The average value of goods packed into a 20-foot shipping container from China fell nearly 40 percent between January 2025 and February 2026. Over the same period, container values from the rest of the world barely moved. Researchers and trade experts say the numbers point to one explanation: companies have been systematically falsifying the declared value of Chinese imports to reduce the tariffs they owe to the United States government.
Ryan Petersen, the chief executive of supply chain firm Flexport, put it plainly in a recent New York Times investigation into the practice: “We’re seeing just total, rampant fraud.”
That fraud has a legal name and a legal consequence. When a company falsifies customs documents to reduce what it owes in import duties, it may be violating the False Claims Act, the federal statute that allows the government to recover up to three times the unpaid amount from companies that knowingly submit false financial claims. It also empowers private whistleblowers to file suit on the government’s behalf and collect a share of whatever the government recovers.
What the Fraud Actually Looks Like
Several distinct schemes have emerged as tariff rates on Chinese goods climbed, in some categories above 30 percent or higher. Trade experts and industry executives have identified the following patterns:
- Undervaluation through DDP shipping services: Chinese manufacturers and logistics companies have been marketing “delivered duty paid” services to U.S. importers at flat fees that come in well below what the actual tariff should cost. The Times reported one example: a shipment of cotton throw pillows valued at $9,504 was offered for a flat $3,058 fee covering tariffs and delivery, compared to the $4,563 that a direct import would have cost. Trade experts say many of these services work by filing false low values with U.S. Customs, cutting the declared price of the goods before any tariff is calculated.
- Shell company schemes: Some foreign sellers have begun routing goods through newly formed U.S. entities, selling to the U.S. shell at an artificially low “wholesale” price so the tariff is assessed on a fraction of the real value. The goods are then marked up for sale to the end customer. Licensed customs broker Thomas Taggart told the Times the strategy sounds too good to be true “because I think it is.”
- First-sale rule abuse: A legitimate customs regulation permits tariffs to be assessed on the first price in a multi-party transaction, typically the manufacturer’s wholesale price rather than the retail price. Some firms are exploiting this rule to declare values well below actual market prices, a practice now under scrutiny in Congress.
- Intangibles stripping: Larger companies have used accounting techniques to carve out the value of brand names, software, and design rights from the declared import price, leaving only the bare physical cost of the product subject to tariff. While the technique can be legal when done correctly, the Times reported it is being stretched beyond its proper limits.
The Companies Feeling the Effects
The harm from this conduct is not abstract. Bradley Handelman, president of Strikeforce Bowling in Illinois, told the Times he spent $1.7 million in tariffs last year importing bowling equipment, including investing $1 million in a domestic assembly operation to compete legally. He says competitors are publicly filing incorrect tariff numbers that allow them to undercut his prices.
Aaron Womack of CVB, a Utah-based mattress company, described seeing competitors declare customs values at one-tenth to one-twentieth the typical cost of their products. “It’s definitely a sham,” he said.
Domestic manufacturers who follow the rules are at a direct competitive disadvantage when fraudulent importers cut their costs through false filings. This is one reason why the False Claims Act matters here: companies with knowledge of a competitor’s fraudulent customs practices are among the people positioned to bring a qui tam case.
The False Claims Act and Customs Duties
The False Claims Act covers not only false invoices submitted for government payment, but also false statements made to reduce a financial obligation owed to the government. Customs duties are exactly that kind of obligation. An importer that knowingly files a false customs entry to reduce what it owes has, under the Act, made a false claim.
The government can recover up to three times the unpaid duties in a False Claims Act case. Civil penalties apply on top of that. Companies facing that exposure typically settle well before trial.
Who Is Positioned to Blow the Whistle
The most valuable whistleblowers in customs fraud cases are people with direct, non-public knowledge of specific schemes. That can include:
- Customs brokers instructed to file entries they know to be inaccurate
- Freight forwarders and logistics personnel who are aware that declared values have been altered
- Employees at importing companies with access to communications or records showing that management knew the filings were false
- Domestic competitors who have access to public customs data and internal knowledge showing that a rival’s declared values could not reflect the true cost of its goods
- Supply chain and compliance professionals at companies that have been solicited by DDP service providers and have documentation of those offers
A whistleblower does not need to hand the government a complete case. The False Claims Act’s qui tam provisions allow a relator to file a complaint under seal, giving the government time to investigate. If the government intervenes and recovers money, the relator receives a percentage of the total. If the government declines to intervene, the relator may still pursue the case independently.
The Act also protects employees from retaliation. A company that fires, demotes, or otherwise punishes a worker for raising customs fraud concerns can face a separate legal claim.
Speak With a Whistleblower Attorney at Keller Grover
If you have knowledge of customs undervaluation, false country-of-origin declarations, or tariff evasion schemes, contact the whistleblower attorneys at Keller Grover. The False Claims Act’s first-to-file rule means that timing matters, and consulting counsel early protects both your rights and your potential recovery.
Contact our office today to speak confidentially with a whistleblower attorney about what you have seen.