Customs and Duties

Effective regulation of imports and exports is essential to the trading economy of the United States and its economic partners.   The False Claims Act serves as a crucial check on entities seeking to avoid, decrease, or withhold payment of an obligation to pay money to the United States pursuant to an import or export’s appropriate shipping or customs obligation.

Section 3729(a)(1)(G) of the False Claims Act subjects an individual who “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government.”  In other words, the Act prohibits false statements concerning the value, weight, type, country of origin, or other characteristic and made to reduce or otherwise avoid the full amount owed under an applicable tariff, duty.  In addition to liability for affirmatively making a false statement, the Act also applies to one who knowingly “conceals” or “improperly avoids or decreases” an obligation owed to the government.

Jurisdictional Issues 

The unique regulation of customs and duties has presented some interesting legal results, though the jurisdictional conflict does not appear to have any effect on the ability of a qui tam relator (i.e. “whistleblower”) to bring a False Claims Act suit on behalf of the United States in a federal district court.

Generally speaking, a federal court’s exercise of jurisdiction over False Claims Act cases is fully consistent with 28 U.S.C. 1331 which grants district courts subject matter jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.”  Likewise, section 1345 of that title allows a similar exercise of jurisdiction over civil matters “commenced by the United States” unless congress expressly specifies otherwise.  In customs matters, Congress has expressed  an intention, pursuant to 28 U.S.C. 1582(3) to confer upon the Court of International Trade (CIT) “jurisdiction of any civil action which arises out of an import transaction and which is commenced by the United States” to, among other things, “recover customs duties.”

Although the distinction has raised some confusion, most False Claims Acts for customs and duties fraud may be brought in a federal district court, rather than the CIT.  False Claims Act actions may be brought by the United States government alone, by a qui tam relator in a case in which the government has chosen to intervene, and by a qui tam relator where the government has declined to intervene.  Although some courts have considered False Claims Act charges brought solely by the government and without the assistance of a qui tam relator to be actions “commenced by the United States” and thus within Section 1582(3)’s grant of jurisdiction to the CIT,[1] the jurisdictional requirement does not appear to apply to actions brought by a qui tam relator [2].  The distinction does appear odd as it has been well established that the United States government remains “the real party in interest” regardless of whether it initiates a False Claims Act suit, intervenes in one, and even where it declines to intervene in a case.

[1] United States v. Universal Fruits and Vegetables, 370 F.3d 829 (9th Cir. 2004)
[2] United States ex rel. Huangyan Imp. & Exp. Corp. v. Nature’s Farm Prods., Inc., 370 F.Supp.2d 993 (N.D. Cal. 2005)