DOJ Joins Whistleblower Case Against UK Retailer for Splitting Shipments to Fall Under de Minimis Limits, Avoid Duties
The Justice Department’s recent intervention in a whistleblower case against a UK retailer that allegedly split shipments on its U.S. imports to avoid duties “sends a clear message that this behavior will not be tolerated,” said the law firm Constantine Cannon, which represents the whistleblower, in a Sept. 8 press release. The July complaint alleges that Pure Collection and its executive Samantha Harrison deliberately split large orders so their shipments to the U.S. would fall under the $200 de minimis threshold, later raised to $800, despite knowing the practice violated customs rules.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
According to the complaint, Pure and Harrison aggregated “single orders exceeding $200 (and later $800) into multiple different parcels in order to manipulate and evade Customs’ applicable de minimis value limits.” The multiple parcels “entered the United States duty free because of their ostensible individual de minimis value. All the while, however, the aggregate value of each original single order and the merchandise comprising it actually exceeded the de minimis value exemption and carried a duty obligation,” the government said. The customs regulations at 19 CFR 10.151 prohibit sending single orders “separately for the express purpose of securing free entry,” it said. Pure did not immediately comment.
Andrew Patrick, a U.K. resident that worked in Pure’s customer service department, filed the underlying False Claims Act complaint in 2016. In allegations mirrored by the government’s complaint, Patrick says the apparel retailer directed its personnel to split U.S. orders, explicitly citing the U.S. de minimis level in its instructions to employees. Company personnel were aware the practice violated U.S. customs regulations, Patrick said, citing an overheard conversation between two mid-level managers “boasting about how much trouble Pure would be in if U.S. authorities were to find out about their method of evading customs duties.”
The government said staff was instructed not to tell customers that orders were split to avoid duties, and instead tell them that individual items may come from different warehouses. “Yet Pure had only one warehouse,” it said. After the de minimis level was raised to $800 in 2016, Pure began, at the direction of a U.S.-based shipper, to send its orders on separate days to avoid CBP’s scrutiny. But the de minimis exemption “does not apply when ‘the shipment is one of several lots covered by a single order or contract … sent separately for the express purpose of securing duty free entry therefor or of avoiding compliance with any pertinent law or regulation,” the government said.
The government seeks triple damages and civil penalties from Pure for duties avoided from 2010 through 2017. Pure’s sales in the U.S. during that period ranged from about $10 million to $25 million annually, the government’s complaint said. As the whistleblower, Patrick stands to get 15 percent to 25 percent of the total penalty award.
The case is novel in that the whistleblower and the company sued are both located in the UK. "If this case is successful, Mr. Patrick will be among one of the first British whistleblowers to expose a U.K. company for evading U.S. import duties and receive a financial reward under the whistleblower provisions of the False Claims Act," said Mary Inman, a lawyer in Constantine Cannon’s London office. "As global business expands, European whistleblowers like Mr. Patrick play an increasingly vital role in alerting the U.S. Government to fraud schemes that cross international borders."
Email ITTNews@warren-news.com for a copy of the complaints.