When the Feds Don't Like the Ambiance: Customs Fraud Can Get Importers in a World of Trouble

Home | China Law Blog | When the Feds Don’t Like the Ambiance: Customs Fraud Can Get Importers in a World of Trouble On August 26, the U.S. Department of Justice (DOJ) announced plea agreements with Ambiance Apparel ("Ambiance") and its owner Sang Bum "Ed" Noh. The charges against Ambiance and Noh include a duty evasion scheme, which worked like this: Ambiance imported clothing from Asian countries and submitted fraudulent invoices to U.S. Customs and Border Protection (CBP) that undervalued the shipments and allowed Ambiance to avoid paying the full amount of tariffs owed on the imports, according to court documents. At Noh’s direction, the Asian manufacturers prepared two invoices for the clothing ordered by Ambiance – one that usually reflected 60 to 70 percent of the actual price and was paid by letter of credit, and one that reflected the balance of the actual price and was paid by wire transfer. The first invoice, which fraudulently reduced the value of the shipment, was submitted to CBP and was used to calculate the tariffs due on the imports. According to ICE, "over the course of just over 4½ years, Ambiance undervalued imports by about $82.6 million and failed to pay more than $17.1 million in tariffs." This is a timely reminder to importers of the grave risks associated with undervaluation. While Noh is on the hook for separate tax offenses as well, he is still looking at a maximum sentence of eight years. Importers should be on guard against foreign suppliers who offer to help them "reduce" duty. These offers are sometimes rather blatant. Earlier this year, one of our clients started a text-message exchange with a Chinese supplier he suspected of colluding with his U.S. competitors to evade duties. Discussing possible reductions to the Section 301 China tariffs, the supplier said, "Even if no reduce [sic] , we save about 40% tariff." When our client asked how, the supplier replied, "Lower cost in commercial invoice." In some instances, suppliers might double-invoice as a matter of course. Keep in mind suppliers might be used to dealing with customers from countries where defrauding the customs authorities might not be a big deal. Even in the U.S., duty evasion is widespread in certain industries, and suppliers might assume customers want to play the same games as their competitors. A variation of the Ambiance scheme is to submit to CBP an invoice for samples (which are not subject to duty). Undervaluation is not the only way in which importers can get in trouble with the Feds for duty evasion. Importers should ensure their goods' country of origin is correctly declared, and beware of proposals to "save money" by simply transshipping goods through a third country not subject to tariffs. By far the most common illegal transshipment scenario these days involves Chinese suppliers shipping goods via Southeast Asian countries such as Indonesia, Malaysia, or Vietnam. In some cases, suppliers will claim the goods will undergo changes in the third country, to a degree that allows them to be designated as goods of that third country ("substantial transformation" in customs lingo). Importers should ensure they have evidence of such substantial transformation. And by evidence, we mean more than an invoice or a certificate from the local ministry of trade or some brochure photos of the factory floor. Think videos documenting the entire process, from receipt of raw material to storage. Because a supplier could, if so inclined, send a video of some random factory, this is something importers will need to do themselves or have a reliable third party do it. The last evasion musketeer is mislabeling, which entails declaring the entry of one products subject to no or lower duty, instead of the product actually entered. In some cases, this is close to impossible to pull off: A cow imported from China, whether bound for a dairy farm, breeding facility, or petting zoo, would be subject to Section 301 tariffs. However, with some goods there is room to maneuver. Take wooden bedroom furniture from China, which is subject to steep antidumping and countervailing duties (AD/CVD). A night table is considered bedroom furniture under the scope of the relevant AD/CVD order, but an end table is not. Earlier this year, DOJ announced an agreement with an importer and two of its executives, who were accused of having conspired to evade millions of dollars in anti-dumping duties and customs fees by falsely describing wooden bedroom furniture imported from China as “metal” or “non-bedroom” furniture on documents submitted to U.S. Customs and Border Protection. "The defendants manipulated images of their products in packing lists and invoices, and directed their Chinese manufacturers to ship furniture in mislabeled boxes and to falsify invoices to help the defendants avoid detection by authorities in the United States." These tricks might seem ingenious, but rest assured the Feds know all about them, and will hone in on importations whose fact patterns match those commonly used by duty evaders. We know this because we talk to them, and see how closely they scrutinize even legit transactions. Check Out Our China Law Services Share Twitter Facebook LinkedIn E-mail Comment Fred Rocafort Fred leads Harris Sliwoski’s intellectual property practice and is the coordinator of the firm’s international team. Much of Fred’s practice consists of helping cannabis businesses protect their brands. He also works with entrepreneurs and companies entering the Web3 space, a new frontier for IP law. Prior to joining Harris Sliwoski, Fred worked overseas for more than a decade, in both government and private sector roles. Fred is a regular contributor to the award-winning China Law Blog and Canna Law Blog. Fred began his career overseas as a U.S. consular officer in Guangzhou, China, where he advocated for fairer treatment of American companies and citizens in China and for stronger intellectual property rights enforcement. After entering the private sector, Fred worked at a Shanghai law firm as a foreign legal advisor and later joined one of the oldest American law firms in China, helping foreign companies navigate the Chinese legal environment. He also led the legal team at a Hong Kong-based brand protection consultancy, spending most of his time out in the field, protecting clients against counterfeiters and fraudsters in Greater China, Southeast Asia and Latin America. In addition to his IP work, as a native Spanish speaker, Fred works closely with different Harris Sliwoski teams on Latin America and Spain matters. Fred also provides advice to cannabis industry participants and other businesses on import and export transactions. Fred is an ardent supporter of FC Barcelona—and would be even in the absence of Catalan forebears who immigrated to Puerto Rico in the mid-1800s. Harris Sliwoski Attorney Read more posts [email protected] Read More International Business, International Manufacturing Related Posts September 15, 2026 Your AI-Drafted China Contract Says It Needs a Lawyer. Listen to It. September 11, 2026 Forensic Accountants in China Business Litigation: How True Numbers Can Tell the Wrong Story September 4, 2026 China NNN Agreement or Trademark Registration? You Usually Need Both September 1, 2026 AI Didn't Replace Lawyers. It Gave Us the 48-Page Contract. August 27, 2026 Do I Need a China NNN Agreement or a China Manufacturing Agreement? Usually Both. August 26, 2026 China’s New Overseas Investment Rules: Can Your Chinese Investor Actually Get the Money Out? August 24, 2026 International IP Protection for Startups: What to Protect and Where August 19, 2026 The Documents Are the International Deal August 19, 2026 China Supplier Fraud in Yiwu: Why We Recommended the Police, Not a Lawsuit August 17, 2026 China Trademark Registration: Why U.S. Companies Need More Than a Filing Agent August 10, 2026 Buying Expensive Equipment from China: Seven Questions to Answer Before You Pay August 7, 2026 DDP Shipping Risks: What Boise Cascade’s Guilty Plea Means for U.S. Buyers August 6, 2026 Protecting Your Artwork Internationally: What Artists Need to Do Before the Work Travels August 5, 2026 Your China Employee Signed the Vacation Policy. You Can Still Lose. July 29, 2026 The RedNote Contract Lesson for Companies Doing Business in China Leave a comment Cancel reply