On August 29, 2025 the Department of Justice (“DOJ”) announced the launch of a cross-agency Trade Fraud Task Force (“TFTF”), a partnership between DOJ’s Civil and Criminal Divisions, as well as the Department of Homeland Security (“DHS”). On the same day, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) issued a 7-4 ruling striking down President Trump’s use of the 1977 International Emergency Economic Powers Act (“IEEPA”) to impose tariffs, a decision which, if ultimately upheld, would limit the administration’s trade fraud enforcement efforts.
The creation of the Task Force is a significant development that furthers the Administration’s efforts to prioritize enforcement focused on tariff evasion. Importers, and any of their corporate affiliates involved in U.S. trade activities, should remain diligent and ensure compliance with all appropriate regulations in this heightened enforcement environment. And, to comply with the current U.S. trade and customs regime, importers must continue to pay IEEPA tariffs, as the Federal Circuit decision will not take effect until the Supreme Court has weighed in.
This alert introduces the Task Force and its origins; describes the Task Force’s new features and likely impact on enforcement; explains the Federal Circuit ruling finding the IEEPA tariffs to be in excess of the President’s authority; explores the effect of this opinion on the current trade landscape; highlights repercussions for noncompliance with the trade regime; and concludes with recommendations for navigating trade compliance going forward.
What is the Trade Fraud Task Force?
The TFTF is a partnership between DOJ and DHS that will “aggressively pursue enforcement actions against any parties who seek to evade tariffs and other duties, as well as smugglers who seek to import prohibited goods into the American economy.”[1] The Task Force will address the Administration’s concerns about non-compliance with trade laws, stemming from the “America First Trade Policy” announced on Inauguration Day. The TFTF’s creation is consistent with DOJ’s practice of forming special task forces to address high concern areas.
Trade fraud has not historically been a primary focus of criminal enforcement by DOJ, but DOJ announced a renewed interest in this space in its May 12 white collar enforcement plan, which described the Division’s enforcement priorities as including “trade and customs fraud, including tariff evasion.”[2]
What’s New?
The TFTF’s rollout is still in its early stages, and it remains to be seen what approaches the Task Force will take to identify and investigate trade fraud. However, the DOJ Press Release highlights several areas of increased emphasis.
- First, the TFTF places increased emphasis on the role of domestic industries as key partners in its effort to root out trade fraud. The TFTF believes U.S. companies are often best placed to spot fraud due to their direct involvement in the markets and competitions where trade fraud occurs. Therefore, the TFTF encourages companies to refer potential offenders and cooperate with the TFTF to help bring offenders to justice.
- Second, the TFTF seeks to enhance enforcement by “augment[ing] the existing coordination mechanisms” between DOJ and DHS. In particular, the TFTF seeks to facilitate greater communication and harmonization among the DOJ Civil Division, DOJ Criminal Division, DHS Customs and Border Protection, and DHS Homeland Security Investigations. Although the details are still unclear, DOJ believes that the “enhanced cooperative efforts will serve the dual purposes of a more efficient government for the taxpayer and improved enforcement and deterrent outcomes.”
- Third, DOJ wants to assume a more active role in detecting and prosecuting trade fraud. While there were numerous civil trade fraud resolutions in 2025, those matters were initiated by qui tam whistleblowers or voluntary disclosures. However, on the same day the Criminal Division announced its new enforcement priorities, it also amended its Corporate Whistleblower Awards Pilot Program to reflect that an individual may be eligible for a whistleblower award if they provide information that leads to criminal or civil forfeiture exceeding $1,000,000 for “trade, tariff, and customs fraud" by a corporation, among other priority areas. This incentivizes whistleblowers to come forward with trade and customs fraud allegations without having to file a qui tam action.
Unlike some prior task force announcements, which have been accompanied by the launch of a supporting website with additional guidance and materials, thus far DOJ has provided limited information to the public about the TFTF. Companies and contractors should continue to monitor the rollout for new developments.
Risks of Non-Compliance for Corporations – Criminal and Civil Penalties
The formation of the TFTF will increase the resources devoted to enforcement against trade and customs fraud and will potentially drive up the number of investigations, the stakes of which have always been high.
