A British company has agreed to pay more than $900,000 to settle allegations that it structured shipments to avoid paying U.S. duties on its goods, including sales to dozens of customers in Maine.
The settlement by the U.S. Attorney’s Office in Maine will require Pure Collection to pay $908,100 under the False Claims Act, a civil remedy. Most of the penalty will be paid by the company, but $32,562 will be paid by Pure Collection’s chief executive officer, Samantha Harrison, for her role in the scheme.
The company, based in Harrogate, England, sells clothing – primarily knit and cashmere sweaters – through its catalog and online.
The complaint says that Pure Collection structured its shipments to make the value of items it was sending to the U.S. under $200 to avoid import duties of up to 32 percent. Shipments valued under $200 from 2010 to March 2016, and then under $800 after that date, were not subject to duties. Breaking connected orders into smaller units to avoid the duties is barred.
The U.S. Attorney’s office said Pure Collection made the individual shipments less valuable to keep its pricing competitive with U.S. manufacturers and to avoid refunding the duties paid by customers. Shipments that are valued below the duty limit are generally sent directly to the customer, while those at a higher value are held at the Post Office, where the customers have to pay the duty before they are given the package.
Pure Collections’ policy was to reimburse customers if they paid any duties, the complaint against the company said, so higher-valued shipments would increase the refunds the company would have had to pay to customers.
“Finding a way around Customs duties freed Pure from making good on this reimbursement promise to its U.S. customers,” the complaint said, thus improving the company’s bottom line.
An internal company manual, included in the complaint against the company, instructs employees how to split shipments in a way that the value is under the Customs limit to avoid paying a refund to duties charged to U.S. customers.
The company’s shipments to U.S. customers grew from $9.7 million in 2010 to $20.4 million in 2016, according to the complaint.
The complaint includes details on dozens of shipments to Maine – to customers in towns such as Southwest Harbor, Seal Harbor, Cumberland Foreside and Kennebunkport – that were improperly split to avoid the duties. Also included are details on shipments to other states.
The investigation began after a complaint by a former Pure Collection employee in Britain, Andrew Patrick, who tried unsuccessfully to interest Customs officials in London in the company’s practices in 2014.
He ultimately filed suit in Maine in 2016 through a Portland law firm and the federal government then intervened in the case. Patrick will receive a reward of 18 percent of the settlement amount, or more than $160,000 under a whistleblower provision of the False Claims Act.
Edward D. Murphy can be contacted at 791-6465 or at:
emurphy@pressherald.com
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