Chinese Apparel Exporter To Pay Over $13 Million for Role in Double-Invoicing Undervaluation Scheme
A Chinese apparel exporter agreed to pay more than $13 million to settle allegations that it engaged in a double-invoicing scheme that resulted in the underpayment of millions of dollars in duties, ICE said (here). Motives Far East and Motives China, along with their U.S. affiliate Motives, Inc., admitted that they worked with U.S. wholesalers to create the false invoices, and filed some of them with CBP on their own entry summaries, settling a False Claims Act suit filed by an undisclosed whistleblower. The settlement (here) was approved July 12 in Manhattan federal court, the U.S. Attorney’s Office for the Southern District of New York said (here).
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
According to the settlement, Motives conspired with several apparel importers between 2009 and 2013, including Siouni & Zarr and Dana Kay, which paid $10 million in 2014 to resolve similar allegations in another whistleblower suit (see 14041026). Motives would create an invoice that undervalued the apparel by a given amount, usually around $2.50, for the importer to provide to CBP as part of its entry documentation, the government’s complaint said (here). Motives would also create a second, secret “debit note” for the importer that reflected the amount deducted from the customs invoice. The importer would pay Motives the full amount of the invoice plus the debit note.
Motives worked with importers to determine how much should be deducted from the actual value of the shipment when it created the invoice, with deductions increasing over the years to reflect the increasing cost of labor overseas, the complaint said. At one point in 2013, a representative of Motives Far East expressed concern to an importer that the amount of one deduction requested would cause it to get “in trouble” with CBP, the complaint said. Motives also filed fraudulent invoices with CBP on its own behalf, the settlement said.
As a result of the scheme, importers were able to undervalue their shipments with CBP, resulting in “millions of dollars” in lost revenue to the government, the complaint said. Motives will pay $13,375,000 to the U.S. under the settlement. Documents associated with the case did not reveal the amount of the settlement that will be paid to the whistleblower.