On April 18, 2025, the U.S. Department of Justice (DOJ) announced the filing of a civil complaint against Barco Uniforms Inc., its executives Kenny and David Chan, and several affiliated companies. The complaint alleges violations of the False Claims Act (FCA) through a scheme to underpay customs duties on imported apparel. The case, originally filed under the FCA’s qui tam whistleblower provisions, was brought by a former Barco executive and is now being pursued by the government.
The DOJ contends that Barco and its affiliates engaged in a fraudulent scheme to undervalue imported garments from overseas suppliers, primarily in the People’s Republic of China. This was allegedly accomplished through a double-invoicing system, wherein false entry summaries were submitted to U.S. Customs and Border Protection (CBP), resulting in reduced duty payments. Notably, the government asserts that the defendants continued this practice even after a third-party auditor highlighted the risks associated with underpayment and recommended a review of duty calculations. The affiliated entities named in the complaint include Able Allied Limited, Nathan Global Direct Inc., J&K Garment Inc., Mega Goodwill Ltd., JS Garment Co., and Superway Import & Export Inc.
Under the FCA, knowingly submitting false claims or causing false claims to be submitted to the federal government is prohibited. Violations can result in treble damages and substantial penalties. The qui tam provisions allow private individuals to sue on behalf of the government and share in any recovery. In this case, the DOJ has intervened, indicating the seriousness of the allegations.
The action against Barco Uniforms reflects a broader and growing trend of heightened FCA enforcement in the customs arena. In recent years, the DOJ has increasingly targeted companies that misrepresent the value or origin of imported goods to reduce duty obligations, often focusing on schemes involving double invoicing, misclassification, and undervaluation. Importers should expect continued enforcement activity and ensure that their customs compliance programs are robust and up to date.
This case also underscores the critical importance of accurate customs declarations and compliance with trade laws. Businesses involved in importing goods should:
- Evaluate and enhance internal controls governing import and export compliance practices and rectify potential issues;
- Bolster mechanisms for responding to whistleblower concerns, as FCA investigations frequently stem from internal reports;
- Take proactive steps when third-party audits reveal compliance risks; and
- Educate staff involved in import and export operations about compliance requirements and the legal, financial, and reputational consequences of violations.