Federal Lawsuit Accuses Barco Uniforms of Massive Customs Duty Evasion

The U.S. government has launched a legal battle against Barco Uniforms Inc., a California-based apparel company, accusing it of dodging customs duties on imported garments. Filed in the Eastern District of California, the lawsuit names Barco, its executives Kenny and David Chan, and several related companies, alleging they used deceptive practices to underpay duties on clothing sourced from overseas, including China. The case, rooted in the False Claims Act, highlights a growing focus on trade compliance as global supply chains face tighter scrutiny.

At the heart of the dispute is a practice known as double-invoicing, where importers submit falsified documents to customs authorities to undervalue goods and reduce duties. For Barco, which supplies uniforms to restaurants and healthcare providers, the allegations suggest a deliberate scheme to skirt federal trade laws. The lawsuit, initiated by a former employee turned whistleblower, underscores the role of private citizens in exposing fraud and the complexities of enforcing fair trade in a high-stakes industry.

This case arrives amid heightened tensions in global trade. New U.S. tariffs, including a 10% blanket duty on imports and steeper rates on goods from China and Vietnam, have raised the stakes for apparel companies. With customs duties generating billions in federal revenue, the government is cracking down on evasion to protect economic interests and level the playing field for compliant businesses.

The government’s complaint paints a detailed picture of Barco’s alleged misconduct. Prosecutors claim the company, alongside the Chans and their network of suppliers, manipulated invoices to report lower values for imported garments. By presenting false entry summaries to U.S. Customs and Border Protection, the defendants reportedly slashed the duties owed, pocketing the savings. The scheme allegedly persisted even after a third-party auditor flagged risks and urged Barco to verify its duty calculations.

Double-invoicing, while not new, remains a persistent headache for customs officials. In 2023, tariff evasion schemes cost the U.S. an estimated $130 billion, with apparel among the hardest-hit sectors due to its high duty rates. The practice distorts trade data, undercuts honest competitors, and deprives the government of funds that support public services. For Barco, the fallout could include hefty fines, reputational damage, and potential exclusion from federal contracts if found liable.

The case also spotlights the False Claims Act, a Civil War-era law designed to combat fraud against the government. Under its whistleblower provisions, private individuals can sue on behalf of the U.S. and share in any recovery. Toni Lee, Barco’s former director of product commercialization, triggered this lawsuit, and the government’s decision to intervene signals confidence in the evidence. Yet, the claims remain allegations, with no liability determined as the case heads to court.

Barco’s case is a microcosm of larger challenges in the apparel industry, where trade rules are growing more intricate. The U.S.-Mexico-Canada Agreement, for instance, imposes strict origin requirements, while recent tariffs on Chinese and Vietnamese goods have pushed companies to rethink sourcing strategies. Mexico’s retaliatory duties and tightened e-commerce rules add further complexity, forcing importers to navigate a maze of regulations or risk penalties.

Transparency is another hurdle. Consumers and regulators increasingly demand clear supply chain data, driven by concerns over labor practices and environmental impact. Nearly half of major apparel brands now disclose factory details, but tracing goods back to raw materials remains tough. Laws like the Uyghur Forced Labor Prevention Act require proof that imports are free of forced labor, adding pressure to verify every link in the chain. For companies like Barco, compliance failures can spiral into legal and market consequences.

Globally, apparel faces some of the highest trade barriers, with average duties around 6% and even steeper rates in developing markets. Tariff escalation, where finished goods face higher duties than raw materials, complicates efforts to build local industries in poorer nations. Meanwhile, sustainability incentives, like lower tariffs for eco-friendly textiles, are gaining traction but require robust tracking systems to verify claims.

Whistleblowers like Toni Lee are driving a surge in False Claims Act cases. In 2024, the Justice Department recovered $2.9 billion from 558 settlements, with 70% of new cases sparked by private individuals. These relators, often insiders with unique access to evidence, can earn 15% to 30% of recovered funds, a powerful incentive. Last year’s record 979 whistleblower lawsuits reflects growing awareness and trust in the system, though legal challenges to the law’s constitutionality loom.

Historically, the False Claims Act has been a cornerstone of anti-fraud efforts, revitalized in 1986 to encourage private enforcement. Its roots trace back to the Civil War, when contractors fleeced the Union Army with shoddy supplies. Today, it tackles everything from healthcare scams to customs fraud, with apparel increasingly in the crosshairs. The Barco case illustrates how one insider’s tip can unravel complex schemes, but it also raises questions about corporate accountability and the pressures employees face to stay silent.

As the Barco lawsuit unfolds, it will test the government’s ability to enforce trade laws in an era of globalized supply chains and escalating tariffs. A guilty verdict could send a strong message to apparel importers, reinforcing the need for rigorous compliance. But the case also highlights the limits of enforcement, as double-invoicing and similar schemes persist despite crackdowns. For consumers, the ripple effects may include higher prices if companies pass on the costs of compliance or penalties.

The broader takeaway is clear: trade compliance is no longer a back-office issue but a strategic priority. With whistleblowers emboldened, tariffs rising, and transparency demands growing, apparel companies must adapt or face steep consequences. The Barco case, while still in its early stages, serves as a reminder that no industry is immune to scrutiny when public funds are at stake.