German Tool Co Pays $1.9M To End Customs Fraud Case

German Tool Co Pays $1.9M To End Customs Fraud Case

In a high-stakes game of international trade and deception, a renowned German toolmaker has agreed to a $1.9 million settlement, effectively ending a heated legal battle over accusations of mislabeling Chinese-made machinery. This dramatic resolution unfolds in the legal arena of Georgia, USA.

German Tool Co Pays $1.9M To End Customs Fraud Case : The Settlement

The plot thickens as King Kong Tools GmbH & Co KG, along with its Atlanta-area subsidiary, finds itself ensnared in a whistleblower complaint. The claim, spearheaded by a rival, accuses the company of a cunning ruse – labeling machine parts manufactured in China as German-made. This sleight of hand was purportedly to sidestep U.S. import tariffs. A federal judge in Georgia gave the green light to dismiss this lawsuit following a settlement agreement involving the parties and the U.S. government.

German Tool Co Pays $1.9M To End Customs Fraud Case :  The Deceptive Strategy Unveiled

The U.S. prosecutors painted a picture of deceit, alleging that King Kong Tools, primarily a producer of forestry and construction cutting tools, had orchestrated a crafty plot. Products made in China were reportedly shipped via Germany to the U.S., bearing the deceptive mark “made in Germany.” This strategy, running from 2018 to 2023, allowed King Kong to illicitly evade a hefty 25% tariff on Chinese goods.

Whistleblower Sparks Legal Firestorm

The whistleblower, China Pacificarbide Inc., a California-based tool company, accused King Kong in 2019 of completing the manufacturing of tungsten carbide tools in China but falsely claiming German finishing. They argued that genuine German production would have doubled the product costs, considering European duties and labor expenses. The accusation pointed to a sharp rise in U.S. tariffs on Chinese products in 2018, from 10% to 25%, as the impetus for King Kong’s alleged fraud.

Legal Closure and Financial Repercussions

The settlement, while resolving the allegations, did not establish liability. As a part of this legal closure, all claims against King Kong were dismissed. For their role in uncovering the alleged customs fraud, China Pacificarbide will receive nearly $287,000 from the settlement, in addition to legal fees.