On June 23, 2025, the U.S. Court of Appeals for the Ninth Circuit issued a ruling in Island Industries v. Sigma Corporation, a False Claims Act case involving whistleblower allegations of customs duty evasion. The ruling, in favor of the whistleblower, bolsters the ability of whistleblowers to use the False Claims Act to hold companies accountable for committing customs and tariff fraud.
Companies can be liable under the FCA for so-called “reverse” false claims when they knowingly conceal and improperly avoid an obligation to pay or transmit money to the U.S. government. Thus, when an individual or company knowingly evades paying custom duties on goods it knowingly violates the FCA. Under the FCA’s qui tam provisions, a whistleblower may file a suit alleging FCA violations on behalf of the U.S. government and is entitled to a share of the recovery if the suit is successful.
The case stems from a qui tam whistleblower lawsuit filed by Island Industries, a competitor of the defendant, which alleged that Sigma Corporation violated the False Claims Act by evading federal antidumping duties on pipe fittings it imported into the United States.
The Ninth Circuit ruling touched on a number of issues concerning the ability of whistleblowers to leverage the False Claims Act against customs fraud. First, it held that qui tam suits alleging evasion of customs duties can be brought in federal district courts, and are not required to be heard before the Court of International Trade...
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