Five defendants and a trading company pleaded guilty in federal court in San Juan to conspiring to smuggle aluminium extrusions into the United States. The scheme was straightforward: buy the aluminium in China, ship it to Malaysia, repackage it, create invoices showing Malaysian origin, and enter it in Puerto Rico. The point was to avoid antidumping and countervailing duties that ran to several hundred percent.
Those people knew exactly what they were doing. The more useful question is the one nobody asks about these cases: what happens to the importer who bought from that Malaysian supplier in good faith?
The short answer is that they owe the duty anyway, and they may owe a penalty on top.
The Duty Bill Does Not Care What You Knew
Antidumping and countervailing duties attach to merchandise based on what it actually is and where it actually came from, not on what the paperwork said or what the importer believed. If the extrusions were Chinese, the Chinese rate applies, and it applies to the importer of record.
Duties are restored whether or not a penalty is assessed
Section 592(d) of the Tariff Act says it directly: where the United States has been deprived of lawful duties as a result of a violation, CBP shall require that those duties be restored, whether or not any monetary penalty is assessed. An importer who successfully argues they were not culpable has won the penalty argument and still owes the money. On merchandise subject to an order carrying a rate in the hundreds of percent, the duty bill alone can exceed the value of the goods and end the business.
That is the exposure, and it lands on the party who filed the entry rather than on the supplier who lied. Our page on AD/CVD duties and scope rulings covers how these orders work and how goods fall inside them.
The Penalty Is a Separate Question, and “I Didn’t Know” Is Not the End of It
Penalties under 19 U.S.C. § 1592 turn on culpability, and there are three tiers: fraud, gross negligence, and negligence. An importer who was genuinely deceived is not a fraud case. But negligence is the floor, and negligence in this context means a failure to exercise reasonable care.
That is the part importers miss. The law does not ask only whether you knew. It asks whether you took the care a reasonable importer would have taken to find out. An importer who accepted a Malaysian invoice at face value, asked no questions about a supplier with no visible manufacturing capacity, and never looked at a mill certificate has an answer to the fraud allegation and a much weaker answer to the negligence one. Our page on fraud, negligence and gross negligence penalties under § 1592 sets out how the tiers differ and how each is calculated.
The practical consequence is that “we were deceived” is a partial answer at best. What converts it into a strong one is evidence of the diligence that was actually performed.
What Reasonable Care Looks Like on a Transshipment Risk
Certain commodities carry known circumvention histories. Aluminium extrusions, steel products, solar cells and modules, plywood and hardwood flooring, quartz surface products, and a long list of others have all been subject to orders that generated transshipment schemes. If you import something on that list from a country adjacent to the country subject to the order, you are in a risk category whether you feel like it or not.
- Verify the manufacturer, not just the seller. A supplier and a producer are different things. Ask who made the goods, where the plant is, and what its capacity is.
- Look for manufacturing evidence. Mill certificates, production records, plant photographs, factory audit reports. A company with no plant that ships large volumes of a heavy manufactured product is telling you something.
- Test the commercial logic. A price materially below what the subject-country rate would allow is the single most common red flag. If the numbers only work when the duty is not paid, ask why.
- Trace the routing. Goods that originate in one country, transit a second, and are invoiced from a third deserve questions.
- Get the classification and scope question answered in advance. Whether particular goods fall within an order is frequently arguable, and a scope ruling resolves it before entry rather than after.
- Document all of it. Diligence that was performed but not recorded is diligence you cannot prove.
Country of origin for duty purposes is a legal determination, not whatever the invoice says, and our page on country of origin requirements covers how it is made.
What Has Changed Since This Case
In 2014 an evasion case like this generally surfaced through a criminal investigation. That is no longer the main route.
The Enforce and Protect Act created a formal administrative process under which CBP investigates allegations that merchandise subject to an AD/CVD order has been entered through evasion. The significant feature for importers is who starts it: allegations come from interested parties, which in practice means domestic producers and competitors watching import data. An importer can find itself under investigation without any criminal conduct, any customs inquiry, or any notice that a competitor had been building a file.
Interim measures bite before anything is decided
Where CBP finds reasonable suspicion during an evasion investigation, it can act while the investigation is still running: suspending or extending liquidation, adjusting how entries are handled, and changing bonding requirements. Those steps affect cash flow immediately and long before any final determination. An importer’s first indication of a problem is often a change in how its entries are being treated rather than a letter explaining why.
If You Find It Yourself: Prior Disclosure
This is the most valuable option in the entire area and the one most importers do not know exists.
An importer who discovers a violation and discloses it to CBP before the agency has commenced a formal investigation of it, in accordance with the statutory requirements, limits the penalty exposure dramatically. For a negligent violation, a valid prior disclosure can reduce the penalty to interest on the unpaid duties. The duties themselves are still owed, but the difference between interest and a multiple of the loss of revenue is frequently the difference between a survivable problem and a fatal one.
The timing requirement is strict and unforgiving. Once CBP has commenced a formal investigation into the disclosed conduct, the opportunity is substantially narrowed. An importer who suspects a supply chain problem and spends six months deciding what to do may find the option gone. Our page on prior disclosure of § 1592 violations covers the requirements and what a valid disclosure must contain.
Where a penalty notice has already issued, the response is a petition for mitigation or remission filed within the deadline on the notice, and the diligence record is what it is built on. Our import compliance page covers the wider set of obligations. Outcomes depend heavily on the specific facts, the compliance history and the documentation available.
Duty Demand or Evasion Investigation?
If you suspect a supply chain problem, the options available narrow once CBP opens an investigation. Contact us for a confidential case evaluation.
Frequently Asked Questions
My supplier lied about the country of origin. Do I still owe the duty?
Yes. Duty liability follows what the goods actually are and where they actually came from, and it falls on the importer of record. Section 592(d) requires lawful duties to be restored whether or not any penalty is assessed.
Can I be penalised if I genuinely did not know?
Potentially. Penalties under § 1592 run on culpability, and negligence is the lowest tier. Negligence means failing to exercise reasonable care, so the question is not only what you knew but what steps you took to find out.
Who can start an evasion investigation against me?
Allegations of AD/CVD evasion are brought by interested parties, typically domestic producers and competitors monitoring import data. An investigation can begin without any criminal conduct and without prior contact from CBP.
I think there is a problem in my supply chain. What should I do first?
Get advice quickly, because prior disclosure can dramatically limit penalty exposure and the window closes once CBP commences a formal investigation into the conduct. Deciding slowly is the most expensive option available.
Legal Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. Reading it, or contacting Great Lakes Customs Law through this website, does not create an attorney-client relationship. Great Lakes Customs Law does not represent defendants in federal criminal proceedings; references to the criminal case described are drawn from a public announcement and are general background. Antidumping and countervailing duty rates, orders and scope change frequently and must be checked against current determinations. Procedural requirements for evasion investigations and prior disclosures are detailed and strict; nothing here should be relied on in place of advice on a specific matter. Laws, regulations and CBP procedures change, and the outcome of any customs penalty matter depends heavily on its specific facts and circumstances. No result is guaranteed or implied. You should consult a licensed attorney about your particular situation before taking or refraining from any action.