DOJ Announces Settlement Over False Claims Act Allegations for Failure to Pay Customs Duties

Recently, the Department of Justice (DOJ) reached a $765,000 settlement with Danco Laboratories, LLC, to resolve allegations that the company violated the False Claims Act by failing to pay customs duties on imported pharmaceutical products that did not have markings to identify the country of origin.

Danco is a United States pharmaceutical company that distributes one pharmaceutical product, Mifeprex (mifepristone).

Under the Tariff Act of 1930, companies that import foreign products into the United States have to mark the country of origin on the imported products. Importers that do not mark their products are subject to a 10% ad valorem duty, or export or destroy the unmarked imported goods.

This settlement resolves allegations filed under the qui tam provisions of the False Claims Act that from 2011 through 2019, Danco did not mark imported pharmaceutical products with the correct country of origin, thereby violating the False Claims Act by knowingly avoiding the marking duties owed to the United States for those improperly marked imports. The qui tam complaint did not allege that Danco’s products are defective, unsafe, ineffective, or otherwise in violation of United States Food and Drug Administration (FDA) regulations.

Danco will make four payments to the United States totaling $765,000, plus 3.625% interest: the first payment of $255,000 was due in April 2023, with three subsequent payments of $170,000 each (plus interest) payable in July 2023, October 2023, and January 2024. The United States will pay the Relator a portion of the total the Relator can expect to receive after each payment is made by Danco.

The Relator who initially filed the complaint will receive $116,140.35 and Danco will pay an additional $46,220.28 for Relator’s expenses, attorneys’ fees, and costs.

“The United States has required imported goods to be marked with their country of origin for generations, so American consumers can use that information in their purchasing decisions,” said Director Frank Russo of the U.S. Customs and Broder Protection (CPB) New York Field Office. “CBP takes the marking laws very seriously, and is pleased to work with our partners to ensure importers adhere to all customs laws.”

“Our office is committed to ensuring that importers are transparent with consumers and comply with customs laws and the False Claims Act,” said U.S. Attorney Brit Featherston. “We will continue to pursue aggressively those who seek to avoid their duties and obligations under the law.”

As is often the case, the settlement did not include any determination of liability and the claims resolved by the settlement are only allegations.