Apparel Customs Fraud: Double Invoices and False Garment Descriptions

Apparel customs undervaluation fraud puts two prices on the same shipment: finance pays the supplier’s invoice, while the customs broker files a lower invoice for those same garments. The company can know exactly what it bought and paid for while telling Customs something else. If you work with supplier payments, garment specifications or broker instructions, you may see the part of the transaction that Customs never received.

The entry summary tells U.S. Customs and Border Protection the value, classification and duty rate. The commercial invoice supports the declared value. HTS misclassification fraud changes a different part of that declaration: what the garment is. An importer can understate the price and misdescribe the product on the same entry. The apparel business paying its full duties has to compete against the resulting price advantage.

Double Invoices Can Hide Behind a Debit Note

The second price can sit in a debit note that never reaches the customs broker. Dana Kay and Siouni & Zar, doing business as Danny & Nicole, agreed to a $10 million settlement in 2014. In the Justice Department’s account of their admissions, the women’s-apparel importers reported less than the total value on commercial invoices, paid manufacturers the excess through debit notes, and withheld those additional payments from the government.

The government alleged that the importers deducted a flat fee per garment from the declared price. The factory got paid. Customs got the smaller number. Finance could reconcile the supplier’s account while the entry still understated what the garments cost.

A 2022 court opinion about Greenlight Organic describes government allegations of both undervaluation and misclassification of apparel. The court’s account describes demands for shipping documents, commercial invoices and receipts of payment. The government said Greenlight’s internal business records later supplied evidence of double invoicing. Those documents connect what crossed the border to what the company actually paid.

Medical Scrubs, Customs Prior Disclosure, and Undervaluation

Medical scrubs can be undervalued and misclassified on the same customs entry. Selecta Corporation, doing business as Dickies Medical Uniforms, disclosed both problems on 1,295 apparel entries, principally medical scrubs and lab coats.

According to the Court of International Trade’s opinion, Selecta’s disclosures admitted the false entry statements. After the company’s own report to Customs, it paid $839,694 in duties and fees, and the court ordered a separate $51,102 negligence penalty in January 2019. The penalty was based on interest on the underpayments.

The product question survives a price correction. In Greenlight, Customs testing showed that sample garments were knit but had been classified as woven. Someone who knows the fabric and construction can explain the product discrepancy. Someone who knows the accounts can explain the price discrepancy. A case involving both needs both accounts.

What Is an Assist in Customs?

An assist is something the buyer provides free or at a reduced cost for making the imported goods, such as materials or production tools. Customs value can include these inputs even when they sit outside the factory’s garment invoice. Qualifying overseas design and development work can count too. The sourcing team’s records can therefore explain costs missing from the invoice finance pays.

In its 2022 settlement, Luchiano Visconti admitted significantly underreporting the value of imported menswear and routinely underpaying duties. The Justice Department’s account included payments labeled design, preproduction, patent and other service charges as part of the true apparel price. The names given to those payments did not tell the whole story.

Does Customs Value Include Freight?

International freight and insurance are excluded from the price used for U.S. customs valuation. The actual freight charge matters because inflating that deduction shrinks the declared merchandise value. Transactions between connected companies raise another document question: whether the relationship influenced the price.

First-Sale Prices Have to Come From a Sale

A first-sale price is the earlier factory-to-middleman price in an import chain. High Life’s 2023 case shows what happens when a desired customs value drives the paperwork.

The government’s complaint described High Life’s change from Landed Duty Paid terms, under which vendors handled importation, to Free on Board terms, under which High Life handled importation. Existing orders assumed the vendors would pay the import costs. The government alleged that paying duties on the actual price High Life paid its vendors would defeat its projected margins, so High Life worked backward to the customs values it wanted. The complaint put the problem plainly:

High Life agreed to a $1.3 million settlement over 67 shipments and admitted giving instructions, revising documents and using the vendor-provided first-sale values. The complaint describes a production-team email directing vendors to rework their prices using High Life’s estimated freight costs, with a revised Excel spreadsheet attached. The factory’s agreed price was the missing fact at the center of the government’s allegation.

