The amicus curiae brief addresses the crucial issue if customs fraud is actionable under the False Claims Act.
WASHINGTON, DC — On June 26, 2023, The Anti-Fraud Coalition (TAF Coalition) filed an amicus curiae brief in the U.S. Court of Appeals for the Ninth Circuit in U.S. ex rel. Island Industries, Inc. v. Sigma Corp. The brief was drafted by Jonathan Tycko and Jaclyn Tayabji from member firm Tycko & Zavareei.
TAF Coalition’s brief addressed the critically important issue of whether customs fraud is actionable under the False Claims Act (FCA). Relator Island Industries brought this FCA case against defendant Sigma Corporation, alleging that Sigma submitted false statements to the United States for the purposes of avoiding an obligation to pay antidumping duties. “Dumping” occurs when a foreign producer or exporter sells a product in the United States at a price that is below “normal value.”
Normal value may be the price at which the foreign producer sells the merchandise in its own domestic market or a third-country market, or may be a constructed value based on its production costs plus an amount for profit. Anti-dumping duties are taxes imposed on imported goods in order to compensate for the difference between their export price and their normal value. The relator alleged that Sigma concealed obligations to pay duties on goods it imported and submitted false claims to the government. The government declined to intervene, and the relator moved the case forward through trial. The jury ruled in favor of the relator and awarded $24,256,638.09 in damages and penalties.
Sigma appealed to the circuit court, and on appeal, though not raised by the parties, the court ordered supplemental briefing on whether the district court lacked subject-matter jurisdiction over the suit, because the Court of International Trade (CIT) had exclusive jurisdiction over civil actions which arise out of an import transaction and which is brought by the United States to recover customs duties under 28 U.S.C. § 1582(3). After the parties submitted their briefing, the court ordered another round of supplemental briefing on the issue. That’s where TAF Coalition stepped in.
This was a unique part of the case to file an amicus brief, as those briefs are generally due at the beginning of briefing, seven days after the party amici are supporting file their opening brief. However, the court granted TAF Coalition’s motion and accepted the brief.
The brief argues that Congress amended the FCA in 2009 specifically to expand liability under the “reverse false claims” provision with the stated intent of including knowing evasion of customs duties as actionable under the statute. Further, the brief emphasized the importance of the FCA in thwarting customs fraud and how important whistleblowers are to enforcement efforts. Considering the amount of goods the United States imports, potentially hundreds of millions of dollars are at stake.
“It is impossible for the government to inspect every shipment coming into the United States,” said TAF Coalition Director of Legal Education, Jacklyn DeMar. “Whistleblowers are critical to shining a light on these frauds and supplementing the government’s limited resources. Congress recognized that, and amended the FCA to explicitly include customs fraud, and whistleblowers have been responsible for recovering millions of dollars for the taxpayers and the government from companies evading customs duties.”
“It’s an honor to represent TAF Coalition, and I hope that the Court finds the amicus brief helpful as it wrestles with this important case that could have a major impact on enforcement of duties and tariffs,” said Jon Tycko, Partner at Tycko & Zavareei.
For more information on this topic, please contact James King at [email protected].