Tungsten Carbide Importer Agrees to Pay $54.4M to Settle FCA Case for Evaded Duties
Ceratizit USA, a North Carolina-based tungsten carbide distributor, agreed to pay $54.4 million to settle allegations it violated the False Claims Act by "knowingly and improperly failing to pay duties owed on tungsten carbide products" from China, DOJ announced.
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The case was initially brought by a whistleblower, Mark Stover, a "long-time participant in the metalworking products industry," who will receive around $9.75 million of the settlement proceeds. Tycko & Zavareei, the firm representing Stover, said the $54.4 million settlement is the "largest-ever settlement of a customs duties evasion case under the False Claims Act."
Tungsten carbide is a material used to make cutting tools and other components, DOJ said. From August 2020 to March 2024, Ceratizit "knowingly misrepresented" the Chinese country of origin of its tungsten carbide products, the agency said. Specifically, the U.S. alleged Ceratizit knew the goods had been made in China then transshipped to Taiwan before finally being exported to the U.S.
Ceratizit allegedly told CBP the goods originated in Taiwan to avoid Section 301 tariffs on China. DOJ also alleged the company misclassified the goods by using the incorrect Harmonized Tariff Schedule subheading to lower the company's final duty bill and failed to mark the proper country of origin on the products.
According to the complaint, the goods at issue were made by Luxembourg corporation CB-Ceratizit, an affiliate of Ceratizit USA and 50/50 joint venture of Ceratizit Group and CB Carbide. While CB Carbide was originally based in Taiwan, the company moved the "vast majority of its manufacturing from Taiwan to China" from 1999 to 2003.
From 2007 to 2018, every time Ceratizit USA imported tungsten carbide rods made by CB-Ceratizit, the shipment originated in Xiamen, China, the complaint said. However, starting in October 2018, one month after the implementation of Section 301 tariffs on China, and "continuing to the present," nearly all shipments are listed as having originated in Taiwan and not China.
However, the goods aren't actually made in Taiwan, the complaint said, adding that "CB-Ceratizit does not have sufficient manufacturing capabilities in Taiwan to make the volume of rods that have been imported into the United States." Nor does Taiwan have "sufficient raw materials to produce that volume of rods, nor have the necessary raw materials been imported into Taiwan." The complaint also said Ceratizit USA representatives have admitted in conversations with customers that the products aren't actually made in Taiwan.
In its press release, DOJ suggested the enforcement action was aided by the cross-agency Trade Fraud Task Force, which was launched in August to "enhance efforts to combat and prevent trade fraud." Trade fraud enforcement is widely seen as an enforcement priority of the Trump administration, evidenced not only by the establishment of the task force but by a slew of recent enforcement actions or resolutions announced this month (see 2512190022 and 2512190036).