U.S. Customs Officials Sour On Honey Fraud Organization by T. Augustine Lo

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On February 20, 2013, U.S. Immigration and Customs Enforcement (“ICE”), CBP, and the U.S. Attorney’s Office for the Northern District of Illinois jointly announced  federal criminal charges against five individuals and two honey-processing companies for illegally importing dumped honey from China. The government alleges that the scheme evaded more than $180 million in antidumping duties. The two companies have concluded deferred prosecution agreements, with one agreeing to pay a $1 million fine, and the other agreeing to a $2 million fine. 

ICE and CBP collaborated on the original investigation, which began in 2008. Since 2001, honey from China has been subject to an antidumping duty order that is meant to remedy sales at less than fair market value. ICE and CBP’s investigation uncovered schemes to transship honey through third countries and mislabel merchandise to disguise the Chinese origin of imported honey. The defendants in the scheme allegedly evaded $80 million in antidumping duties. The government seized and forfeited more than 3000 drums of illegally imported honey. This more recent investigation focused on companies that served as domestic conduits for such illegal imports by purchasing and processing honey.

The U.S. Attorney’s Office in Chicago is now prosecuting the defendants under 18 U.S.C. § 542. This statute criminalizes the importation of merchandise by means of fraudulent statements. The defendants in this scheme allegedly purchased honey for processing with the knowledge that the merchandise had been imported illegally. The principal of one of the honey processors pleaded guilty after cooperating with the investigation for two years. The alleged broker for the scheme has indicated his intent to plead guilty in exchange for a recommended prison sentence of 74 months, a fine of $250,000, and an order of restitution of $2.64 million, subject to the court’s approval. Two other defendants each face up to 20 years in prison, in addition to fines and orders for restitution. A Canadian broker for the scheme remains at large. The two companies involved have agreed to implement corporate compliance programs as part of their deferred prosecution agreements.