US Opens $3.4M Trade Fraud Suit Against Household Goods Importers, Owner
The U.S. opened a customs penalty suit on Jan. 8 against importers Skyline International and Skyline Brands, along with their owner Zainulabedin Subhani, alleging that the three defendants undervalued their entries of household merchandise. The government is seeking a penalty totaling over $3.4 million for the defendants' alleged fraud along with a judgment of over $447,000, which represents the duties avoided by the defendants (United States v. Skyline International, CIT # 26-00295).
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Alternatively, the U.S. said that if the Court of International Trade doesn't find that the companies and their owner committed fraud, the court should grant an over $1.7 million penalty for gross negligence or an over $894,000 penalty for negligence.
From May 2013 to May 2018, the Skyline companies and Subhani made 155 entries of various household merchandise, including "kitchen tools, bathroom accessories, wireless speakers, and outdoor lights." The U.S. said Subhani directed Skyline International and Skyline brands to "use invoices received from vendors to create false invoices that understated the dutiable value of the subject merchandise."
The companies' customs brokers allegedly used the false invoices to calculate the duties and fees owed on the entries, and the defendants didn't submit the "original vendor invoices to CBP at the time the defendants made each subject entry," the complaint alleged. Each of the 155 entries allegedly contained "at least one material false statement or omission with respect to the dutiable value of the subject merchandise," the U.S. said.
In addition, the defendants made 14 payments to vendors in Hong Kong from January 2014 to April 2018, totaling $476,760.02. The government alleged that this total comprises "undeclared merchandise value that was not declared to CBP and should have been subject to duties and fees."
The U.S. alleged that the Skyline companies and Subhani didn't exercise "reasonable care in ensuring that its entry documentation was accurate before filing with CBP." The government said Subhani's counsel acknowledged to CBP that there's "sufficient basis for CBP to conclude that he acted negligently, and perhaps even grossly negligently, in failing to properly declare the value of the goods he imported," the complaint said.
After CBP issued a penalty notice to the defendants, Skyline International's surety paid over $101,000 to CBP, and Skyline Brands' surety paid over $53,000. In addition, the defendants paid over $94,000. The government said these payments were applied to the $447,111.99 in "actual lost revenue," leaving the defendants liable for "$196,797.14 in actual lost revenue and for $3,456,644.76 in penalties."