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Tip US Customs if your competitor is curcimventing tariffs by illegal transshipping

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Because of tariffs on Chinese goods imported to United States, goods are often transshipped through third countries and labelled as originating from these countries. Trade statistics shows that it is done mainly through Vietnam & Taiwan, not small numbers, could be about 20-40 billion dollars for Jan-Sep 2019 period. Chinese goods on their way to United States are transshipped in Saigon and reach United States as made in Vietnam, tariff exempt goods.

There is a law to prevent such cheating with prizes for whistleblowers.

How To Get Rich From Your Competitor’s Illegal Transshipping: Moiety and the False Claims Act

By Bill Perry on July 17, 2019
Posted in Legal News

international trade lawyersThe United States has imposed tariffs and duties against a whole slew of Chinese products, increasing the costs of those products sold to the United States.

To avoid these tariffs and duties, many companies are shipping their Made in China products to countries other than China and then shipping those products to the United States, claiming those products were made in a country other than China. This is called transhipping and it is illegal. See US-China Tariff Updates: What You Can (and Should NOT) do NOW.

My law firm’s international trade lawyers are being bombarded these days by companies (mostly U.S. importers) contacting us about competitor companies gaining cost advantages by illegally transhipping their products.


My importer client was angry because it knew transshipping and it knew it could find himself criminally liable for such a scheme. Most importantly, it also knew that some of its competitors would buy this product, import it into the United States illegally and perhaps get away with having done so, at least for a time. My client was angry because it knew that these illegal importations would give some of its competitors short-term cost and pricing advantages.

In another situation, several importers contacted me for help in “getting around” trade orders, including antidumping orders and Section 301 tariffs. I had to patiently explain to them what was legal and what was not.

Many Chinese companies are telling their U.S. importers they will just label their products with Hong Kong or Singapore or Taiwan or Vietnam country of origin stickers as though doing that is perfectly legal. That is not legal and these sort of import games constitute civil and criminal violations of U.S. law and they can and often do lead to enormous financial penalties and even prison time.

Chinese companies and U.S. importers have different interests. Chinese companies typically wants to ship as much of its product to the United States as it can. U.S. importers want to stay out of Customs trouble and avoid civil and criminal liability.

But what can a company to do if it knows about Chinese producers or U.S. importers that are not playing by the rules? What can a company do if it knows about illegal transshipments?

Anyone, including Chinese companies and U.S. importers, can profit from transshipments  that violate US Customs and Trade laws. The Moiety Statute, 19 USC 1619, provides for any person to receive compensation of up to 25% from the United States Government of any amount the U.S. Government  recovers from an illegal transhipment based on information provided to any Customs officer or US attorney, in an amount up to $250,000. To quote the statute itself this reward is available to anyone who provides “original information concerning .. . any fraud upon the customs revenue, or any violation of the customs laws or the navigation laws which is being, or has been, perpetrated or contemplated by any other person and such information leads to a recovery of . . .any duties withheld, or … any fine, penalty, or forfeiture of property incurred . . . .”


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