Customs and tariff fraud enforcement intensifies: DOJ wields mix of tools to target trade violations
18 min read
As the Trump Administration’s America First trade policy and reciprocal trade agreements continue to take shape, the DOJ is gearing up for increased criminal and civil enforcement of customs and tariff violations. In the Criminal Division’s Fraud section, DOJ has rebranded one of its units the Market, Government, and Consumer Fraud Unit, which plans to prioritize criminal charges against companies and individuals that try to evade US tariffs.1
The DOJ is also expanding civil enforcement of tariff evasion through the False Claims Act (FCA), which can result in the imposition of both treble damages and civil penalties. And increasing criminal and FCA punishment of tariff violations supplements the DOJ’s long-time use of 19 U.S.C. § 1592 to address violations related to the entry of merchandise into the United States.
The DOJ has now formalized this enforcement push through an interagency “Trade Fraud Task Force” between the DOJ and the Department of Homeland Security (DHS), within which Customs and Border Protection (CBP) resides.2 The Trade Fraud Task Force will coordinate criminal, civil, and administrative enforcement components from the DOJ Criminal Division, the Civil Fraud and National Courts sections within the Civil Division, and DHS, to pursue enforcement against parties that fail to pay tariffs and other duties.
Companies should expect customs fraud enforcement, both criminal and civil, to remain a top-line DOJ priority in the coming years regardless whether the Administration’s tariffs remain in place. The Trade Fraud Task Force promises a potentially significant increase in trade-related enforcement actions using all of DOJ’s legal remedies, particularly customs violations. The DOJ may be looking for early targets of enforcement to send a message and deter future violations. Companies and individuals with exposure to changes in trade policy should take steps to mitigate increased risk of DOJ sentencing or punishment. Companies and individuals should also work to comply with a mind to potential defenses they can assert in case they come under investigation. Because the government can punish violations often many years after a violation has occurred, decisions companies make to comply with trade rules and prepare to defend themselves in case of an investigation can affect them years into the future.
Current Groundwork for Customs Enforcement Adaptable to Tariff Investigations
Over the first eight months of the Trump administration, the White House has unveiled numerous country-specific reciprocal tariffs that create different levies for different trading partners, and for the U.S. importers purchasing those goods. Reciprocal tariffs against countries around the world vary from 10% to 41%. In some cases, those reciprocal tariffs are cumulative with tariffs in country-specific Executive Orders, such as an additional 40% on most products from Brazil and an additional 25% on most products from India. The White House has further implemented, or threatened to implement, various product-specific tariffs which range from 25% to 100% duties depending on the product in question. Some product-specific tariffs also vary depending on the product’s country of origin. For example, aluminum and steel from most countries are subject to a 50% tariff, but aluminum and steel from the United Kingdom are subject to a lower 25% tariff.
These variations create a significant financial incentive for importers or exporters to misrepresent a product’s country of origin, or to mislabel a product, in order to evade substantially higher tariffs. Before the imposition of reciprocal tariffs, the most significant source of potential fraud was in the evasion of anti-dumping/countervailing (AD/CVD) duties. When tariffs were low, companies had little incentive to violate customs rules except for products from countries in which AD/CVD duties were in place. For imports from those countries, companies have some incentive to evade AD/CVD duties by misclassifying products on the Harmonized Tariff Schedule of the United States, misstating the country of origin, or undervaluing products.
Reciprocal tariffs amplify this incentive by increasing the number of countries where increased duty rates are in place. The potentially dramatic increase in cost companies may face to pay tariffs comes with an equally dramatic increase in incentive to evade payment. The DOJ has a track record of obtaining both criminal and civil enforcement resolutions for the evasion of AD/CVD duties. Should the Administration’s tariff regime pass legal muster, the legal theory underlying previous enforcement actions for the failure to pay AD/CVD duties can seamlessly be applied to tariff evasion.
Criminal Enforcement for Tariff and Customs Evasion Looms
Numerous criminal statutes impose penalties for offenses connected to the import or export of goods. Collectively, these are described as “trade fraud” statutes because they each proscribe different forms of misrepresentations about either the origin or the nature of an imported product as part of an effort to evade import duties and tariffs. Proving “trade fraud” can be difficult for law enforcement, as determining a product’s true country of origin is not an easy task and requires applying a set of criteria used in international trade and guided by international agreements. But that imprecision may be used by DOJ to support aggressive theories to investigate. Historically, Customs and Border Protection (CBP) has enforced import rules through applicable regulations, while others have more recently been enforced through coordinated efforts between CBP and the DOJ Civil Division.
