Auto Parts Cos. Pay $6.3 Million for Duty Avoidance; Falsely Classified as "Unfinished"
A $6.3 million settlement was reached Monday to resolve claims that companies misclassified auto parts manufactured in China and imported to the U.S. to evade $2.5 million in duties, said Immigrations and Customs Enforcement. Six companies from the U.S. and China, as well as two named individuals, allegedly violated the False Claims Act by knowingly misclassifying auto manifolds to obtain a duty rate of zero, ICE said, while charging its customers the correct duty of 2.5%, and retaining as "profit" the duty that should have been paid to U.S. Customs and Border Protection. Between June 2004 and June 2011, the U.S. alleged that the company evaded $2,549,000 worth of duties on 706 entries involving manifolds valued at $102 million.
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Related Companies from Michigan, China, Cayman Islands pay $6.3 Million
CMAI Industries, LLC, a Michigan limited liability company doing business as CMAI North America; China Metal Products Co., Ltd.; China Metal Automotive International Co., Ltd.; China Metal International Holdings, Inc.; CMP (Hong Kong) Industry Co., Ltd.; CMW (Cayman Islands) Co., Ltd.; Shiuh-Lung Chiang, also known as Ronny Chiang; and Ho Ming-Shiann paid the U.S. $6.3 million to resolve claims that the companies violated the False Claims Act by falsely misclassifying the auto parts, according to ICE. ICE said more than $4 million of the $6.3 million paid in settlement came from assets seized during the investigation.
Auto Parts Falsely Declared as "Unfinished" to Avoid 2.5% Duty Rate
In the related criminal case, on December 8, CMAI North America pleaded guilty to one count of entry of goods by means of false statements, ICE said. CMAI North America assisted in entering commercial vehicle exhaust manifolds manufactured in China into the commerce of the U.S. by means of fraudulently declaring that the parts were "unfinished," alleged ICE. CMAI North America knew that if the correct Harmonized Tariff Schedule Code associated with the merchandise had been used, the U.S. would have been owed duty of 2.5% for each entry, or a total of $1,290,399.95, ICE said.
Whistleblower Collects $1.2 Million of Settlement
ICE said the scheme came to the government's attention through a lawsuit that was brought under the qui tam or whistleblower provisions of the False Claims Act. The Act permits private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery. The whistleblower in this suit, Theodore Ludlow, received $1.2 million from the U.S.'s recovery, ICE said.