On August 29, 2025, the Department of Justice (DOJ) announced a cross-agency Trade Fraud Task Force in conjunction with the Department of Homeland Security intended to “aggressively pursue enforcement actions against any parties who seek to evade tariffs and other duties…” The DOJ announced that:
“Since March of this year, the Commercial Litigation Branch has reached civil settlements to resolve allegations of improperly evaded customs duties across a wide range of products, including multi-layered wood flooring, plastic resin, extruded aluminum products, and quartz surface products.”
The federal government’s aggressive enforcement is sending a strong message: tariff evasion and customs fraud are a top enforcement priority for the DOJ and the federal government.
Recent cases show examples of the False Claims Act (FCA) being used to combat customs fraud:
- In August, DOJ announced a $12.4 million settlement with a Texas company and its president for allegedly dodging tariffs on imports from China.
- In July, DOJ announced a $6.8 million settlement with a New York company for failing to pay custom duties from products imported from China.
- In March, a California-based importer paid $8.1 million to resolve claims they misrepresented the country of origin (China) of their products.
However, behind many of these cases are whistleblowers. Insiders who know how importers are misclassifying goods, hiding their true country of origin, or routing products through third countries to disguise Chinese and other high tariff countries’ components are often the only ones who can shine a light on fraud that would otherwise go undetected. Speaking with a skilled customs fraud whistleblower attorney can be critical for protecting those insiders.
One of the most powerful tools available to the government is the FCA. The FCA allows whistleblowers — known as “relators” — to file lawsuits on behalf of the government when companies knowingly submit false information to avoid paying duties or tariffs. Customs fraud constitutes a violation of the False Claims Act (FCA) when an importer knowingly takes actions to conceal, avoid, or reduce an obligation to remit funds owed to the United States government. Common methods include underreporting the value or country of origin of imported goods, misclassifying items to obtain lower tariffs, or submitting falsified documentation. Such conduct falls under the FCA’s “reverse false claims” provision, which addresses the avoidance of payment obligations and may result in the imposition of treble damages and civil penalties. In the August 2025 announcement of the new Trade Fraud Task Force, DOJ made clear “we welcome the vital contributions of whistleblowers who can help identify fraud schemes involving an array of imported products.”
Transshipment schemes are increasingly being used to evade paying higher customs
The new task force follows the July 31, 2025 Executive Order intended to put a stop to importers “transshipping” to avoid higher tariffs. Transshipping occurs when importers reroute shipments through a third country to conceal their actual origin and avoid higher tariffs of the source country. That Executive Order subjects importers who engage in transshipping to a 40% tariff rate as a penalty. This 40% penalty tariff does not provide any provisions for mitigation, waiver, or reduction. The policy is designed to address and close loopholes used to evade tariffs, such as the practice of sending Chinese-origin goods through countries like Vietnam, Malaysia, or Mexico to take advantage of lower rates.
When companies attempt to skirt these rules by manipulating their supply chains, they are committing fraud against the government and are subject to FCA liability and treble damages and civil penalties. According to Jeffrey Keller, of Keller Grover, “far too frequently, whistleblowers are the only ones who can expose customs fraud on the government. Whistleblowers have the firsthand knowledge of the fraud, have access to the documents showing the fraud and most importantly have information regarding the company’s motives for falsifying documents in furtherance of the fraud on the government.”
The Importance of Whistleblowers
Customs fraud can be difficult to detect from the outside. It often takes employees, contractors, or business partners with inside knowledge of the fraud to uncover:
- False declarations of country of origin
- Misclassification of goods under the tariff schedule
- Undervaluation of imports to reduce duties
- Routing goods through third countries to conceal their origin
Whistleblowers who step forward under the False Claims Act not only help level the playing field for honest businesses but may also be eligible for financial rewards mandated by the statute of between 15% and 30% of the government’s recovery.
If you have knowledge of a company evading tariffs or committing customs fraud, it is important to act carefully. Speaking with an experienced customs fraud whistleblower attorney can help you understand your rights, protect against retaliation, and determine whether you may have a claim under the False Claims Act.