Government Joins Reverse False Claim Suit Over Illegal Use of de Minimis Exemption

The Department of Justice recently agreed to intervene in a qui tam whistleblower lawsuit against Selective Marketplace Ltd. and the company's alleged use of de minimis exemptions for the expressed reason of avoiding customs duties, the DOJ said in a March 27 filing. The filing was in U.S. District Court for the District of Maine because "a substantial part of the events or omissions giving rise to the claims occurred in this District," the DOJ said. Selective, which is based in England, mostly sells premium womenswear under the Wrap London and Poetry brands, the DOJ said.

Mostly prior to the de minimis threshold increase in 2016, Selective is said to have "'split' U.S. customers' aggregate single orders exceeding $200 in multiple different parcels in order to manipulate and evade Customs' applicable de minimis value limits," the DOJ said. "Splitting shipment resulted in Selective improperly and artificially valuing separate parcels at below the de minimis limit, notwithstanding that the aggregate value of the items comprising the original, single order exceeded that limit."

The de minimis exemption "by law did not apply to single orders 'sent separately for the express purpose of securing free entry therefor or of avoiding compliance with any pertinent law or regulation,'" the DOJ said. The company's electronic order management system "automatically split all orders exceeding the $200 threshold into parcels valued at lower amounts," the government said. Such actions were "in direct violation of Customs' laws and regulations," it said. Selective advertised itself online as making "every attempt to prevent [its] customers from incurring any import duties," the DOJ said.

The suit is filed under the False Claims Act and the illegal avoidance of the duties constitutes a reverse false claim, the government said. "Reverse false claims liability in such circumstances is consistent with the larger import/export regulatory scheme created by Congress," the DOJ said. When the value of importing goods without paying duties "exceeds the risk that deception will be discovered," such actions may continue as long as there's a "net gain to the company," it said. "Reverse false claims liability changes that value proposition because a find[ing] of improper avoidance of customs duties carries the possibility of treble damages and substantial additional civil penalties," it said.

Email ITTNews@warren-news.com for a copy of the complaint.