Duty Drawback Fraud, Customs Fraud & Relanding Exported Goods - 18 U.S.C. § 544

18 U.S.C. § 544 makes it a federal crime to reimport merchandise into the United States after it was previously entered or withdrawn for exportation without payment of duties, with the intent to obtain a drawback or to receive another export allowance, and no entry was made when the merchandise returned.

The statute can apply to international businesses, exporters, customs brokers, logistics companies, and individuals involved in the transaction, with penalties of up to two years in prison and forfeiture of the merchandise.

What is 18 U.S.C. § 544?

Section 544 is a customs offense concerning the unlawful return of merchandise that received, or was intended to receive, favorable customs treatment because it was being exported.

The statute essentially prevents merchandise from leaving the country under an export-related customs treatment and then being brought back into the United States without the entry required for an importation.

The statute covers three circumstances involving the original export transaction:

Merchandise entered or withdrawn for exportation without payment of duties
Merchandise entered or withdrawn for exportation with intent to obtain a drawback of duties paid
Merchandise entered or withdrawn for exportation with intent to obtain another allowance provided by law for exportation

The merchandise must then be relanded at a place in the United States without an entry having been made. Section 544 provides that the merchandise is treated as having been imported into the United States contrary to law.

How Does a Duty Drawback Create a § 544 Issue?

A duty drawback is a statutory refund of certain duties, taxes, and fees paid on imported merchandise when the merchandise subsequently satisfies the requirements for drawback, including qualifying exportation or destruction.

Drawback is therefore tied directly to the movement and identity of merchandise through the import-export process.

Customs and Border Protection (CBP) requires documentation supporting the exportation underlying a drawback claim.

Depending on the applicable drawback provision and regulations, records may need to establish the date and fact of exportation, the exporter's identity, and the relationship between the imported merchandise and the merchandise later exported. Reviews can involve:

Inventory records,
Bills of lading,
Invoices,
Transportation records,
Export documentation, and
Accounting procedures.

How Do Federal Investigations Under § 544 Begin?

A § 544 investigation can develop from a customs examination, a drawback review, an audit of export records, discrepancies identified in shipment documentation, or information obtained during another federal investigation.

CBP may scrutinize a drawback claim by requesting supporting records and comparing the company's documentation against customs and transportation information.

For example, CBP has conducted full desk audits in which it selected particular exports from drawback claims and requested proof of export, export sales orders, invoices, carrier records, and documentation establishing the date, place, and fact of exportation.

A company can also attract scrutiny when its records do not establish that merchandise identified in a drawback claim is the same merchandise that was imported, when inventory controls do not permit the merchandise to be traced, or when export documentation does not establish that the claimed merchandise actually left the United States.

CBP has specifically identified deficiencies involving:

Inventory controls,
Proof of exportation,
Exporter identification, and
Recordkeeping in drawback audits.

The investigation can become criminal when federal agents or prosecutors believe the customs discrepancy reflects intentional conduct rather than a documentation deficiency.

Investigators may then examine communications among executives, employees, customs brokers, freight forwarders, warehouses, and foreign counterparties to determine who participated in the transactions.

For companies operating through the Port of Los Angeles or Port of Long Beach, the number of entities involved in a single international shipment can make attribution particularly important.

An importer may rely on a customs broker, a logistics provider may arrange transportation, a warehouse may receive or release the merchandise, and a corporate executive may approve the commercial transaction without personally controlling customs entry procedures.

What Does “Relanded” Mean Under § 544?

The law does not separately define “relanded,” but the term refers to merchandise that was sent out of the United States for exportation and subsequently brought back into the United States.

The return location does not have to be the same United States location from which the merchandise was exported.

Section 544 expressly provides that “any place in the United States” does not include certain territories and possessions listed in the statute, including the:

Virgin Islands,
American Samoa,
Wake Island,
Midway Islands,
Kingman Reef,
Johnston Island, and
Guam.

What Does “Each Person Concerned” Mean?

The phrase “each person concerned” is one of the most important parts of § 544 for executives, employees, brokers, and other individuals who did not personally transport the merchandise.

“Concerned” refers to a person who is involved in the transaction, affected by it, has a connecting relation to it, or takes an active or real part in it. See Winkler v. United States, 372 F.2d 74 (5th Cir. 1967).

That definition is broader than simply asking who physically possessed the goods. At the same time, it does not mean that every employee of an importing or exporting company is automatically criminally liable because the company handled merchandise covered by § 544.

The individual's actual connection to the unlawful relanding matters.

A prosecutor may attempt to establish that connection through instructions to a broker, shipment approvals, communications with a warehouse, control over transportation, participation in customs filings, or other evidence showing an active relationship to the transaction.

For a corporate executive, this distinction between general corporate authority and personal involvement is particularly important. Signing an ordinary business document associated with an export does not necessarily establish that the individual was involved in the subsequent unlawful relanding.

Hypothetical Case Study: Challenging a Port of Long Beach Relanding Allegation

A California manufacturing company imports specialized components, uses some components in products manufactured in the United States, and exports unused components to an affiliated company in South Korea.

The company later files drawback claims based on qualifying exports. Several months later, a container containing components with matching model numbers is shipped from South Korea to Long Beach and enters the company's California distribution system.

