Customs Fraud, Whistleblowers, and $1.8 Billion in Liability: Lessons for Importers

Between July 2011 and June 2014, California-based Perfectus Aluminum Inc., Perfectus Aluminum Acquisitions LLC, and four affiliated warehousing companies imported more than 2.2 million aluminum extrusions from China. These products were subject to significant antidumping and countervailing duties, including rates as high as 374.15%.

To avoid these duties, the companies spot-welded the extrusions together into structures resembling pallets and declared them as “pallets” rather than extrusions. Because pallets are treated as finished merchandise rather than subject goods, this misclassification enabled the companies to evade more than $3 billion in duties owed to U.S. Customs and Border Protection (CBP).

During this period, the companies had no customers or sales for these so-called “pallets,” reinforcing the government’s position that the classification served no legitimate commercial purpose. A criminal investigation followed, and in August 2021, a jury in the Central District of California convicted the defendants of conspiracy to defraud the United States, wire fraud, and passing false or fraudulent documents through a customhouse. Reporting these items as pallets on Customs Form 7501 Entry Summaries was determined to be fraudulent.

As a result, the defendants were ordered to pay more than $1.8 billion in restitution to CBP and to forfeit nearly 280,000 aluminum structures to the government.

Subsequently, three civil suits were filed and combined into a single civil settlement agreement on May 12, 2025. The defendants agreed to pay an additional $549.5 million to the United States, representing recoveries from the sale of warehouses and remaining inventory. These civil actions originated from whistleblower (qui tam) lawsuits brought under the False Claims Act, which allows private parties to share in government recoveries. In this case, relators—including the Aluminum Extruders Council—will receive 17.5% of the settlement proceeds.

Importantly, the settlement did not resolve all potential liability. The government expressly reserved criminal liability, administrative enforcement rights, individual liability, and liability for conduct outside the covered period.

The outcome of this case highlights significant compliance risks for importers, particularly in the areas of classification, documentation, and internal controls.

Key Takeaways for Importers:

1. Customs Declarations are Legal Representations

Entry Summaries were a key factor in both the criminal and civil matters involving Perfectus Aluminum Inc. Information included in the Customs Form 7501 is a legal certification that can result in a “false statement” if an importer makes a mistake. Every entry summary is a legal certification with the potential to expose parties to False Claims Act suits and should be handled with proper due diligence. Importers should maintain robust internal controls to ensure that entry documentation accurately reflects product identity, value, country of origin, and applicable duty classifications.

2. Antidumping and Countervailing Duties Require Careful Analysis

Antidumping and Countervailing Duty orders can impose high duty rates, like the 374.15% on aluminum extrusions. To determine if a product falls within one of these orders, importers must conduct careful, fact specific analysis of product descriptions and any processing or assembly that takes place before importing a good. The government can investigate imported goods and their documentation to determine if the importer is reporting the true commercial purpose of the goods or is just attempting to avoid payment.

3. Whistleblowers Create Real Risk

Enforcement risk does not come solely from the government. The False Claims Act allows private parties to bring actions on behalf of the government and share in recoveries.  In this case, the relators are set to receive 17.5% of the $549.5 million that CBP recovered. The False Claims Act contains a provision that permits whistleblowers to share in some of the recovery if their report leads to a settlement (with some additional requirements). Importers should be aware that competitors, employees, former employees and even industry groups have a financial incentive to report any possible evasion of duty payments to the government. Just because a government official has not realized something is occurring, doesn’t mean another party won’t report it anyway. 

4. Civil Settlements are Not the End

Civil resolution does not eliminate further exposure. In this matter, the government expressly reserved criminal liability, administrative enforcement rights, liability of individuals, and liability for conduct outside of the covered period. The resolution of the lawsuits does not immunize the companies, or their executives, from further proceedings related to these actions. Importers experiencing possible duty issues should establish and maintain strong internal controls related to customs compliance to avoid any future misunderstandings or claims of false statements. Importers with historical entries that may not withstand scrutiny should assess those records now and consider hiring outside experts for assistance.

Conclusion

The Perfectus Aluminum case underscores the significant consequences of duty evasion. With heightened enforcement, high duty rates, and strong whistleblower incentives, import compliance must remain a top priority. Proactive review of classification practices and internal controls can help mitigate exposure and prevent costly enforcement actions.