On April 18, 2025, the Department of Justice (DOJ) announced the filing of a complaint against defendants Barco Uniforms Inc. (Barco) and its suppliers, alleging violations of the federal False Claims Act (FCA) through knowing failure to pay customs duties on apparel imported from China. The complaint marks the first time that the DOJ under the new administration has announced its intervention in an FCA case based on customs violations. 

As we previously reported here and here, the DOJ has identified customs fraud as a key area of enforcement focus and is increasingly conducting civil customs fraud enforcement under the FCA using a "reverse false claim" theory, in which defendants are alleged to have knowingly prevented the government from receiving money it was owed, including through underreporting the value of imports, misclassifying goods, or misrepresenting the country of origin.

The initial complaint in United States ex rel. Lee v. Barco Uniforms Inc., et al., No. 2:16-CV-1805 (E.D. Cal.) was filed under seal by a qui tam whistleblower, the former director of product commercialization at Barco, in August 2016. Over the following eight and a half years, the DOJ investigated the relator's allegations, including issuing Civil Investigative Demands (CIDs) and taking testimony from employees. The DOJ filed a notice of its election to intervene in part in January 2025, filing an amended intervenor complaint on April 11, 2025. 

The DOJ's intervenor complaint alleged that Barco conspired with various supplier entities operated by two individual defendants to falsely report the value of uniforms imported from China. The defendants allegedly participated in a "double invoicing" scheme that involved use of two sets of invoices for the same transaction: one accurate set showing the actual prices of garments sold to Barco, and a falsified set submitted to customs brokers. 

The complaint also alleged that the defendants engaged in efforts to cover up the conspiracy even after the DOJ served CIDs on the defendants in 2018, including by changing the names of the importer entities and intentionally omitting Barco's name from Form 7501 entry summaries involving products imported by the supplier companies from China.

The complaint alleged that the defendants submitted fake invoices and falsified entry documents on hundreds of import transactions with U.S. Customs and Border Protection (CBP), thereby avoiding paying millions of dollars in duty revenue that was owed to the U.S.
 
Actions like the one against Barco are likely to be a feature of the enforcement landscape as long as tariff evasion enforcement remains a priority. Companies engaging in import transactions involving China should be proactive in preparing for increased scrutiny on their supply chains and review their trade compliance programs accordingly. 

Miller & Chevalier represents companies in FCA cases involving allegations of customs fraud. We regularly advise clients on trade compliance, trade policy, and criminal defense, and defend companies in civil and criminal customs enforcement proceedings and import/export seizures. Similarly, when a company independently discovers an error in its import transactions, we can provide assistance in evaluating the matter and preparing voluntary disclosures to CBP. 

For more information, please contact:

Joshua Drew, jdrew@milchev.com, 202-626-5811

Richard A. Mojica, rmojica@milchev.com, 202-626-1571

Bradley E. Markano, bmarkano@milchev.com, 202-626-6061

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