Barco Uniforms, False Claims Act Violations, California 2023

SACRAMENTO, Calif. – Grimy Times has learned that the United States has filed a complaint against Barco Uniforms Inc., Kenny Chan, David Chan, and companies operated and controlled by the Chans, alleging that they violated the False Claims Act by knowingly and improperly underpaying customs duties owed on imported apparel.

Barco sells apparel, including uniforms, to restaurants and healthcare providers, among others. Kenny and David Chan operate various companies that supply Barco with apparel manufactured overseas, including in the People’s Republic of China (PRC).

To import merchandise into the United States, the party making the entry must declare, among other things, the value of the goods, whether the goods are subject to duties, the applicable duty rate, and the amount of duties owed. U.S. Customs and Border Protection (CBP) relies on these representations to levy and collect duties on imported merchandise. A commercial invoice reflecting the value of the goods is required to support the declarations submitted to CBP.

The United States’ complaint alleges that the defendants conspired to knowingly and improperly avoid or decrease the payment of customs duties by undervaluing imported garments Barco purchased from foreign suppliers. Among other things, the government’s complaint alleges that the defendants used a double-invoicing scheme featuring false entry summaries presented to CBP that undervalued imported goods purchased by Barco, thereby reducing the duties paid on the merchandise.

The government further contends that the defendants continued to underpay customs duties even after a third-party auditor advised Barco of risks associated with the underpayment of duties and recommended that Barco “double-check” duty calculations underlying prices that Barco agreed to with its foreign suppliers. In addition to Barco, Kenny Chan, and David Chan, the government’s complaint asserts claims against the following entities operated and controlled by the Chans: Able Allied Limited, Nathan Global Direct Inc., J&K Garment Inc., Mega Goodwill Ltd., JS Garment Co., and Superway Import & Export Inc.

“Those who import and sell foreign-made goods in the United States must comply with all trade laws,” said Acting Assistant Attorney General Yaakov M. Roth of the Justice Department’s Civil Division. “The government will hold accountable parties who evade or underpay duties owed on imported merchandise.”

The lawsuit was originally filed under the qui tam or whistleblower provisions of the False Claims Act by Toni Lee, the former Director of Product Commercialization at Barco Uniforms. The act permits private parties to file suit on behalf of the United States for false claims and to share in any recovery. The act also permits the United States to intervene in and take over responsibility for such an action, as it has done in this case.

Senior Trial Counsel Elspeth A. England of the Civil Division’s Commercial Litigation Branch, Fraud Section, and Assistant United States Attorney David E. Thiess of the Eastern District of California are handling the matter, with assistance provided by CBP and Homeland Security Investigations. The case is captioned United States ex rel. Lee v. Barco Uniforms Inc., et al, No. 2:16-CV-1805 (E.D. Cal).

The claims asserted by the United States are allegations only, and there has been no determination of liability.

The case is a stark reminder that businesses operating in the United States must comply with all trade laws and regulations. Grimy Times will continue to follow this case and provide updates as more information becomes available.

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