Customs Fraud and Evasion Practices
Double invoicing is a procedure in which an importer and foreign exporter agree to divide the per-unit cost between two invoices and present only one invoice at entry. The second invoice for the balance is forwarded to the importer, either before or after entry, and is paid separately. The customs officials are able to detect the improper value of goods listed on an invoice if they are well seasoned in their work. The double invoicing scheme will work if all of the documents are altered properly. To continue the concealment from detection during post-entry review, the importer would:
- alter the purchase order;
- alter the confirmation order or contracts;
- change the accounts payable ledger; and
- attempt to divide payments or deposits.
Some importers declare that they are importing fewer goods than they actually are in order to obtain a lower tariff rate. This type of fraud is more difficult to detect because it requires a thorough inspection of the goods imported.
Misstatement of Country of Origin
The country of origin listed on the documents or the goods themselves may not be correct. The reason that the exporter or importer would misstate the country of origin is to receive a lower tariff rate; although the country of origin may also be misstated in order to circumvent quotas, embargoes, or anti-dumping laws. Further, sometimes goods are shipped from the exporter to an intermediate country and slightly altered in the intermediate country and then transferred to the United States. The name of the intermediate country is listed as the country of origin even though the goods did not actually originate in the intermediate country.
Misdescription to Alter Classification
Tariff or duty rates vary depending upon the classification under which the imported goods fall. If the importer improperly describes the imported goods, it may be able to obtain a lower or free tariff rate.
For example, an auto company imports windshield wiper reservoirs from Mexico and the reservoirs are primarily made of rubber. Rubber carries a higher tariff rate than plastic. Plastic reservoirs are free. If the importer says that there is more plastic than rubber on the goods or that the goods mainly consist of plastic, the tariff rate is free.
In order to deter importers from misstating the description of the imported goods, customs officials have wide discretion to take and retain samples or to conduct tests.
Failure to Declare Assists
An assist is defined as an item of value, such as a machine tool, a die, a mold or engineering work furnished free or at a reduced cost to the manufacturer of merchandise by the importer. The value of the assist is generally not reflected in the price to the importer, resulting in undervaluing of the goods.
Falsely Increasing Dutiable Value of the Imported Goods
In a few cases, the importer may criminally or fraudulently agree to evade duties by raising the price of imported merchandise and avoiding anti-dumping duties.
Anti-dumping duties may be collected if the merchandise was sold at less than fair value and an industry in the United States which is producing a like or directly competitive article is materially injured or threatened with material injury by reason of such sales. The dumping of merchandise by itself is not illegal.
Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.