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Shell Company Fraud Puts Importers at Risk

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Brands and importers need to watch out for shell companies seeking to evade customs duties. A California company and its owner were recently convicted of a running a scheme to avoid paying duties on over $30 million in Chinese-made apparel.

According to a report from Sandler, Travis & Rosenberg, the company hired a group of San Diego-based businessmen and logistics professionals to initiate the shipments from China to the Port of Long Beach.

On arrival, the man would insure that the goods were classified as in-bond, making it appear that they were transiting U.S. territory on their way to Mexico. The man then diverted the goods to warehouses in Los Angeles and used the money saved on duties to undercut similar goods. The scheme involved falsifying customs documentation and database entries, as well as forging special perforation marks found on some customs filings.

The company and its owner were charged with conspiring to defraud the U.S., along with two counts of importing goods with false statements, and one count of conspiring to launder money.

The lesson for brands and importers? Watch out for offers that seem too good to be true, particularly if they are coming in from the West Coast. Your firm could be held liable for the fraud, even if you were not aware of it. Charges include a $500,000 fine and up to 20 years in prison.

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