Two Canadian steel distributors and their principal executive have agreed to pay $19 million to settle allegations of a systematic customs fraud scheme designed to bypass heavy U.S. import tariffs. The settlement, announced by the U.S. Department of Justice, resolves claims that Brampton, Ontario-based Farjess Inc. and Royal Canadian Steel Inc., along with their president Feroz Jessani, spent over five years laundering cheap foreign steel through Canada to make it look like North American product. The scheme unraveled not because border guards caught it at the crossing, but because an insider blew the whistle.
By falsifying the country of origin, the companies avoided massive trade penalties designed to protect domestic manufacturers. The $19 million resolution marks a major victory for cross-border trade enforcement at a time when the U.S. border has become a highly politicized economic battleground.
How the Shell Game Worked
The mechanics of the operation were simple but brazen. Between May 2019 and January 2025, the Ontario firms bought flat-rolled steel from overseas mills. The material originated in China, Indonesia, Italy, Turkey, and Vietnam—countries subject to strict anti-dumping duties, countervailing duties, and emergency trade penalties.
Once the steel landed in Canada, the companies allegedly altered the paperwork. When shipping the metal across the border to American buyers, Farjess Inc. acted as the importer of record, telling U.S. Customs and Border Protection that the steel was melted and poured in Canada or the United States.
Under the rules of the Canada-United States-Mexico Agreement, legitimate North American steel moved across the border duty-free for most of that period. By claiming regional status, the firms completely bypassed the tariffs. They avoided Section 232 penalties, Section 301 duties aimed at Chinese manufacturing, and specific anti-dumping orders that can add triple-digit percentages to the cost of raw metal.
The Whistleblower inside the Logistics Machine
The federal government did not uncover this paper-shuffling operation through routine cargo scanning. A customs broker named Shamsh Dhala, who worked directly with Farjess Inc., noticed the discrepancies in the shipping manifests and supply chain records.
In August 2023, Dhala filed a civil lawsuit in the U.S. District Court for the Eastern District of Michigan under the qui tam provisions of the False Claims Act. This law allows private individuals with direct knowledge of fraud against the government to sue on its behalf.
The strategy carries a massive financial incentive. For exposing the six-year pipeline, Dhala will receive a 19 percent cut of every dollar collected by the government, an amount totaling roughly $3.61 million.
The Structured Payout and Acceleration Claws
The financial penalty is not a standard lump-sum check. The settlement terms reveal a highly structured, multi-year payment plan that highlights the financial strain a $19 million hit places on mid-sized industrial distributors.
- Upfront Payment: The defendants must pay $3,166,666.67 within 30 days of the agreement.
- The Installment Plan: The remaining $15.83 million will be paid out over five years.
- The Interest Premium: The entire $19 million balance accumulates interest at an annual rate of 4.5 percent, starting retroactively from January 15, 2025.
The Justice Department built a defensive wall into the contract. If Royal Canadian Steel or Farjess Inc. attempts to sell the business, merge with another company, or transfer a significant portion of their assets to a third party, an acceleration clause triggers immediately. The entire remaining balance becomes due on the spot, preventing the owners from dodging the debt through corporate restructuring.
The Border Friction Reaches an All-Time High
The timing of this settlement coincides with an increasingly hostile trade environment between Washington and Ottawa. The Trump administration upended cross-border commerce by imposing sweeping 25 percent tariffs on steel, which later ballooned to 50 percent, hitting even traditional allies like Canada.
While legitimate small businesses on both sides of the border are currently drowning in paperwork to claim exemptions or fight for retroactive refunds, illegal transshipment operations create an existential threat to trade relations. Every time a distributor uses Canada as a washing machine for cheap Chinese or Indonesian steel, it hands political ammunition to protectionist policymakers in Washington who want to close the border entirely.
The Department of Justice is treating this case as a warning shot to the logistics industry. The settlement specifically releases the companies only from civil monetary liability. It does not clear them of criminal liability, tax liabilities, or potential debarment from international trade.
Government investigators are looking for structural patterns, not isolated incidents. As the U.S. Customs and Border Protection team tightens scrutiny at major northern ports of entry like Detroit and Buffalo, the reliance on insider whistleblowers will remain the most effective tool for cracking open paper-based supply chain fraud.
