Colorado Company and Danish Parent Company Pay $728,910 to Resolve Allegations of Failure to Pay Customs Duties

Colorado Company and Danish Parent Company Pay $728,910 to Resolve Allegations of Failure to Pay Customs Duties

DENVER – The United States Attorney’s Office for the District of Colorado announced today that Ellab, Inc., a Colorado corporation, and Ellab A/S, its Danish parent company, have paid the United States $728,910 to resolve civil allegations that Ellab, Inc. failed to properly classify its imported products and declare their value, thereby failing to pay the full amount of customs duties owed to the United States on the imported goods.

Under the Tariff Act of 1930, companies that import products into the United States are required to pay customs duties—typically calculated as a percentage of the value of the goods—on those products.  Importers must classify their imported products according to the Harmonized Tariff Schedule of the United States (HTSUS), and they owe different rates of duty depending on which HTSUS category the product properly falls into.  Importers are also required to properly declare the value of any goods they import, including products that have been exported, repaired abroad, and re-imported into the United States.

The United States alleges that Ellab, Inc.—a company that imports thermal validation equipment for use in the healthcare, pharmaceutical, and food industries from its Danish parent for resale to domestic customers—failed to properly classify its imported products.  Rather than separately determining which HTSUS category each of its imported products fell into, Ellab, Inc. instead classified all of its imported products under a single HTSUS code, one which carried a low rate of duty.  In addition, the United States alleges that Ellab, Inc. failed to declare the cost of repairs for products that it exported and then re-imported into the United States.

The United States claims that this conduct violated the Tariff Act.  The United States also alleges that this conduct violated the federal False Claims Act, because Ellab, Inc. made false statements to the United States regarding its customs duties owed, resulting in Ellab, Inc. paying far less than it properly owed to United States Customs and Border Protection. 

The settlement in this case covers a period of nine years, from April 3, 2010, through May 21, 2021. The lawsuit resolved by this settlement was originally filed by William Day, a former employee of Ellab, Inc. who had knowledge of its record keeping and import practices. Mr. Day filed a civil action, under seal, in the United States District Court for the District of Colorado, captioned United States ex rel. William Day v. Ellab, Inc. & Ellab A/S, No. 18-cv-00768-NRN (D. Colo.). Under the False Claims Act, private citizens who know about a fraud against the United States may present those allegations to the government by bringing a lawsuit under seal on behalf of the United States.  If the government’s investigation substantiates those allegations and the United States obtains a monetary recovery under the False Claims Act, the private citizen may share in that monetary recovery. 

“American companies that import products have a duty to truthfully report the nature and value of their imports and pay the appropriate customs duties,” said United States Attorney Cole Finegan. “If a company cuts corners and pays less than it owes, that threatens the entire system of self-disclosure, while depriving the United States government of duties lawfully owed.  Importers need to understand that if they try to game the system, they can face serious penalties.”

“The Machinery Center of Excellence and Expertise, Enforcement Division, working in close collaboration with Office of Chief Counsel (Chicago) and the U.S. Attorney’s Office for the District of Colorado during the investigation was able to uncover a significant underpayment of owed Customs duties due to improper classification of repair value of products imported into the U.S. by importer Ellab, Inc.” said Juan J. Porras, Director, Machinery Center of Excellence and Expertise. “As this case illustrates, CBP will continue to exercise vigilance in the enforcement of customs and trade laws in the machinery sector to ensure that U.S. trade law is not abrogated and the revenue of the U.S. is protected. CBP’s ongoing commitment to upholding U.S. trade law helps foster U.S. economic security and in so doing strengthens U.S. national security.”

The claims settled by this civil agreement are allegations.  In entering into this civil settlement, Ellab, Inc. and Ellab A/S did not admit to any liability. 

The United States was represented in this matter by Assistant United States Attorneys Kyle Brenton and Amanda Rocque.

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