But as the Trump Administration has prioritized an aggressive tariff regime and sought to enforce compliance with new trade rules, it has choreographed a number of changes to invigorate trade fraud enforcement. In May, Acting Assistant Attorney General Matthew Galeotti, who leads the DOJ Criminal Division, issued a memorandum outlining the Administration’s white collar enforcement priorities. Chief among them is trade and customs fraud, which the memo indicates includes those who commit tariff evasion. In a list of ten policy changes to the Criminal Division’s white collar priority list, tariff evasion was listed second after waste, fraud, and abuse of federal programs and procurement fraud that harms the public fisc. The shift increases the likelihood of parallel civil and criminal investigations in this area.
At the same time, the Criminal Division also expanded its Corporate Whistleblower Awards Pilot Program to cover information given to the Department regarding trade fraud. This provides an incentive for internal employees to bring information to DOJ about potential criminal violations relating to customs or trade laws and regulations, and may aid DOJ in pursuing criminal investigations of corporations.
As the effective date for some of the much-delayed tariffs loomed in early August, DOJ announced additional changes, including the renaming of a longstanding unit within DOJ which falls under the Criminal Division’s Fraud Section. The unit is now known as the Market, Government, and Consumer Fraud Unit and will now be As the effective date for some of the much-delayed tariffs loomed in early August, DOJ announced additional changes, including the renaming of a longstanding unit within DOJ which falls under the Criminal Division’s Fraud Section. The unit is now known as the Market, Government, and Consumer Fraud Unit and will now be responsible for criminal investigations into trade and customs fraud, including tariff evasion. DOJ has added prosecutors from the Consumer Protection Branch to this unit, increasing the number of prosecutors available to target tariff evasion and trade and customs fraud.
The Trump Administration may lean on traditional statutes when prosecuting trade fraud cases, as prosecutors historically have done. For example, last year prosecutors in the Southern District of Florida obtained a guilty plea from a defendant related to a conspiracy to smuggle merchandise into the US by means of false and fraudulent invoices presented to CBP.3 The defendant pled guilty to conspiracy to commit an offense against the US and faces five years in prison. Months earlier, another court sentenced a couple to 57 months in prison for illegally importing and selling tens of a millions worth of plywood products in violation of the Lacey Act and other customs laws meant to protect from environment damage.4 In 2021, prosecutors in the Southern District of New York announced criminal charges against the CEO of a NY apparel company for his participation in a years-long scheme to defraud CBP by submitting invoices that falsely understated the value of goods his company imported into the U.S., evading hundreds of thousands of dollars in customs duties. The indictment charged the CEO with conspiracy to commit wire fraud and violations of 18 U.S.C. §§ 541 and 542, which prohibit the effecting the entry of goods, wares, and merchandise at less than the true weight and measure thereof. And in 2020, prosecutors in the Southern District of Texas brought identical charges against a ring of individuals in connection with a decade-long scheme involving the import of tires from China.5
DOJ corporate criminal enforcement differs substantially from civil enforcement. The Department regularly obtains guilty pleas, deferred prosecution agreements (DPAs), or non-prosecution agreements (NPAs) that impose significant penalties and remediation requirements for criminal violations. These penalties may include fines and other financial penalties, multi-year cooperation terms, regular reporting requirements, compliance enhancements, or even monitorships. As DOJ shifts its enforcement priorities toward tariff evasion and the Trump Administration’s trade policy takes firmer shape, the Administration may also ask Congress to pass legislation creating new penalties for trade fraud and to provide specific funding for the DOJ unit investigating trade fraud cases. One pending piece of legislation, the Protecting American Industry and Labor from International Trade Crimes Act, has the potential to further entrench DOJ’s approach to trade fraud within the Criminal Division of DOJ and align the Department with the Trump Administration’s America First Trade Policy agenda. While the Market, Government, and Consumer Fraud Unit is technically a renamed unit which previously existed within DOJ, the proposed law would establish and fund a dedicated DOJ program in the Criminal Division to investigate and prosecute trade-related crimes funded by $20 million in additional spending.
