Customs fraud cases under the False Claims Act can reach companies that never filed the official entry paperwork, a point clarified by recent litigation and Department of Justice filings.
What the importer of record actually means
When goods enter the United States, customs officials require an Entry Summary on Form 7501. The form lists the importer of record (IOR), defined by law as the party responsible for paying all duties. Statutes specify that the IOR must be the owner, purchaser, or ultimate consignee, or a broker acting on their behalf.
The IOR’s liability is not a matter of private contracts alone. Even if a buyer and seller agree that the seller will handle duties through a “delivered duty paid” (DDP) arrangement, the government can still pursue the party that ultimately benefits from the transaction.
How DDP deals intersect with false claims litigation
DDP is an Incoterm that shifts the duty‑payment burden to the seller, who also clears the goods through customs. This term is a commercial agreement, not a legal shield against government collection. The False Claims Act (FCA) allows private relators to sue on the government’s behalf for fraud that deprives the United States of revenue, including unpaid customs duties.
These theories illustrate that liability can arise from knowledge or participation, not merely from who signs the entry form.
For companies that rely on DDP to reduce costs, the risk is that the arrangement may be interpreted as a scheme to evade duties, exposing both parties to treble damages and penalties. The FCA permits damages up to three times the unpaid duty amount, plus additional fines.
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In practice, this means that firms must conduct due diligence on the customs compliance of overseas partners, even when those partners claim to handle all import responsibilities.
What this means for importers
The legal setting suggests that simply delegating the filing of an Entry Summary does not absolve a company from responsibility. Courts may view the buyer’s role as integral to the transaction, particularly when the buyer benefits from reduced costs that stem from illegal duty avoidance.
This perspective aligns with the Department of Justice’s stance that the FCA’s reach extends to any party that knowingly participates in or enables customs fraud, regardless of formal IOR status.
Companies should therefore reassess DDP contracts, ensuring that any potential duty‑saving strategies comply with customs law. Failure to do so could result in costly litigation and reputational damage.
Strong internal controls are essential.
Practical steps include auditing supplier customs filings, requiring certifications of compliance, and embedding contractual clauses that obligate partners to reimburse any duty shortfalls. Regular training for logistics staff helps identify red flags before shipments clear customs.