Federal investigators conclude that the returned components are the same merchandise previously exported for drawback.

They identify emails from the company's chief operating officer discussing the Korean shipment and an earlier email approving the original export. Prosecutors allege that the executive was “concerned” with the unlawful relanding under § 544.

Federal Case Review by Eisner Gorin LLP

The evidence appears substantial because the model numbers match, the company received the merchandise, and the executive participated in both commercial transactions.

At Eisner Gorin LLP, we would examine the physical and documentary chain for each component rather than assuming that matching model numbers establish identity. Our team would compare:

Serial numbers,
Lot numbers,
Warehouse records,
Purchase orders,
Production records,
Container manifests, and
Outbound and inbound transportation records.

The objective was to determine whether the components returned to Long Beach were the same merchandise covered by the earlier export and drawback transactions.

The analysis could reveal that the company maintained identical model numbers for components purchased from several manufacturers and that the returned shipment contained newly manufactured replacement units.

The original exported components could be traced to a South Korean customer and then to a separate manufacturing facility.

The government's conclusion would therefore depend on the assumption that the model number established identity, even though the company's records showed otherwise. We would also address the executive's status as a person “concerned.”

The evidence that the executive approved two commercial transactions would not necessarily establish an active or real part in the alleged unlawful relanding.

If the customs broker independently prepared the entry documents, the logistics subsidiary arranged the return, and the executive had no role in the customs treatment of the inbound shipment, those facts would directly challenge the government's attempt to connect the executive to the statutory violation.

The case would ultimately turn on the government's ability to prove:

A statutory connection between the exported merchandise,
The alleged relanded merchandise,
The missing entry, and
The individual defendant's involvement.

In this case, after the shipment records were reconstructed and the government's identification theory was challenged, prosecutors would dismiss the § 544 allegations against the executive.

Related Federal Laws

Related laws matter because federal prosecutors rarely charge customs violations in isolation; a comprehensive defense requires addressing the full web of overlapping criminal and civil statutes investigators use to increase legal exposure and leverage plea deals.

18 U.S.C. § 542 (Entry of Goods by Means of False Statements): Prohibits importing merchandise into U.S. commerce using fraudulent invoices, affidavits, or false statements to evade duties.
18 U.S.C. § 545 (Smuggling Goods into the United States): Makes it a felony punishable by up to 20 years in prison to knowingly import merchandise contrary to law or receive smuggled goods.
18 U.S.C. § 550 (False Claim for Refund of Duties): Directly criminalizes knowingly filing false or fraudulent claims, entries, or affidavits to obtain duty drawback refunds on exported goods.
18 U.S.C. § 1001 (False Statements to Federal Agents): Penalizes knowingly submitting false material statements or concealing records during a Customs and Border Protection (CBP) or federal investigation.
18 U.S.C. § 371 (Conspiracy to Defraud the United States): Criminalizes agreements between two or more parties—such as brokers, executives, or logistics providers—to execute customs fraud or duty drawback schemes.
19 U.S.C. § 1592 (Civil Penalties for Fraud, Gross Negligence, and Negligence): Allows the government to pursue massive monetary fines, treble damages, and merchandise forfeiture independently of criminal charges.
19 U.S.C. § 1593a (Civil Penalties for False Drawback Claims): Imposes severe monetary fines up to three times the actual or potential loss of revenue for fraudulent or negligent duty drawback submissions.

Frequently Asked Questions (FAQ)

What triggers an 18 U.S.C. § 544 investigation?

Investigations typically stem from routine U.S. Customs and Border Protection (CBP) drawback audits, discrepancy reports in shipping manifests, or unexpected matches identified between export records and inbound entry data at U.S. ports. Discrepancies in inventory controls or serial numbers can trigger deeper scrutiny by federal agents.

Can a corporate executive be held criminally liable under § 544 if they didn't transport the goods?

Yes. The statute targets "each person concerned" in the unlawful transaction. Courts define "concerned" broadly as anyone who plays an active or connecting role in the scheme—such as approving false export documentation, instructing logistics providers, or coordinating shipments—even if they never physically touched the merchandise.

What are the criminal penalties for violating 18 U.S.C. § 544?

A conviction under § 544 carries up to two years in federal prison, monetary fines, and mandatory forfeiture of the relanded merchandise (or its equivalent value) to the United States government.

What is the difference between civil drawback audit deficiencies and a criminal § 544 charge?

Civil administrative issues usually involve clerical mistakes, missing documentation, or poor recordkeeping during a CBP desk audit. A case becomes criminal under § 544 when federal prosecutors establish intent—meaning the parties purposefully exported merchandise to claim refunds or avoid duties and knowingly brought those same goods back without proper customs entry.

How do defense attorneys challenge an 18 U.S.C. § 544 allegation?

Defense strategies focus on breaking the physical or documentary chain of identity (e.g., proving that returned items were new replacement units rather than the originally exported goods) or showing that an individual lacked personal involvement or knowledge regarding the improper customs entry.

The federal criminal defense attorneys at Eisner Gorin LLP can help you. Schedule your consultation by calling (818) 781-1570 or using the contact form. Our law firm is based in Los Angeles.

Duty Drawback Fraud