United States

How Trek Leather and the False Claims Act may Re-shape the Importing Environment

Jul 26, 2017
From the KPMG TaxWatch

Companies engaging in U.S. import and export activity should understand that to manage risk effectively, trade activity carries with it certain compliance responsibilities. This article from Bloomberg BNA considers how the decision in United States v. Trek Leather coupled with recent actions under the False Claims Act potentially expands liability for individuals and companies involved in the importation process into the U.S.

Importers into the U.S. should understand that importing carries with it certain obligations, beyond payment of customs duties, or taxes on goods imported into a country which are considered indirect taxes.

In 1993, the Customs Modernization Act, or ‘‘Mod’’ Act, became effective and introduced the trade community to ‘‘informed compliance.’’ This concept was premised on the supposition that both U.S. Customs and Border Protection (CBP) and the importer are responsible for following customs regulations. Specifically, CBP must make information about the trade community’s rights and obligationavailable, and the importer must demonstrate reasonable care when entering, classifying and declaring the value of imported products.

This includes providing accurate and complete information on import declarations filed with CBP to enter merchandise into the customs territory of the U.S. and pay the correct customs duties and related fees upon importation. Historically, if these requirements were not met, liability would generally lie with the importer of record. However, the U.S. Court of Appeals for the Federal Circuit’sdecision in United States v. Trek Leather potentially expands liability to include individuals involved in the importation process.

Further, the False Claims Act (FCA) is another avenue through which companies may face large penalties, as the FCA is a federal statute that prohibits false statements made to the U.S. Government. Due to the increased number of FCA cases that the U.S. Department of Justice has handled in recent years, the federal government’s recoveries in 2015 exceeded $3.5 billion for the fourth consecutive year.


business man with shipping containers