Aluminum company was found to have dodged antidumping duties on Chinese-produced magnesium by misdeclaring its origin.
The U.S. government has determined that a Cleveland-based aluminum company evaded antidumping duties on Chinese-origin magnesium ingots by transshipping them through Turkey and falsely declaring Turkey rather than China as their country of origin.
U.S. Customs and Border Protection (CBP) said its investigation revealed a complex scheme involving multiple Turkish companies that facilitated the transshipment of the metal. The findings highlight the U.S. government’s ongoing efforts to enforce U.S. trade laws and protect domestic industries from unfair trade practices. They also underscore how such conduct can form the basis for whistleblower lawsuits under the False Claims Act (FCA).
The Transshipment Scheme Exposed
CBP found that Thompson Aluminum Casting Company imported Chinese-manufactured magnesium alloy ingots through Turkey while falsely declaring the products as Turkish-origin to avoid paying up to 141.49% in antidumping duties.
The investigation was launched after a competing U.S. magnesium producer filed allegations with the agency about the transshipment scheme, which the producer said was injuring it competitively.
CBP found evidence confirming the producer’s transshipment allegations, according to a report it issued. For example, a purported Turkish supplier of the magnesium could not account for acquiring sufficient raw materials to have produced the quantity of ingots it supposedly sold. Photographs showed a factory had limited capacity, inconsistent with the volume of goods it supposedly supplied. Timecards for employees purportedly involved in the production process were dated after the goods had already been shipped.
Moreover, documents provided by Thompson contained significant discrepancies, including mismatched quantities on purchase orders and invoices. Additionally, a supplier’s catalog did not include the magnesium it supposedly shipped, while records showed a Turkish supplier sourced magnesium from China.
Magnesium is a lightweight structural industrial metal known for its low density and high strength-to-weight ratio. It is used in aluminum casting processes, in which molten aluminum is poured or injected into molds to create desired shapes, as well as in the automotive, electronics, and biomedical industries.
Whistleblower Opportunities in Customs Fraud Cases
While the investigation was conducted by CBP using administrative procedures, the same type of unlawful practices uncovered can serve as the basis for whistleblower lawsuits under the False Claims Act (FCA) in United States federal court.
The FCA allows individuals with knowledge of fraud against the U.S. government to file claims on its behalf and receive a portion of any recovered funds. Specifically, whistleblowers who file qui tam lawsuits can receive rewards ranging from 15% to 30% of the amount the government collects. Those rewards can be substantial given that the statute allows the government to recover three times its damages (the amount of the duties evaded), plus penalties for each false claim.
Customs fraud whistleblowers play a crucial role in exposing schemes that deprive the U.S. Treasury of import duties and tariffs. Without their information, it is often impossible for CBP to detect such fraud. This is particularly true in complex customs fraud schemes like those involving transshipment.
Implications for Potential Whistleblowers
CBP’s investigation uncovered common customs fraud tactics, including transshipment through third countries to disguise the goods’ actual country of origin, false documentation to support fraudulent country-of-origin declarations, and activity to obscure the details of the supply chain and product sourcing.
Whistleblowers who observe similar practices may be eligible for significant rewards under the FCA. Common red flags of transshipment include:
- Sudden changes in supply chains involving countries subject to high duties.
- Unusual shipping routes or transshipment through third countries.
- Minimal processing or simple repackaging in those third countries.
- Instructions to create or modify documentation to conceal the true origin of the goods.
You may be eligible to become an FCA whistleblower if you have information about an importer evading customs duties through transshipment, undervaluation, misclassification, or other fraudulent means. Customs fraud whistleblowers have recovered millions of dollars in whistleblower rewards for stepping forward.
Speak with a Customs Fraud Whistleblower Attorney
To blow the whistle on customs fraud, it is essential to consult with an experienced whistleblower attorney familiar with trade matters and customs fraud. With over 30 years of experience handling complex fraud cases, including those involving customs duties, customs fraud whistleblower attorney Mark A. Strauss will work to protect your rights and maximize any potential whistleblower reward.
If you have observed fraudulent practices to evade customs duties, you may have valuable information that could lead to a successful whistleblower claim. Contact Mark A. Strauss Law today for a free and confidential consultation to discuss your potential case and learn about your rights as a potential FCA whistleblower.
Simply alerting CBP to trade violations will not entitle you to an FCA whistleblower reward. To get one, you must file an FCA lawsuit and be represented by legal counsel.
Fraud is their game. Integrity is yours. Call us today. There is no fee unless you receive a whistleblower reward.
