. While proactive risk mitigation strategies can be essential for preventing escalation of importers’ exposure, it is critical to ensure that submitting a voluntary disclosure is the most appropriate course of action before moving forward.

Do I need an attorney if I have been accused of drawback fraud?

Yes, if you have been accused of drawback fraud, you should consult with an experienced international trade attorney immediately. This is a high-risk scenario, and you will need to work with your attorney to quickly develop a defense strategy focused on avoiding unnecessary consequences in light of the specific allegations and circumstances at hand.

Schedule a Free and Confidential Consultation with an International Trade Attorney at Oberheiden PC

If you are under investigation or facing federal charges for drawback fraud, we encourage you to contact us immediately so that we can help. To schedule a free and confidential consultation with an experienced international trade attorney at Oberheiden PC as soon as possible, call us at 888-680-1745 or tell us how we can reach you online now.

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