Trade and Customs Fraud Enforcement: Five Things Clients Need to Know

• Customs fraud enforcement has been on the rise, including cases under the False Claims Act, which authorizes the government to recover up to three times the revenue lost, plus penalties, when a company knowingly evades tariffs. The Department of Justice (DOJ) is coordinating internally and with other agencies to leverage data and identify potential fraud cases.
• Last year for the first time the Criminal Division identified “trade and customs fraud, including tariff evasion” high on its list of enforcement priorities. DOJ also amended its Corporate Whistleblower Awards Pilot Program to reflect that an individual may be eligible for an award if they provide information to the Criminal Division that leads to a criminal or civil forfeiture exceeding $1,000,000 for “trade, tariff, and customs fraud” by a corporation.
• Last August, DOJ also launched a Trade Fraud Task Force (TFTF), a partnership between its Civil and Criminal Divisions, U.S. Customs and Border Protection (CBP), and Homeland Security Investigations (HSI). In December 2025, the TFTF announced a resolution – its first – with MGI, a global plastic resin distributor. DOJ declined to prosecute and credited $6.8 million MGI had paid to resolve civil liability for customs fraud under the False Claims Act. MGI’s former COO pleaded guilty to conspiracy to smuggle goods into the United States for instructing subordinates to misrepresent the manufacturer and country of origin to avoid paying high tariffs applicable to Chinese goods.
• Since MGI, the Task Force has continued to pursue trade fraud cases and recoveries, including a record-breaking $549.5 million False Claims Act settlement in which DOJ alleged Perfectus Aluminum and its related companies made material false statements on customs entry forms to evade high tariffs applicable to aluminum goods imported from China.
• Yesterday, DOJ announced that in less than one year, the TFTF has recovered more than $1 billion in civil and criminal recoveries, penalties, forfeitures, and publicly charged losses, and released A Resource Guide to Trade Fraud Enforcement outlining DOJ’s trade fraud compliance and enforcement priorities.
• This article breaks down in detail all the different paths available to the government to enhance trade fraud enforcement.

II. There are Many Ways Companies Fail to Pay What they Owe in Tariffs. Depending on What Employees Knew, DOJ Could View Missteps as Fraud.

• Trade and customs fraud cases require knowing efforts to evade tariffs. Under the False Claims Act, “knowledge” can be based on “reckless disregard” of facts that would have put the company on notice it was underpaying duties.
• With evidence of knowledge, DOJ can pursue a fraud case based on underpayments and false submissions to CBP resulting from a range of customs missteps, including:
  • Misclassifying imports, to reduce applicable tariff rates.
  • Undervaluing imports, to reduce the amount subject to tariffs.
  • Misidentification of the country of origin of imports. This is a significant risk for products originating in China, which are often shipped through and may undergo minor processing in countries in Southeast Asia.
  • Incorrect country of origin marking on imports.
  • Improperly claiming preferential treatment under a Free Trade Agreement or other preference programs.
  • Failing to enter goods as subject to relevant antidumping or countervailing duty orders.

III. Companies Need to Rethink How they Engage with CBP and Other Regulators in Light of the Shifting Enforcement Landscape.

• It has long been common practice for companies to remediate the kinds of missteps identified above by making a prior disclosure to CBP and admitting a violation of 19 U.S.C. § 1592, which prohibits the underpayment of duties resulting from fraud, gross negligence, or negligence, in order to receive reduced penalties that could potentially save millions of dollars.
• In the current environment, companies weighing whether to make a prior disclosure should consider that the filing of a prior disclosure could trigger an investigation by CBP itself, and/or a referral to DOJ.
• In the same vein, companies that receive inquiries from CBP – such as CF-28s or CF-29s – should consider involving counsel in the process of preparing their responses and assessing whether the inquiries relate to broader compliance concerns that could be the subject of investigation by the government.

IV. There are Steps You Can Take Right Now to Mitigate these Risks.

• Meet with the Customs Compliance team to assess potential risk areas and gaps and, if needed, consider conducting an audit to gather more information.
• Create or enhance your trade compliance program. DOJ often will reduce criminal penalties for companies with effective compliance programs. At a high level, a good compliance program is well designed, adequately resourced and empowered, works in practice, and is periodically updated to ensure continued compliance.
• Regularly monitor new tariff actions and guidance from CBP, which change frequently, and make sure broker instructions and other compliance procedures reflect the latest developments.
• Encourage reporting of, and then promptly investigate and take corrective action to address, potential trade misconduct.

V. If You Receive a Whistleblower Report, Investigate Immediately and Consider Whether—and to Whom—to Make a Voluntary Disclosure.

• Consider hiring outside counsel to assist with an internal investigation and to potentially represent the company in any future discussions with the government.
• Evaluate, with outside counsel, whether to self-report to DOJ and to CBP or other agencies. Under its recently updated Corporate Enforcement Policy, in the absence of aggravating circumstances, DOJ will decline to prosecute (but may still require restitution or disgorgement) when a company voluntarily discloses criminal misconduct, fully cooperates with DOJ’s investigation, and timely and appropriately remediates the misconduct. DOJ has already declined at least one case following a voluntary self-disclosure related to tariff evasion.