Who Supplied the Price and Product Information?

The supplier or purchaser may set the price and product information that the broker files. The importer of record remains responsible for the duty. That makes the original instruction, any replacement invoice and the person directing the change part of the same story.

A customs broker whistleblower may know which invoice reached Customs. Finance may know what the supplier received. Product and sourcing staff may know the actual garment, the factory and the charges outside the main invoice. Those are different views of the same shipment, and each can fill a gap the others leave.

Customers can hold the missing information too. Notations, which settled in 2017, was a major purchaser of imported garments. The government alleged that the pricing arrangement and false entry papers made undervaluation visible to that purchaser. In its settlement with Notations, the Justice Department reported admissions concerning warning signs and continued conduct. The evidence reached beyond the company named as importer.

When an Apparel Importer Continues Undervaluation After an Auditor Warning

When an apparel importer continues undervaluation after an auditor warning, the warning and the later entries can show what the business knew and what it kept doing. Barco Uniforms sells apparel to restaurants and health care providers. The Justice Department’s April 18, 2025 complaint announcement alleged a double-invoicing scheme involving foreign suppliers and false entry summaries that understated garment values.

The government further alleged that the conduct continued after a third-party auditor flagged underpayment risks and recommended that Barco double-check the duty calculations behind its supplier prices. Barco’s former director of product commercialization brought the whistleblower case, which the government joined.

The auditor’s warning puts deliberate ignorance in customs fraud in concrete terms: what did the business do after someone pointed out the underpayment risk? A failure to correct a customs entry after learning duties went unpaid can support a False Claims Act case. Later invoices, correction records and duty payments show what changed after the warning, and which affected shipments the company addressed.

How to Prove Country of Origin?

Factory production records and the work performed in each country underpin country-of-origin evidence. For garments, that production history answers a question the price and shipping route cannot: where the apparel was made under the textile rules identified in Customs’ origin guidance.

What Evidence Is Needed to Prove Fraud?

The useful customs fraud evidence connects the goods, the price paid, the entry filed and the decisions behind it. In Greenlight, the government had a competitor’s account and Customs’ garment testing before it said internal records revealed double invoicing. An outside business can recognize the pattern while the documents explaining it remain inside the importer.

Matching the shipment across those documents matters. A 2020 working paper in the U.S. Census Bureau’s Center for Economic Studies series, Are Customs Records Consistent Across Countries? Evidence from the U.S. and Colombia, found low shipment-matching rates even where buyer and seller identities could be matched. Its sector analysis included knitted and non-knitted apparel. The study recommended a practical bridge between countries’ records:

That is the value of an insider who can connect the invoice number to the shipment and the payment. A trade-data comparison can help identify a shipment worth examining. The underlying documents let us examine what the importer actually declared and paid. If older shipments raise questions about the customs fraud statute of limitations, we address those with you.

How Much Is a Whistleblower Claim Worth?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. For apparel insiders, the valuable knowledge may be the payment Customs never saw, the garment description someone changed or the warning the company ignored.

Sources

• Justice Department: Dana Kay and Siouni & Zar settlement and admissions, April 9, 2014
• Court of International Trade: Greenlight Organic opinion, August 4, 2022
• Court of International Trade: Selecta Corporation penalty opinion, January 11, 2019
• U.S. District Court, Southern District of New York: government’s High Life complaint, January 2023
• Justice Department: Barco Uniforms complaint announcement, April 18, 2025
• U.S. Census Bureau, Center for Economic Studies: Are Customs Records Consistent Across Countries? Evidence from the U.S. and Colombia, 2020

The Garments Behind Your Concern

If you know why the supplier’s payment and the customs entry tell different stories, speak with our whistleblower experts about those garments. We connect your knowledge of the apparel business to the unpaid duties and find you customs fraud whistleblower lawyers who know apparel valuation and classification to build your strongest case. We stay beside you from the first conversation through the case.