In Record-Breaking Settlement, Ceratizit USA Agrees to Pay Substantial Sum

In a landmark settlement that sets a new precedent for customs fraud cases, Ceratizit USA, LLC has agreed to pay $54.4 million to the United States government, marking the largest settlement ever recorded for customs duties evasion under the False Claims Act. The whistleblower who initiated the case will receive $9.75 million as a reward for bringing the violations to light.

The case, represented by the Washington, D.C.-based law firm Tycko & Zavareei LLP, exposed a complex scheme of tariff evasion by the major tungsten carbide rod importer. Ceratizit supplies these specialized rods primarily to manufacturers of cutting tools used in the metalworking industry.

According to the lawsuit, Ceratizit engaged in three distinct types of customs fraud. First, the company falsely claimed on official import documentation that its tungsten carbide rods were manufactured in Taiwan when they were actually produced in China and merely transshipped through Taiwan to disguise their true origin. This misrepresentation allowed the company to evade significant tariffs specifically imposed on Chinese-made products.

The second allegation involved deliberate misclassification of the tungsten carbide rods under the Harmonized Tariff Schedule of the United States (HTSUS). By incorrectly categorizing its products, Ceratizit provided misleading information to customs officials about the nature of the imported goods, enabling the company to avoid paying the appropriate duties.

The third violation concerned Ceratizit’s failure to properly mark its imported tungsten carbide rods with their country of origin as required by U.S. law, further obscuring the products’ Chinese manufacturing source.

The case highlights the critical role of the False Claims Act’s qui tam provision in detecting customs fraud. This legal mechanism allows private individuals or companies with knowledge of fraudulent activities to file lawsuits on behalf of the government. When such cases result in monetary recoveries, the whistleblower—officially known as the “relator”—receives a percentage of the settlement as compensation for their role in exposing the fraud.

Jonathan Tycko, a founding partner at Tycko & Zavareei who represented the whistleblower in this case, emphasized the importance of qui tam actions in the customs enforcement system. “Without whistleblowers, these sophisticated customs frauds would go undetected by U.S. Customs & Border Protection,” Tycko noted. The attorney has developed specialized expertise in customs duties and tariff evasion cases, representing industry insiders, experts, and domestic companies affected by such violations.

The settlement’s unprecedented size underscores the government’s growing focus on customs enforcement, particularly regarding products originating from China. As trade tensions between the United States and China have intensified in recent years, authorities have increased scrutiny of imports that may be circumventing tariffs designed to protect domestic industries and ensure fair trade practices.

For the tungsten carbide industry specifically, this settlement could have significant ripple effects. Legitimate manufacturers and importers who have been paying proper duties may now find themselves on more equal competitive footing, as the case helps level the playing field against companies seeking unfair advantages through customs fraud.

The whistleblower and legal team extended their gratitude to Department of Justice attorneys Jonny Zajac and James Nealon for their thorough investigation and successful resolution of the case.

This settlement demonstrates the effectiveness of the False Claims Act as a powerful tool for combating customs fraud and protecting U.S. trade interests, while simultaneously encouraging individuals with knowledge of similar violations to come forward.