Imposition of antidumping duties is a popular trade tool in the modern WTO regime. When it comes to People’s Republic of China, asking the U.S. government to impose antidumping duty is even easier (due to its non-market economy status), and probably politically popular. When these duties are imposed, the tariff rate can easily overshoot 100 percent range. In case of Chinese origin pencils, for example, it would be over 114 percent. High antidupimping duties are designed to prevent “dumping” of a product on the U.S. market. Collaterally, these duties serve as the great incentive to circumvent the law, such as the antidumping duties law.
This is exactly what the plaintiff has alleged in US v. Staples case. The plaintiff complained to the court about various importers, such as Staples, Target, OfficeMax, and Industries for the Blind. According to the plaintiff, these companies circumvented the law by incorrectly declaring the origin of Chinese pencils. Since the antidumping duty is tied to the origin, changing the origin of the product can change the duty. This is what the plaintiff said:
Staples declared falsely on Customs entry documents that its pencils originated in Hong Kong, Malaysia, and Taiwan;
Target falsely declared that its pencils originated in Taiwan and Indonesia;
IFB falsely declared that its pencils originated in Taiwan;
OfficeMax falsely declared that its pencils originated in Vietnam.
These are very serious allegations with very serious consequences! The public, at this point, will never know whether these famous stores in fact made false declarations. The court, in this case, dismissed the complaint finding that plaintiff was not qualified to make such assertions (i.e. plaintiff did not have subject matter jurisdiction). But, while disqualifying the plaintiff-whistleblower, the court explained what any future whistleblower should do to get his or her day in court.
Recent news headlines are full of whistleblowers (e.g. Snowden, Wikileaks) that have apparently noble motives of government accountability and transparency. This article is about whistleblowers have, notwithstanding their motives, a pecuniary interest. Whistleblowers can invoke a “Lincoln Law” – False Claims Act – enacted in 1863. False Claims Act allows private whistleblowers to bring suit on behalf of federal government if they have knowledge of fraud, or failure to pay proper customs duties due to the Government. Government may or may not intervene. If court agrees with whistleblower’s allegations, that whistleblower is entitled to a portion of recover. Linconl Law encourages whistleblowers to disclose fraud, feel patriotic, and importantly, get paid for it.
Motivation alone is not enough to become a Lincoln Law whistleblower. As the pencils whistleblower discovered, there is a strict qualification criteria. Specifically, whistleblower’s statements must not have been publicly disclosed. This means that whistleblower’s knowledge must not come from public domain, such as news media, trade publications or administrative reports. Court was critical of the whistleblower for reliance on PIERS trade reports (trade intelligence provider) and administrative reports of International Trade Commission. Rather, Lincoln Law whistleblower’s information should be based on direct (i.e. through own efforts) and independent (i.e. no reliance on public disclosure). Court also suspiciously looked at whistleblower’s reliance on investigators, stressing that the knowledge that is fist-hand and direct would be treated more favorably.
It is not easy to be a whistleblower generally. Being a Lincoln Law whistleblower is even harder. For now, we just have to take Staples, Target, and OfficeMax at their word next time we purchase Taiwan pencils from their shelves.