On Monday June 23, 2025, a Ninth Circuit Court of Appeals panel issued an important decision upholding a $26 million False Claims Act (FCA) verdict against pipe importer Sigma Corp. (Sigma) for making false statements to avoid paying duties on goods imported from China. The panel decision by Judge Michelle Friedland in Island Industries Inc. v. Sigma Corp. (9th Cir., No. 22-55063) underscores that importers who fail to make reasonable efforts to understand anti-dumping rules and regulations are at risk not only of fines, but of treble damages and civil penalties under the FCA.

In 2017, Sigma's competitor Island Industries brought an FCA complaint claiming that Sigma imported pipe fittings that were "essentially identical" to the carbon steel butt-weld pipe fittings addressed in a 1992 Department of Commerce anti-dumping duty order and were therefore subject to duties on import. The complaint further alleged that Sigma fraudulently made two types of false statements on customs forms to avoid those duties: (1) declarations that its products were not subject to anti-dumping duties, and (2) misidentification of the products as steel couplings, rather than welded pipe fittings. 

At trial, a jury found that Sigma knowingly made false statements about the origin of Chinese-made butt-weld pipe fittings in order to get through customs without paying the applicable 182.9 percent fees applicable to Chinese imports. As a result, Sigma was ordered to pay $24.2 million in damages (trebled from the $8.4 million jury award), plus $1.8 million in civil penalties.

The Ninth Circuit upheld the judgment against Sigma, rejecting Sigma's argument that it had not acted "knowingly" under the FCA because the obligation to pay duties was ambiguous and it had acted according to an objectively reasonable interpretation of the governing requirements. The court explained that this argument was directly foreclosed by the Supreme Court's 2023 decision in United States ex rel. Schutte v. SuperValu Inc. (598 U.S. 739 (2023)), which held that "[t]he FCA's scienter element refers to [a defendant's] knowledge and subjective beliefs—not to what an objectively reasonable person may have known or believed." Id. at 749. (Miller & Chevalier has previously written about the risks that SuperValu presents to defendants in litigation and at trial here). 

The court further noted that the evidence presented at trial "was plainly sufficient" to support a finding that Sigma acted with at least deliberate ignorance or reckless disregard of the truth when it made its customs declarations. The court noted:

The jury heard evidence that products from China, and steel products in particular, are frequently subject to antidumping duty orders. Yet Sigma made no inquiry into whether it owed duties on its welded outlets before stating that it did not. Sigma's vice president overseeing import operations testified that Sigma had never seen the China Order or the Sprink Ruling—both of which were issued in 1992—until 2017 or 2018. That same executive testified that he did not recall anyone at Sigma looking at the International Trade Commission's periodic antidumping reviews or inquiring with Commerce or Customs as to whether its imports were subject to antidumping duties.

Opinion at 27-28. 

The Ninth Circuit's holding is a reminder to importers that a scienter defense based on ignorance of the law is not enough to avoid liability for fraud under the FCA. Instead, importers are advised to make a competent assessment of their obligations and potential liabilities and to maintain records showing their good faith efforts to comply with the law. 

Notably, the obligation to be reasonably informed of governing requirements extends well beyond the administration's new tariffs currently in the headlines. (See our reporting on these reciprocal tariffs and their interaction with other International Emergency Economic Powers Act (IEEPA)-based tariffs and section 232 import duties.) The claims in Island Industries concerned long-standing anti-dumping orders, which impose duties to counteract the unfair trade practices of another country that distort the U.S. market for certain goods in favor of the foreign imports. As the court noted, such anti-dumping orders on Chinese goods and steel products are not uncommon and the defendant's failure to learn of those obligation amounted to deliberate ignorance of the law. 

The court also addressed and rejected three other arguments by Sigma, all of which have implications for future FCA cases based on alleged customs violations.

First, the court found that it had jurisdiction to hear the appeal. Although section 1582 of the Tariff Act vests the Court of International Trade (CIT) with exclusive jurisdiction over "any civil action which arises out of an import transaction and which is commenced by the United States... to recover customs duties," the court found that this provision does not prevent a qui tam relator who "effectively stands in the shoes" of the government from bringing a case in federal district court in order to recover such duties. Instead, the court noted, the Supreme Court has held that "[t]he United States... is a party to a privately filed FCA action only if it intervenes." Opinion at 17 (quoting United States ex rel. Eisenstein v. City of New York, 556 U.S. 928, 933 (2009)). 

Second, the court addressed Sigma's argument that section 1592 of the Tariff Act provides an exclusive mechanism for the government to recover customs duties that importers evade through fraud. Although the court found that section 1592 "undoubtedly overlaps with the FCA," id. at 19, it held that the two statutes did not irreconcilably conflict. The court also noted that the FCA "expressly contemplates that FCA cases can proceed in parallel with the government's pursuit" of other remedies. Id.

Third, the court held that Sigma could not disclaim its duty to pay anti-dumping duties by referencing a Department of Commerce statement in a scope ruling that it only planned to collect additional duties from recent years, not older ones like Sigma's, based on its interpretation of the complicated restrictions in the liquidation and suspension regulations. The court found that although Commerce may not intend to collect these duties now, Sigma was still obligated to pay them at the time they were incurred: "In sum, an importer cannot evade duties, wait until its entries are liquidated, and then assert based on that liquidation that its actions did not deprive the government of money." Id. at 24.

In total, the Ninth Circuit's decision is a warning to potential customs defendants of the risk of FCA suits, including suits arising from disgruntled competitors as well as insider whistleblowers. Such cases are likely to become increasingly common as the Department of Justice (DOJ) continues to target customs violations as an area of FCA enforcement. We covered this enforcement trend here and here. 

Miller and Chevalier advises clients on their needs related to trade compliance, trade policy, and criminal defense. We regularly defend companies in civil and criminal customs enforcement proceedings, and import/export seizures. Similarly, when a company independently discovers an error in its import transactions, we have experience providing assistance in evaluating the matter and preparing voluntary disclosures to Customs and Border Protection (CBP).

For more information, please contact:

Joshua Drew, jdrew@milchev.com, 202-626-5811

Richard A. Mojica, rmojica@milchev.com, 202-626-1571

Bradley E. Markano, bmarkano@milchev.com, 202-626-6061

Peter Kentz, pkentz@milchev.com, 202-626-5891

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