Investigations Involving Undervaluation of Imported Goods

Our Lawyers Defend Clients in CBP and DOJ Investigations Involving the Alleged Undervaluation of Imported Goods

Importers, customs brokers, foreign manufacturers, and other parties are required to accurately value imported goods for purposes of calculating the customs duties owed. Undervaluing imported goods violates federal trade laws, and it can trigger steep federal penalties.

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

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

The declared value of imported merchandise determines the customs duties owed—unless and until the federal government says otherwise. Due to the enormous volume of imported goods entering the United States, the federal government relies on importers’ customs declarations to determine how much to collect under the Harmonized Tariff Schedule (HTS), executive tariffs, and other pertinent sources of authority.

As a result, undervaluation is a significant concern, and it has become a top federal law enforcement priority in recent years. The US Department of Justice (DOJ) defin e s undervaluation as follows:

“Undervaluation is the practice of intentionally stating a lower price for goods on a commercial invoice than the actual price paid or the true market value of the goods. This may be accomplished in several ways including false claims of first sale pricing or failing to accurately account for the value of assets.”

If you are under investigation for understating a customs valuation, you need experienced defense counsel. These investigations can lead to civil or criminal penalties depending on the circumstances involved. Customs duties are a key source of revenue collection for the federal government; and, when understating the true value of imported goods results in a loss of revenue, the government can—and will—enforce compliance through all available means.

Matters We Handle

Our law firm provides experienced legal representation for all international trade matters, including matters involving the alleged undervaluation of goods imported into the United States. If you are facing back import duty liability (in which case you are likely also facing other penalties), we can help—as long as you contact us in time.

Representative examples of matters we handle include:

US Customs and Border Protection (CBP) Investigations

US Customs and Border Protection (CBP) is the federal government’s first line of defense for customs and duty fraud. It devotes substantial resources to enforcing compliance with respect to shipments coming into the United States from countries around the world.

Facing a CBP investigation involving allegations of understating customs values can pose significant risks. This is true not only for the importer, customs broker, or other party directly targeted in the investigation, but for related parties as well. If a misrepresented transaction value results in the underpayment of US customs duties, this can potentially result in liability for all parties involved.

US Department of Justice (DOJ) Investigations

The US Department of Justice (DOJ) also conducts investigations targeting domestic and foreign businesses suspected of undervaluation. While the DOJ prioritizes import cases involving certain countries (i.e., China and Venezuela), it also handles cases involving imported goods from manufacturers and suppliers worldwide. The DOJ enforces compliance with a host of federal laws and regulations; and, as a result, DOJ investigations can pose multiple risks for targeted parties.

Civil and Criminal Customs Fraud Enforcement Cases

Since undervaluation schemes harm law-abiding US companies, the US economy as a whole, and the US government, the DOJ aggressively pursues enforcement when warranted. We provide defense representation for civil and criminal customs fraud enforcement cases involving allegations including (but not limited to):

False Invoicing

False invoicing is among the most common allegations in cases involving alleged undervaluation of imported goods. In many cases, defending against these allegations will involve providing substantiation for the pricing reported to CBP. However, if a targeted importer or another defendant cannot substantiate its reported pricing, avoiding unnecessary liability will require a strategic defense focused on avoiding prosecution for criminal fraud.

Double Invoicing

Double invoicing involves creating two commercial invoices with different prices—one with the actual price of the products being sold and one with a reduced price that is used for purposes of calculating customs duties. Undervaluation schemes that involve double invoicing of goods are highly likely to lead to criminal accusations, as they generally imply intent to defraud the United States. Similar to other federal criminal charges, criminal charges related to double invoicing can lead to penalties including fines and prison time.

Other Undervaluation Schemes

The DOJ pursues cases involving allegations of various other types of undervaluation schemes as well. These include alleged schemes that involve tampering with weights or quantities, misclassification of goods as a means of undervaluing imports, and failing to report assists (which must generally be declared as part of the transaction value), among others.

How the Defense Team at Oberheiden PC Can Help if You Are Facing Allegations of Customs Undervaluation

Systematic undervaluation of imported goods can lead to macroeconomic distortions; and, while it is often undertaken in an attempt to reduce consumer prices, it can ultimately lead to higher prices long-term. Undervaluation also disrupts the local economy by creating unfair competition for domestic manufacturers.

For all of these reasons, the US government takes undervaluation very seriously. As a result, if your business is facing allegations of undervaluing imported goods, you need to take your situation very seriously as well. At Oberheiden PC, we can:

Intervene in the government’s investigation to protect your business
Thoroughly assess the allegations and risks at issue
Build a comprehensive and cohesive defense strategy tailored to the facts at hand
Work to secure an amicable resolution that protects your business from unwarranted liability
Fight to protect your business’s interests in administrative proceedings or federal court if necessary

With a defense team that includes former DOJ prosecutors, we have extensive experience on both sides of high-stakes federal law enforcement matters. Regardless of the circumstances at hand, we can get to work defending your business immediately. Individuals can face serious risks in undervaluation cases as well, and we also provide federal defense representation for business owners, executives, and customs brokers nationwide.

FAQs: Defending Against Allegations of Underpayment of US Customs Duties

Does understating the import value of goods constitute customs duty evasion?

Yes, understating the import value of goods constitutes customs duty evasion under federal law. This is a serious offense that has become a top federal law enforcement priority in recent years. If your business has been accused of understating the value of imported goods, you will need to execute a proactive and strategic defense to avoid unnecessary consequences. Our experienced international trade lawyers can help.

What are the penalties for customs duty evasion under the False Claims Act (FCA)?

While customs duty evasion involving the undervaluation of imported goods can have a variety of serious consequences, many cases involve civil or criminal enforcement actions under the False Claims Act (FCA). The FCA prohibits the submission of “false or fraudulent claims” to the federal government—and this includes making false claims about customs duties owed.

In civil cases, penalties under the FCA can include treble damages and other forms of liability. In criminal cases, penalties under the FCA can include fines and prison time.

Which is the correct price paid or payable to use when valuing imported goods?

Federal law allows importers to use the “first sale” price when valuing imported goods. This is the price paid or payable in the original transaction between a foreign seller and reseller rather than the price agreed upon between the importer and the reseller. When relying on the “first sale” price to calculate US customs duties, it is critical to ensure that this price is both reasonable and capable of substantiation based on available documentation.

What if I disagree with the government’s claim of undervaluation?

If you believe that you have been falsely accused of undervaluing imported goods, you should engage experienced legal counsel promptly. While there are avenues for challenging CBP’s valuation methods, asserting a successful challenge requires familiarity with the relevant substantive laws and regulations as well as the relevant administrative procedures. Our law firm can help you make an informed decision about whether to file a challenge; and, if you decide to file, we can communicate with CBP on your behalf.

Do I need defense counsel if I am being accused of undervaluing imported goods?

Facing accusations of undervaluing imported goods is a high-risk matter that requires experienced legal representation. At Oberheiden PC, we handle undervaluation cases involving CBP and the DOJ. Here too, we can help you thoroughly assess your options, and then we can work with the appropriate federal authorities on your behalf to target a favorable resolution that avoids unnecessary liability and protects your business going forward.

Contact the International Trade Lawyers at Oberheiden PC

If you need to speak with experienced defense counsel about a federal undervaluation investigation, we encourage you to contact us promptly. We represent importers, resellers, manufacturers, and other parties throughout the United States and worldwide. To speak with a senior international trade lawyer at Oberheiden PC in confidence as soon as possible, call us at 888-680-1745 or tell us how we can reach you online now.

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