Customs Fraud
Customs fraud is any knowing or negligent misrepresentations to the Customs agency that polices a national border.
It involves the deceptive importation and exportation of goods to evade duties or restrictions, and it’s combated through legal measures like the U.S. False Claims Act and enforcement mechanisms including documentary checks, physical inspections, and other technologies.
It can be committed by an importer or an exporter. It often involves misclassifying a product or good or by understating (or, in rare cases, overstating) its value.
Here are some common types of customs fraud:
- Underreporting of Value – importers may undervalue goods to reduce the amount of import duties or taxes payable. By declaring a value lower than the actual transaction value, they can evade the rightful amount of customs duties and taxes.
- Misclassification – goods may be classified under a tariff code that attracts a lower rate of duty than the actual code applicable to those goods. For example, an importer might declare a luxury item as a basic item to benefit from a lower tariff rate.
- False Country of Origin – importers may falsely declare the country of origin for goods to benefit from preferential duty rates or to avoid anti-dumping duties. This is especially pertinent when certain goods from particular countries are subjected to higher duties or restrictions.
- Overstatement of Quantity – importers might declare a higher quantity of low-value items and hide high-value items among them, thereby evading the correct duty on the high-value items.
- Smuggling – this is the act of moving goods across international borders without declaration to customs, thereby avoiding all customs controls and duties. It’s often associated with illegal goods, such as drugs or contraband, but can also involve legal goods for which customs duties and taxes aren’t paid.
- False Documentation – using forged or altered documents, like fake invoices or certificates of origin, to deceive customs officials.
- Transshipment Deception – goods might be rerouted through third countries to conceal their true origin, especially if the goods’ actual country of origin faces trade restrictions or higher duties.