The legislation would direct the new unit to initiate investigations and criminal prosecutions in connection with trade fraud, using any one of a variety of statutes that may apply in a given case, including both specific trade fraud statutes and more general criminal statutes.
Legacy Trade Law Powers New DOJ Civil Enforcement Strategy
The DOJ’s expected increase in criminal prosecutions complements an already-robust enforcement tool found in section 1592 of the Tariff Act of 1930. The statute straightforwardly prohibits the entry or attempted entry of merchandise into the United States through material false statements or material fraudulent omissions. Underlying the penalties in § 1592 are the importer responsibilities to operate with a “reasonable care” standard in entering goods and US Customs and Border Protection’s (“CBP’s) responsibility to facilitate “informed compliance” from importers. Enforcement actions capture misrepresentations involving HTSUS product misclassification, country of origin, and undervaluation commonly enforced under the FCA, as well as the entry of prohibited or restricted goods and the outright failure to declare products entirely. The statute’s state of mind requirement is maximally expansive, punishing culpability as high as actual fraud and as low as negligence, as well as gross negligence in between. Section 1592 empowers CBP to impose monetary penalties, informed by the importer’s pattern of conduct, state of mind, and other factors. Enforcement proceedings take place administratively within CBP and are appealed to the US Court of International Trade (CIT), though criminal proceedings can take place in United States District Court.
Depending on the value of merchandise involved and given CBP’s five-year statute of limitations (i.e., its ability to penalize customs entries dating back five years from the date of discovery), the penalties and related settlements can be significant. In 2024, for example, Ford Motor Co. settled for $365 million dollars regarding a section 1592 case in which CBP alleged fraudulent misclassification.
Increased Enforcement Under the False Claims Act Has Also Arrived
At the same time the DOJ is stepping up criminal enforcement of tariff evasion, it is doing the same on the civil side under the FCA. Long a staple of civil enforcement of fraud involving government programs, the FCA is a highly- punitive statute prohibiting fraud or false statements in relation to claims for government funds and obligations owed to the government.
Several characteristics of the FCA make it an especially potent civil tool for the DOJ to supplement the Administration’s trade agenda. The FCA is financially punitive. A finding of liability leads to treble damages as well as the imposition of a penalty for each violation. The total penalty amount can conceivably match or exceed a treble damages award for trade violations, where a penalty may be assessed on every article for which a duty was not paid. FCA actions can also impose the heavy defense costs involved in undergoing a DOJ investigation and litigation.
Violation of the FCA requires a lower standard of proof of the intent or knowledge of those individuals or companies involved than is required for a criminal violation. The government and relator are not required to prove that a defendant intended to defraud the government, but only that the defendant acted recklessly or indifferently to the risk that money owed to the government would not be paid. The statute is also extremely broad: it makes liable any defendant that “causes” the evasion or concealment of an obligation to the government. When it comes to trade violations, that breadth can lead to the liability of a company within the supply chain that was not responsible for the payment of tariffs but that was involved in a scheme to evade them.6
In the international trade space, a well-accepted FCA theory makes a defendant potentially liable for evading or concealing violations of trade regulations. As a result, the last decade has seen a steady increase in the number of FCA 7- and 8-figure FCA settlements involving alleged trade violations. A common theory includes allegations that a company has not used reasonable care in classifying products on the HTSUS, which in turn has led the company to underpay customs duties.7 Another prevailing fact pattern involves companies undervaluing products, including failing to report the value of assists used in connection with the production or sale of an article.8 Other settlements have involved false statements about whether an imported product was subject to antidumping and countervailing duties9 and about an import’s country of origin10 along with violations of “Buy America” requirements11 export control violations12 and sanctions non-compliance.13 Common pitfalls seen in these cases are companies that have received input from employees or third-party consultants or auditors that articles should be classified differently14 as well as double-invoicing schemes in which false statements are made in documentation provided to the government through customs brokers.15
Unlike traditional areas of FCA enforcement such as healthcare and government contracting, trade-related FCA cases are industry-agnostic and pose enforcement risk for any company that relies on imported articles. FCA settlements involving trade violations have spanned product lines, including military equipment, clothing and apparel, dietary supplements, construction and industrial components, various government contracting services, and home and office furniture.
