DOJ intervenes in customs whistleblower suit in North Carolina

by Ben Vernia | April 24th, 2012

On April 24, the Department of Justice announced that it was intervening in a qui tam suit brought by a whistleblower in North Carolina. According to DOJ’s press release:

The United States has intervened in a lawsuit against Japanese company, Toyo Ink Manufacturing Co. Ltd. and its U.S. subsidiaries: Toyo Ink International Corp., located in New York; Toyo Ink America LLC, located in Illinois; and Toyo Ink Manufacturing America LLC, located in New Jersey, the Justice Department announced today. Toyo Ink, which has operations worldwide, is a leading provider of printing inks.

The suit alleges that the Toyo Ink companies knowingly misrepresented the country of origin on documents presented to U.S. Customs and Border Protection to avoid paying antidumping and countervailing duties on imports of the colorant carbazole violet pigment number 23 (CVP-23). The Department of Commerce assesses antidumping and countervailing duties, which are collected by U.S. Customs, to protect U.S. businesses by offsetting unfair foreign pricing and government subsidies. Imports of CVP-23 from China and India have been subject to these duties since 2004.

The suit alleges that Toyo misrepresented Japan and Mexico as the countries of origin for its CVP-23 imports to avoid these duties. Although Toyo’s CVP-23 imports from China and India underwent a finishing process in Japan and Mexico, the complaint alleges that this process was insufficient to change the country of origin.

Comment: It will be interesting to see how the Court rules on the application of the False Claims Act in this case. Other courts have split on whether the avoidance of a customs obligation can provide the grounds for a reverse false claim allegation under the Act.

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