Kirti Reddy Addresses Risk of Increased Freight Supply Chain Customs Fraud in FreightWaves Article
Kirti Reddy, a Quarles & Brady partner and former assistant U.S. attorney in the Southern District of New York, discussed in a FreightWaves article the increased risk of customs fraud throughout the freight supply chain as a result of tariff changes.
The article delved into the potential for a rise in claims under the False Claims Act because of both the size of new tariffs and the speed at which the tariffs are changing. Reddy explained that this could be especially challenging for the freight supply chain, which traditionally has not had to worry as much about customs enforcement.
An excerpt:
“Any time there are trade disruptions, the fraudsters may prey on the vulnerabilities of the rapid change and take advantage of the situation,” Reddy told FreightWaves in an interview.
“Especially with the tariffs being so steep, companies and individuals might be inclined to figure out how they’re going to meet their costs by reporting something lower than what’s actually there. With such rapid change, entities might believe customs, at least initially, is going to have a difficult time keeping up.”
Fraud and cargo theft in the supply chain has been an increasing concern for private companies involved in moving goods, notably among trucking companies, railroads and freight brokers.
The False Claims Act (FCA), on the other hand, deals with fraud perpetrated against the U.S. government. But customs fraud has not been a major focus of the FCA.
“When I started, no one in the U.S. attorney’s office was really doing customs fraud,” Reddy said. “It’s been increasing slowly and steadily, but not as much as health care fraud.”
That could be changing, she said.
“I expect there’s going to be an increase in fraud in the customs industry, and I expect the government is going to prosecute more importers under the FCA for customs fraud.”
Please visit our Federal Policy Watch: Monitoring White House Developments page for more insight about navigating changes at the federal level.