In the prior post, I cited three significant risk areas for False Claims Act (“FCA”) risks and trade compliance: (1) Valuation; (2) Misclassification and (3) Country of Origin. 

Barco Uniforms

On April 18, 2025, the United States filed a complaint against Barco Uniforms Inc. (“Barco”), Kenny Chan, David Chan, and companies operated and controlled by the Chans, alleging that they violated the False Claims Act by knowingly and improperly underpaying customs duties owed on imported apparel.  Barco sells apparel, including uniforms, to restaurants and health care providers, among others. Kenny and David Chan operate various companies that supply Barco with apparel manufactured overseas, including in the People’s Republic of China (PRC).

The United States’ complaint alleges that the defendants conspired to knowingly and improperly avoid or decrease the payment of customs duties by undervaluing imported garments Barco purchased from foreign suppliers. The government’s complaint alleges that the defendants used a double-invoicing scheme featuring false entry summaries presented to CBP that undervalued imported goods purchased by Barco, thereby reducing the duties paid on the merchandise.

The U.S. complaint also alleged that the defendants engaged in efforts to cover up the conspiracy even after the DOJ served CIDs on the defendants in 2018, including by changing the names of the importer entities and intentionally omitting Barco’s name from Form 7501 entry summaries involving products imported by the supplier companies from China.

Yogibo: Failure to Pay Duties

In July 2023, DOJ settled an FCA case against Yogibo, a furniture seller, which agreed to pay $217,832 to resolve allegations that it violated the FCA by failing to pay customs duties on imports from China.

Between 2016 and 2022, Yogibo imported goods from a Chinese manufacturer, Leadershow Home Textile Co., Ltd (“Leadershow”). For each shipment, Leadershow provided Yogibo with two invoices: a commercial invoice listing one price for the goods being imported; and a second invoice (which Yogibo called the “QC Invoice”) that included a separate and additional charge for inland freight from Leadershow to a Chinese port, design services and quality control testing.

Yogibo did not provide the QC Invoice to its customs broker for determining duties owed to the United States government on Leadershow imports and instead, only provided the commercial invoice with the lower total price. As a result, the customs broker did not calculate the duties owed based the total cost of the goods, including the additional charges on the QC Invoice.

The settlement stemmed from allegations originally brought in a lawsuit filed by a whistleblower under the qui tam provisions of the False Claims Act, which allow private parties, known as relators, to bring suit on behalf of the government and to share in any recovery.  In connection with today’s announced settlement, the relator will receive 20 percent of the recovery. 

International Vitamins: Misclassification

In 2023, International Vitamins (“IVC”) settled FCA claims for $22 million for submission of over one thousand CPB Forms 7501, through its customs brokers, that contained false information concerning the classification, under the HTS, of certain products consisting of raw and bulk vitamins and nutritional supplements imported into the United States from China.

IVC discovered the misclassification and retained a consultant in the fall of 2018 and provided the correct classification. Notwithstanding this correction, IVC continued to use the incorrect codes until September 2019 and never reconciled the years of underpayments.

Danco Laboratories

Danco Laboratories agreed to pay $765,000 to resolve allegations that it violated the False Claims Act by failing to pay certain customs duties, known as marking duties, on imported pharmaceutical products that lacked markings to identify their country of origin.

The Tariff Act of 1930 requires companies that import foreign products into the United States to mark the country of origin on those products. Importers that fail to mark their products are subject to a 10% ad valorem duty. The settlement resolves allegations that, during the period 2011 through 2019, Danco failed to mark imported pharmaceutical products with the appropriate country of origin, and thereafter violated the False Claims Act by knowingly avoiding the marking duties owed to the United States for those imports.