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The U.S. Department of Justice (DOJ) has launched an investigation into Barco Uniforms Inc. and its Chinese-based manufacturers, accusing them of engaging in a scheme to dodge customs duties owed on imported apparel. The complaint, filed in California federal court, alleges the companies conspired to underreport the value of goods imported into the United States from China, defrauding U.S. Customs and Border Protection (CBP) and violating the False Claims Act.

The DOJ’s investigation reveals that Barco Uniforms, along with the owners of its Chinese manufacturers, Kenny and David Chan, utilized a double-invoicing tactic. This scheme involved submitting false entry summaries to CBP, enabling Barco to pay significantly reduced customs duties on uniforms it imported and sold to major fast food chains and retailers.

"We will not allow parties engaging in fraudulent schemes to underpay rightful customs duties to profit at the expense of the American public," stated Michele Beckwith, Acting U.S. Attorney for the Eastern District of California.

The Chan brothers, initially operating a factory in California, moved their business to China between 2003 and 2004 to lower manufacturing costs. This transition allowed them to offer more competitive prices, benefiting companies like Barco Uniforms. However, the fraud began in earnest in 2011, when Barco secured a new contract with a fast food company to supply a line of uniforms at tight margins.

In response, Barco worked with the Chan companies to manipulate the customs duties paid on the uniforms. The companies created fake invoices, submitting artificially low values for imported goods to CBP, while reflecting the true prices internally. This fraudulent practice helped Barco outbid competitors, undercutting fair pricing and depriving the U.S. government of millions of dollars in customs duties.

The Chan companies, operating under several names to evade detection, included Able Allied Ltd., Nathan Global Direct, J&K Market, Mega Goodwill Ltd., JS Garment Co., and Superway Import & Export Inc.

The case was initiated by Toni Lee, a former director at Barco Uniforms, who filed a whistleblower complaint in August 2016. The DOJ filed its intervening complaint in federal court on April 11, 2025.

"This case highlights the critical importance of safeguarding the integrity of U.S. customs regulations and ensuring that all companies pay their fair share of duties," said Beckwith.

Representatives for Barco Uniforms have yet to comment, and contact information for Kenny and David Chan remains unavailable. The DOJ is represented by Yaakov M. Roth, Jamie Ann Yavelberg, Colin M. Huntley, and Elspeth A. England, with additional representation from Michele Beckwith and David E. Thiess of the U.S. Attorney's Office for the Eastern District of California.

The case is Lee v. Barco Uniforms Inc., Case No. 2:16-cv-01805, in the U.S. District Court for the Eastern District of California.