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Three Calif. firms charged with dodging $10 million in customs fees

Containers wait to to shipped on Long Beach harbor, California, on April 26.
Containers wait to to shipped on Long Beach harbor, California, on April 26.Joe Klamar / AFP/Getty Images

SAN DIEGO -- Prosecutors have charged three California companies with seeking to avoid paying $10 million in customs fees by bringing containers of food and other items to port and claiming they were destined for other countries, then selling the goods in the United States.

The criminal complaint unsealed by federal prosecutors in San Diego on Wednesday named eight people, including the president of the San Diego Customs Brokers Association, who are accused of being part of the scheme.

Goods in over 90 fraudulently processed container shipments included clothing from China, cigarettes from India and Germany and packages of the Mexican cactus dish nopalitos, officials with the U.S. Attorney's Office said.

It amounted to at least $100 million in products and $10 million in lost customs duties, they said. The complaint says the companies "facilitated" about $500 million in trade between the United States and other countries over the last five years.

The investigation "pulled back the curtain on a potentially costly fraud scheme operating in one of the world's busiest commercial centers," U.S. Immigration and Customs Enforcement Director John Morton told United Press International.

Cheaper prices
Because the goods were reported as simply passing through the Long Beach Port on their way to other countries, they were exempt from U.S. customs fees, prosecutors said.

The defendants "could sell more goods at cheaper prices and for greater profits than their law-abiding competitors, including domestic American manufacturers of these same products," the complaint read. 

The charges were brought against International Trade Consultants LLC and Tecate Logistics, based in Tecate, Calif., about 35 miles east of San Diego and immediately north of the Mexican border. The third company, M Trade Inc., is based in Los Angeles.

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Among the eight people charged -- including the owners or operators of the companies -- some lived in southern California and some were in Tijuana, Mexico.

Local business leader among those charged
One of the accused, Gerardo Chavez, is president of the San Diego Customs Brokers Association and the owner of Tecate Logistics and International Trade Consultants, prosecutors said.

Calls to M Trade and International Trade Consultants were not answered, and an employee at Tecate Logistics declined to comment. The defendants will have their first court appearance on Thursday in federal court in San Diego.

Messages left for the Customs Brokers Association late Wednesday evening were not immediately returned.

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All the defendants were charged with conspiracy to defraud the United States, which carries a maximum penalty of five years in prison if convicted.

Some of the defendants were also accused of importing goods by means of false statements and obstruction of justice.

Reuters and The Associated Press contributed to this report.

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