DOJ Secures Record $550 Million Settlement Over Alleged Aluminum Duty Evasion Scheme

The civil settlement arises from three separate consolidated qui tam suits filed under the FCA’s whistleblower provisions, including a suit brought by an industry trade association. The action was coordinated through the DOJ’s Trade Fraud Task Force, created only 9 months ago, in close partnership with US Customs and Border Protection (CBP). The settlement represents the latest in a series of cases that reflect the broad enforcement climate under the Administration’s Task Force to Eliminate Fraud, and the National Fraud Enforcement Division, both of which were announced this year.

The government alleged that, from July 2011 through June 2014, the defendants knowingly made, and caused others to make, false statements on Customs Form 7501 Entry Summaries. In particular, more than 2.2 million aluminum extrusions were imported in the form of “pallets” and allegedly misrepresented to CBP as finished merchandise not subject to AD/CVD. However, according to the DOJ, the pallets were simply aluminum extrusions that had been spot-welded together to make them appear to be functional pallets. There were no customers for these pallets, and no pallets were ever sold. The government contended the defendants knowingly concealed, avoided, or decreased obligations to pay duties owed to CBP, including countervailing duties of 374.15% on more than $880 million of imported extruded aluminum. The settlement agreement states that, as a result of the covered conduct, CBP was allegedly deprived of more than $3 billion in duties owed to the United States. 

The civil settlement follows a criminal action arising from the same conduct. On August 23, 2021, a federal court jury in the Central District of California convicted the defendants of conspiracy to commit an offense against the United States or defraud the United States, wire fraud, and passing a false or fraudulent document through a customhouse. The defendants were ordered to pay restitution in the criminal case totaling $1,836,244,745 to CBP. The court also entered a forfeiture order authorizing the government to seize 279,808 aluminum structures from the defendants.

The settlement amount is an astonishing $549,594,030, consisting of $349,594,030 attributed to the sale of the warehouses and $200 million attributed to the sale of the aluminum pallets. The United States will receive the net proceeds from the sale of the warehouses and aluminum pallets, and those proceeds will be credited toward the settlement amount. The settlement also provides that 17.5% of the net civil payment will be paid as a relator share.

This settlement highlights the government’s multi-prong and cross-agency strategy encompassing duty and penalty collection actions brought under the Tariff Act, civil enforcement through the FCA, and criminal prosecutions, forfeitures, and seizures. 

Takeaways for Importers

Importers should treat customs declarations as high-stakes legal certifications, not routine paperwork. The DOJ’s allegations focused on statements made in Customs Form 7501 Entry Summaries and the material impact these statements had on obligations to pay duties to CBP. To mitigate risk, companies should establish and maintain robust internal controls to ensure that entry documentation accurately reflects product identity, value, origin, and duties owed (e.g., Section 301 and Section 232 duties).

This settlement underscores the critical importance for importers to carefully evaluate whether their products are subject to AD/CVD orders. Attention to specific product descriptions and any processing or assembly performed prior to importation is essential, as these factors can directly influence duty obligations and compliance requirements. 

Furthermore, the government may challenge attempts to characterize covered merchandise as finished goods when the facts indicate that this does not accurately reflect the commercial nature or intended use of the merchandise. It is vital for importers to ensure their customs declarations and supporting documentation are both precise and truthful to avoid enforcement actions. 

Importers should also be aware of whistleblower risks in customs matters. The settlement resolved the qui tam suits filed by private relators under the FCA, and the DOJ encourages whistleblowers to alert the government to credible allegations of fraud, including through the FCA’s qui tam provisions and the DOJ’s Corporate Whistleblower Program.

Finally, importers should recognize that civil settlements may not eliminate enforcement exposure. The Perfectus agreement reserved criminal liability, administrative enforcement rights, liability for conduct outside the covered conduct, and liability of individuals. Companies facing potential duty issues should promptly assess the accuracy of historical entries, preserve relevant records, evaluate disclosure options, and coordinate customs, compliance, and litigation strategy before enforcement agencies or whistleblowers define the narrative.