Last week the U.S. Attorney’s Office for the Southern District of New York announced it had come to a $1.3 million civil settlement with an U.S. apparel importer that for six months was underreporting the value of its imports.
High Life LLC describes itself an apparel manufacturer and wholesaler based in Manhattan’s Garment District and a distributor of “mass, mid-tier, off-price, specialty, department store and aspirational markets,” according to its LinkedIn page. Its website is currently down for updates. Retail clients have included Kohl’s and Macy’s, and it’s currently recruiting for an associate planner to work on Reebok product, per LinkedIn.
According to the government, between Jan. 21-June 1, 2016, High Life “materially underreported the value of previously ordered apparel in 67 imported shipments.”
Essentially, High Life purchases apparel from international vendors, who then contract to have it produced in overseas factories so that High Life can import and retail the clothing. However, when it came time to declare the value of goods at port, High Life was declaring the value of items to be the price its vendors paid to the factories rather than what it paid the vendors, resulting in the imports being declared “Free on Board” rather than “Landed Duty Paid.”
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Declaring it “Free on Board” would only be legal if the price the vendors paid the factories was reflective of the sale itself. The U.S. Attorney’s Office said the “goods were clearly destined for export to the United States.”
“Rather than comply with the law, High Life chose to underreport the value of apparel imported into this country to avoid paying legally mandated customs duties,” U.S. Attorney Damian Williams said. “This Office will continue to hold companies accountable when they make misrepresentations to CBP to enhance their own bottom line.”
According to the press release, High Life’s shipping practices came to the U.S. Attorney’s Office’s attention in late 2015 when Customs and Border Protection (CBP) agents “had detained numerous High Life shipments due to concerns that the declared values were fraudulent.”
It was at this time, the government alleged, that the company enlisted the workaround to avoid having its imports detained, and along the way drastically undervalued its goods to avoid paying proper customs fees.
CBP director of field operations Francis Russo said High Life’s scheme netted it “hundreds of thousands of dollars.”
“Importers need to know that manipulating the values they report to CBP can come with serious consequences,” CBP executive assistant commissioner AnnMarie R. Highsmith said. “This case is a great example of the collaborative trade enforcement efforts between teams at CBP, who identified the original pattern of misconduct, and the U.S. Attorney’s Office.”
High Life LLC did not immediately respond to Sourcing Journal’s request for comment.
Federal authorities have lodged a string of customs fraud wins in recent years, including last fall’s $6.4 million case linked to a Mexican drug cartel after a whistleblower case resulted in a $6 million settlement. Another attempted to defraud the government put a New York CEO in prison facing a 42-year sentence while a pair of schemers were ordered to pay $118 million after a sweeping, multi-agency investigation.