Trade and customs fraud enforcement in the past often has been driven by civil reverse False Claims Act cases brought by DOJ in coordination with Customs and Border Protection (CBP). Penalties in these cases can be substantial because under the FCA, a court can impose treble damages and additional penalties ranging from $14,308 to $28,619 per violation. However, and particularly with the creation of the TFTF, DOJ may seek to bring more criminal trade and customs fraud cases under a range of criminal statutes, including federal laws prohibiting smuggling (18 U.S.C § 545), wire fraud (18 U.S.C. §§ 1343, 1349), and false statements (18 U.S.C. § 1001).
Companies that willfully underpay certain tariffs also could be subject to criminal penalties and fines under the IEEPA, assuming the president’s invocation of IEEPA to levy those tariffs is upheld. Civil violations of IEEPA-based tariffs can be significant (up to twice the value of the transaction) and are enforced on a strict liability basis, as opposed to civil recoveries under the False Claims Act, which require proof of knowledge or reckless disregard.
Strict Liability May No Longer Apply to Tariff Evasion
With the creation of the TFTF on the same day as the issuance of the Federal Circuit ruling striking down the IEEPA tariffs, importers may be wondering if these tariffs are still binding and whether the TFTF can penalize nonpayment of these duties. The answer to both questions is yes – for now.
The Federal Circuit decision involved two types of tariffs: the “Trafficking Tariffs” (tariffs enacted against Mexico, Canada, and China for alleged failure to meaningfully address the trafficking of opioids into the United States) as well as the “Reciprocal Tariffs” (10 to 50 percent ad valorem tariffs on nearly every country which does significant trade with the United States in response to a supposed lack of reciprocity in trade relationships).
The Federal Circuit affirmed the Court of International Trade’s May ruling, finding the far-reaching Trafficking and Reciprocal Tariffs to exceed “IEEPA’s grant of presidential authority.” The Court held that while IEEPA “bestows significant authority on the President to undertake a number of actions in response to a declared national emergency,” this power does not extend to the “unheralded” and “transformative” tariffs enacted by the President.
Despite this opinion, it would be premature to celebrate an end to the IEEPA tariffs. The Government has already appealed the ruling to the Supreme Court. If the Supreme Court were to accept the appeal, it could take months for the matter to be resolved. And even if the Supreme Court were to deny the appeal or otherwise let the ruling stand, the Federal Circuit’s ruling would not immediately block the imposition of the IEEPA-based tariffs. Rather, the ruling remands the decision to the lower court for further consideration of the appropriate relief. Thus, at minimum, we are months away from a final decision determining the fate of the IEEPA tariffs.
Recommendations
With the increased emphasis on trade fraud enforcement, and given the complex and shifting customs and trade landscape, companies should be taking steps now to protect themselves from potential risks. Key mitigation measures include:
- Audit your importing practices. The current tariff landscape is ever evolving and creates special challenges for companies and contractors that are not historically accustomed to aggressive enforcement in this space. Companies—especially those with substantial importing footprints—would be well-served by engaging in audits of its current practices to identify and remediate potential gaps.
- Create or enhance your trade compliance program. DOJ has historically indicated a willingness to mitigate penalties and damages—including the use of possible deferred prosecution agreements—for companies with effective compliance programs. In September 2024, DOJ’s Criminal Division released guidance on how it evaluates corporate compliance programs, which was the subject of a separate Covington client alert found here. At a high-level, a good corporate compliance program meets three criteria: (1) it is well designed; (2) it is adequately resourced and empowered; and (3) it works in practice. An investment in compliance is a worthwhile step to avoiding and mitigating possible investigations. However, CBP has recently shown less of an inclination to mitigate penalties, an approach encouraged by the Trump Administration. We will publish a client alert focused on this topic shortly.
- Track updates to applicable tariffs. New tariffs are being imposed and challenged at a breakneck pace. It is crucial companies monitor all such announcements to avoid owing hefty penalties. It is also recommended that companies consult counsel to ensure appropriate entry of goods such that importers are taking advantage of all helpful customs programs and thus avoid overpaying tariffs.
- Encourage reporting of, and then promptly investigate, potential trade misconduct. A good trade compliance program has a trusted mechanism that allows employees to anonymously report allegations of impropriety. Companies should also create robust procedures for investigating allegations of misconduct, and where appropriate, implementing discipline or corrective actions. Strong internal reporting procedures can help mitigate the risk of qui tam whistleblowers and increase the opportunity for the Company to course correct problems before they compound.
If you have any questions concerning the material discussed in this client alert, please contact the following members of our White Collar Defense and Investigations and International Trade practices.
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