On January 11, 2017, the U.S. Customs and Border Protection (CBP) and the Attorney General announced the largest criminal and civil settlement ever against Volkswagen (VW) that totaled $4.3 billion. The breakdown of the settlement was $2.8 billion for the criminal penalty and $1.45 billion for a combined civil penalty for both the CBP and the Environmental Protection Agency (EPA). Volkswagen agreed to plead guilty to three felony criminal counts and pay the $2.8 billion dollar penalty. The $1.45 billion combined settlement was for EPA's "claim for civil penalties against VW in connection with VW's importation and sale of these cars" as well as CBP's claim for customs fraud.

CBP’s part of the $1.45 billion settlement dealt with a violation of 19 U.S.C. §1952, which "prohibits persons, by fraud, gross negligence or negligence, from entering or introducing, attempting to introduce, or aiding and abetting the entry or introduction of merchandise into the commerce of the United States, by means of statements or acts that are material and false, or by means of omissions which are material".

CBP's claim was that Volkswagen knowingly submitted material false statements and omitted material information, over multiple years, with the intent to deceive or mislead CBP concerning the EPA emissions standards. According to CBP, Volkswagen added a defeat device to their vehicles that allowed them to cheat on the federal emissions tests. By adding the defeat device to the vehicles, the CBP argued that Volkswagen was trying to evade their importer responsibilities and defraud revenue from the U.S.

The defeat device, is a computer software that suppresses "the car's emissions control system when it's being driven normally, allowing the system to work when the car is being tested in a lab". Once the vehicle is driven on the road, the defeat device would stop suppressing the emissions control system and would then release almost 40 times the permitted levels of nitrogen oxide (NOx). Nitrogen oxide is a highly poisonous pollutant that can cause emphysema, bronchitis, and other respiratory diseases. According to the New York Times, the decision to use the defeat device in the VW vehicles was made more than a decade ago, after employees realized they would not be able to legally meet the clean air standards set by the United States. VW has even acknowledged that the former chief executive, Mr. Winterkorn, was given a memo in May 2014 stating that there were irregularities in the emissions of their diesel cars, but “did not realize the gravity of the diesel emission problem”.

Volkswagen could have easily avoided such a hefty penalty brought on by the fraud claim by fully complying with the customs laws that are set by the CBP and by making sure no defeat devices were used to evade EPA emission standards.

If a company is looking to import into the United States and would need to meet emissions standards by the EPA and ensure compliance with CBP laws and regulations, it is prudent that the company complies with every regulation to avoid any potential penalties. For help with CBP and EPA compliance please contact info@diaztradelaw.com.