As tariffs climb and global trade grows more complex, a growing number of importers are testing the limits, or outright breaking the law, to reduce or avoid duty payments. U.S. enforcement agencies, including Customs and Border Protection (CBP) and the Department of Justice (DOJ), have made it clear that customs fraud will not be tolerated and is a top enforcement priority.
High Tariffs = High Incentive to Cheat
High tariffs create an incentive to cheat. Whether it’s through misclassifying goods, undervaluing imports, or using deceptive transshipment routes, some companies are turning to creative or outright illegal strategies to reduce their tariff liability.
This is not theoretical, we’ve seen it before. During the U.S.–China trade war of 2018–2019, there was a surge in country-of-origin fraud, particularly Chinese goods re-labeled as “Made in Vietnam.” Known as a “country of origin wash,” this practice misleads CBP and avoids duties tied to China.
These incentives have contributed to the emergence of a cottage industry of “tariff reduction” companies that advertise ways to cut import costs. However, many of these so-called strategies amount to evasion, putting importers at serious legal risk.
DOJ Prioritizes Customs Fraud
The Department of Justice is watching closely. In a May 2025 memo, Matthew Galeotti, head of the DOJ’s Criminal Division, named trade and customs fraud as one of the top enforcement priorities in white-collar crime.
The DOJ also expanded its Corporate Whistleblower Awards Pilot Program to include customs fraud.
Even before the latest memo, the DOJ has demonstrated a willingness to criminally charge bad actors with customs fraud. For example, in 2024, a Florida couple was sentenced to nearly five years in prison for evading over $42 million in duties.
CBP’s Position: Zero Tolerance
While CBP hasn’t issued a formal enforcement priorities memo like DOJ, its recent public messaging leaves no room for doubt. In May 2025, the agency warned the pharmaceutical industry that undervaluing goods amounts to trade evasion. Additionally, a LinkedIn post from the agency stated: “CBP targets and combats duty evasion at every level. Make no mistake – bad actors violating U.S. trade law will be identified, investigated, and punished to the fullest extent of the law.”
Common Criminal Charges in Customs Cases
The DOJ has several available statutory options in pursuing criminal cases against companies and individuals who violate customs laws. Commonly used federal criminal statutes that could apply to customs fraud cases include:
- False Classification (18 U.S.C. § 541)
- Underpayment of Duties (18 U.S.C. § 543)
- Smuggling (18 U.S.C. § 545)
- False Claims (18 U.S.C. § 287)
- False Statements (18 U.S.C. §§ 1001 & 542)
- Wire Fraud (18 U.S.C. §§ 1343 & 1349)
- International Emergency Economic Powers Act (IEEPA) Violations (50 U.S.C. § 1701)
- Conspiracy (18 U.S.C. § 371)
Penalties can include fines, imprisonment, and forfeiture.
The False Claims Act: Growing Risk & Big Payouts
The False Claims Act (FCA) has long been used to prosecute fraud against the government, but it is increasingly being used to pursue importers who misstate information to avoid paying import duties. Misrepresenting a product’s origin or value to underpay is known as a “reverse” false claim – essentially, a fraud to avoid paying money owed to the government (as opposed to fraud related to the amount paid by the government).
FCA penalties are steep; violators can be made to pay up to triple the amount of the underpaid duties, plus additional fines for each violation. These fines add up fast when every customs entry can count as a separate false statement.
Additionally, the FCA provides big incentives for whistleblowers. The law allows private individuals (known as “relators”) to file qui tam lawsuits on behalf of the government if they know of a company dodging its duties. Whistleblowers are often a company’s own employee or a company’s competitor.. These whistleblowers can collect 15–30% of any recovery, which, given the treble damages, can be huge. In one case in 2024, a Wisconsin-based whistleblower received a $1.4M payout.
What Importers Should Do
Now more than ever, it is critical for importers to examine their import compliance programs and ensure that adequate procedures are in place to correctly enter goods into the United States. Importers should proactively conduct extensive due diligence in their supply chains to ensure they can detect, report, and remedy any noncompliance with customs requirements. In addition, if an importer becomes aware of the fraudulent conduct of a competitor, they should contact counsel to discuss options for reporting it to the government.
Diaz Trade Law can assist importers in developing compliance plans and guide importers in the event of a customs investigation. Contact us at 305-456-3830 or info@diaztradelaw.com.
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