5 Indicted Over Illegal Customs Drawback Scheme
Five people are facing federal charges over allegations of illegal filing of drawback claims, the U.S. Attorney's Office for the Northern District of California said in a news release. An Aug. 12 grand jury indictment, which was unsealed Aug. 25, charged Dale Behm of Shell Knob, Missouri; Yong Heng Liang of Daly City, California; Joshua Stanka of Katy, Texas; Joshua Clark of Fair Oaks Ranch, Texas; and Michael Choy of Etobicoke, Ontario, Canada, “with conspiracy, wire fraud, and related charges related to an alleged scheme to submit fraudulent claims for refunds on import duties,” the release said.
The group is said to have tried to defraud the U.S. out of “as much as $40 million by submitting multiple claims for refunds to recover tariffs that were properly owed on imports,” it said. The scheme involved The Pacific Rim Traders, LLC, a San Francisco raw plastics importer. Falsified documents allowed “Pacific Rim to receive drawbacks by submitting documents that made it appear shipping containers filled with used tires and scrap plastic” for export “were loaded with drawback-eligible virgin plastic material,” it said.
The scheme also involved the creation of two drawback consulting companies, TPP Export and Hammer Trading, which transmitted drawback claims “based on the export of commercially interchangeable merchandise under the provisions of 19 U.S.C. § 1313(p), when in fact no such export of commercially interchangeable merchandise had occurred,” the Department of Justice said. The scheme also initially involved an undisclosed customs broker in San Francisco, DOJ said. The contract with the broker included payment of $75 for every container of exports, according to the indictment.
The defendants also allegedly “negotiated and purchased drawback rights and import information from plastic resin importers and provided Pacific Rim with delivery certificates in order to submit additional fraudulent drawback claims in the name of Pacific Rim and TPP Export’s other clients,” DOJ said. Pacific Rim was eligible for accelerated drawback as a result of a $1 million customs bond obtained in 2013, which was soon increased to $2 million, DOJ said. “In exchange for using its accelerated drawback program privileges and name on drawback claims, Pacific Rim received approximately 15% to 20% of the proceeds of its drawback claims. The drawback consulting company received fees for preparation of the false drawback claims on a per-container basis.”
Between 2014 and 2017, “Pacific Rim caused to be filed at least 68 claims seeking drawbacks totaling at least $7,216,925 and received at least $6,427,902 based upon such claims,” DOJ said in the indictment. Other “clients” got “as much as an additional $34,000,000 in total refunds,” the release from the California office said.
The investigation was started after a shipping company had to pay to destroy 128 containers of tires that were abandoned in Busan, South Korea. “A comparison of the export documents to the refund claims suggests the coconspirators altered the paperwork so that 'scrap rubber' appeared as 'PFTE Resin' and 'EFTE Resin,'” the release said. “The indictment alleges that if the actual contents of the containers -- scrap rubber tires -- had been reported to CBP, Pacific Rim’s drawback claims would not have been granted.”
Email ITTNews@warren-news.com for a copy of the indictment.