Companies should expect to see an even sharper increase in the months and years ahead as the Trump Administration supplements criminal enforcement of tariff evasion with civil enforcement under the FCA. In her confirmation hearing, Attorney General Pam Bondi confirmed that the FCA would remain a central area of DOJ enforcement. In February 2025 speeches to an industry conference, high-ranking DOJ Civil Division officials highlighted customs enforcement as a key enforcement priority. So far this year, the DOJ has intervened in at least two FCA litigations alleging customs evasion. This year has also seen a notable uptick in the number and frequency of settlements involving alleged trade violations.
The availability of both criminal prosecution and civil remedies offers the DOJ and CBP flexibility in enforcing trade violations. The Trade Fraud Task Force builds on a trend from recent decades of parallel criminal and civil enforcement, in which DOJ criminal and civil components coordinate on investigatory steps and the initiation of criminal, civil, and administrative legal proceedings. As is often the case, an investigation that begins in one component can end with multiple resolutions across components. For example, a common pattern in recent years has seen cases that begin as an FCA qui tam investigation ultimately yield a Section 1592 resolution.
Importers Can Take Steps to Reduce Trade Enforcement Risk and Ready Defenses
As the DOJ may be in search of early examples to increase deterrence, it is important for companies to take compliance and defense steps now to steer clear of DOJ’s enforcement path.
As always, both preventing potential enforcement actions and defending against investigative scrutiny begins with a well-designed and implemented compliance program that extends to the company’s customs and tariffs practices. The implementation of well-crafted compliance program can make a significant difference in warding off investigation or obtaining a more favorable resolution. That program should include ongoing training in regulatory compliance and reporting mechanisms that ensure employees are aware of reporting avenues and that each report is thoroughly investigated.
Companies should also consider input of internal reporters and auditors; even if the company ultimately disagrees with any reported conclusions, a considered response to input reduces the likelihood of whistleblowing and demonstrates the appropriate level of care from the company should enforcement scrutiny arise. Companies may consider seeking a classification or scope ruling from the Department of Commerce to gain confirmation that their tariff payment rates receive governmental imprimatur. Critically, because a company could bear responsibility if it gains knowledge that a supply chain partner is violating trade regulations, companies should do appropriate diligence on those partners’ compliance practices. Finally, should serious violations be uncovered, a company should consider taking advantage of cooperation credit the DOJ offers, including disclosure under the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy.
Additionally, given the speedy implementation of reciprocal tariffs, reports have been made of CBP advising companies to simply make their best effort to comply with the new tariffs. It is critical that companies maintain and memorialize any such communications with CBP and their own efforts to meet the government’s demands.
1 The word “evasion” refers to an effort or attempt to evade the consequences of tariffs, not specific “evasion” investigations that the U.S. federal government may pursue related to antidumping or countervailing duty orders.
2 Departments of Justice and Homeland Security Partnering on Cross-Agency Trade Fraud Task Force (Aug. 29, 2025), available at https://www.justice.gov/opa/pr/departments-justice-and-homeland-security-partnering-cross-agency-trade-fraud-task-force.
3 Dep’t of Justice, Miami Importer Pleads Guilty to Scheme to Evade U.S. Tariffs on Chinese-Made Truck Tires (Dec. 6, 2024) available at https://www.justice.gov/usao-sdfl/pr/miami-importer-pleads-guilty-scheme-evade-us-tariffs-chinese-made-truck-tires.
4 Dep’t of Justice, Florida Conspirators Sentenced to Nearly Five Years in Prison Each for Evading Over $42 Million in Duties When Illegally Importing and Selling Plywood (Feb. 15, 2024) available at https://www.justice.gov/archives/opa/pr/florida-conspirators-sentenced-nearly-five-years-prison-each-evading-over-42-million-duties
5 Dep’t of Justice, 15 Named In $26 Million International Trade Fraud Scheme (Dec. 15, 2020) available at https://www.justice.gov/archives/opa/pr/15-named-26-million-international-trade-fraud-scheme.
