Digital Version of March/April 2015
Digital Version of January/February 2015 Print Edition
ICE HSI cracks $100 million in-bond import fraud scheme
Customs fraud arrest
The president of the San Diego Customs Brokers Association, three international trade companies and seven others, are facing federal charges after a year-long a probe by U.S. customs agencies uncovered a multi-million dollar customs fraud scheme in southern California.
U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), with help from U.S. Customs and Border Protection (CBP) and the Internal Revenue Service (IRS) capped the long investigation with arrests on July 25.
To date, said ICE, the investigation has exposed a sprawling plot exploiting the in-bond import process, a routine feature of international trade that allows duty-free importations for goods that do not formally enter into U.S. commerce.
ICE said its investigation covered more than 90 commercial shipments from several countries, whose value was estimated at more than $100 million. ICE said the fraud ring’s operation cost the U.S. more than $10 million in lost customs duties, taxes and other revenue
Three defendants, including Gerard Chavez, 42, the president of the San Diego Customs Brokers Association, were taken into custody by HSI special agents early on July 25, said ICE.
The 56-count criminal complaint accuses 11 defendants in southern California and Tijuana, Mexico, of orchestrating the lucrative customs fraud scheme. Criminal charges in the complaint include conspiracy to defraud the U.S., falsely bringing in foods and obstruction of justice. The charges carry a maximum sentence of up to 20 years in federal prison, said ICE.
"This investigation pulled back the curtain on a potentially costly fraud scheme operating in one of the world's busiest commercial centers," said ICE Director John Morton. "Instead, HSI, aided by our law enforcement partners, exposed and dismantled this criminal ring and now those responsible will be held accountable."
As part of their scheme, according to the complaint, Chavez and others bought foreign goods like clothing made in China and cigarettes made in India and shipped them to the Port of Long Beach, CA. They allegedly falsified paperwork and electronic entries into a government database to make it appear the shipments would be sent on to Mexico, and not enter the U.S. stream of commerce. Instead of shipping the goods to Mexico, however, the defendants allegedly hired drivers to deliver them to warehouses in Southern California where they were eventually sold in the U.S. market. Chavez and others allegedly forged U.S. customs certifications to make it appear the shipments went to Mexico.
One of Chavez's customers, Sunil Mirwani, a 36-year-old importer who was taken into custody on July 25, allegedly received dozens of shipments of illegally imported Chinese-made apparel at Los Angeles-area warehouses.
Mirwani marketed and sold the apparel using his Los Angeles-based import company, M Trade Inc., which is also a defendant in the case. Similarly, other defendants distributed various shipments of illegally imported cigarettes to warehouses, self-storage units and residences throughout Southern California.
A third defendant, Carlos Medina, 34, of Chula Vista, Calif., was also taken into custody Wednesday. Medina allegedly hired truck drivers and coordinated the delivery of illegally imported goods.
Some of shipments of vegetable produce shipped by the ring, said the complaint, was contaminated with salmonella, a dangerous bacteria that can cause acute illness if consumed.
In at least one of those shipments, according to ICE, several defendants allegedly tried to evade inspections of an imported shipment of prickly pear cactus by the U.S. Food and Drug Administration. They also allegedly conspired to mislabel Mexican snack foods that contained a prohibited dye.