6 Dep’t of Justice, Tennessee and New York-Based Defense Contractors Agree to Pay $8 Million to Settle False Claims Act Allegations Involving Defective Countermeasure Flares Sold to the U.S. Army (Mar. 28, 2016), available at https://www.justice.gov/archives/opa/pr/tennessee-and-new-york-based-defense-contractors-agree-pay-8-million-settle-false-claims-act.
7 E.g., Dep’t of Justice, Multinational Industrial Engineering Company To Pay $22 Million To Settle False Claims Act Allegations Relating to Evade Customs Duties (Sept. 2020), available at https://www.justice.gov/archives/opa/pr/multinational-industrial-engineering-company-pay-22-million-settle-false-claims-act
8 US Attorney’s Office, Southern District of Florida, U.S. Attorney Lapointe Announces $7.6 Million Settlement of Civil False Claims Act Lawsuit Against Womenswear Company for Underpaying Customs Duties on Imported Women’s Apparel (Aug. 9, 2024), available at https://www.justice.gov/usao-sdfl/pr/us-attorney-lapointe-announces-76-million-settlement-civil-false-claims-act-lawsuit.
9 Dep’t of Justice, Patio Furniture Company Grosfillex Inc. to Pay $4.9 Million to Resolve Allegations it Evaded Duties on Extruded Aluminum from the PRC (July 24, 2025), available at https://www.justice.gov/opa/pr/patio-furniture-company-grosfillex-inc-pay-49-million-resolve-allegations-it-evaded-duties.
10 Dep’t of Justice, Japanese-Based Toyo Ink and Affiliates in New Jersey and Illinois Settle False Claims Allegation for $45 Million (Dec. 17, 2012), available at https://www.justice.gov/archives/opa/pr/japanese-based-toyo-ink-and-affiliates-new-jersey-and-illinois-settle-false-claims-allegation.
11 US Attorney’s Office, District of Connecticut, Connecticut Company and Owner Settle Liability for False Claims Related to Violations of Buy American Act and Trade Agreements Act (May 20, 2025), available at https://www.justice.gov/usao-ct/pr/connecticut-company-and-owner-settle-liability-false-claims-related-violations-buy.
12 US Attorney’s Office, Northern District of Texas, 3D Printing Company to Pay Up to $4.54 Million to Settle False Claims Act Allegations for Export Violations in Connection with NASA and DOD Contracts (Feb. 27, 2023), available at https://www.justice.gov/usao-ndtx/pr/3d-printing-company-pay-454-million-settle-false-claims-act-allegations-export.
13 Dep’t of Justice, Defense Contractor Agrees to Pay $45 Million to Resolve Criminal Obstruction Charges and Civil False Claims Act Allegations (Dec. 4, 2019), available at https://www.justice.gov/archives/opa/pr/defense-contractor-agrees-pay-45-million-resolve-criminal-obstruction-charges-and-civil-false.
14 United States Attorney’s Office, Southern District of New York, U.S. Attorney Announces $22.8 Million Settlement Of Civil Fraud Lawsuit Against Vitamin Importer For Underpaying Customs Duties Owed On Products Imported Into The United States (Jan. 30, 2023), available at https://www.justice.gov/usao-sdny/pr/us-attorney-announces-228-million-settlement-civil-fraud-lawsuit-against-vitamin.
15 US Attorney’s Office, District of Massachusetts, Yogibo to Pay $217,000 to Resolve False Claims Act Allegations of Underpaying Customs Duties (July 26, 2023), available at https://www.justice.gov/usao-ma/pr/yogibo-pay-217000-resolve-false-claims-act-allegations-underpaying-customs-duties.
16 Dep’t of Justice, United States Files Complaint Against Barco Uniforms and Its Suppliers, Alleging False Claims Act Violations in Connection with Underpaid Customs Duties (Apr. 18, 2025), available at https://www.justice.gov/opa/pr/united-states-files-complaint-against-barco-uniforms-and-its-suppliers-alleging-false-claims; U.S. Attorney’s Office, District of South Carolina, United States Files Complaint Against Myrtle Beach Office Furniture Supplier, Owner for Customs Fraud (July 16, 2025), available at https://www.justice.gov/usao-sc/pr/united-states-files-complaint-against-myrtle-beach-office-furniture-supplier-owner.
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