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Reduce the risk of tariff evasion to maintain business integrity
Rapidly changing US tariff regulation has introduced more pressure on an already complex global trade environment by increasing the financial incentive to avoid or limit the impact of increasing tariffs. The implications of noncompliance can be severe, leading to legal and financial repercussions.
The Trump Administration has made it clear that the enforcement of tariffs and customs is a top priority. Specifically, the US Department of Justice (DOJ) has committed to using the FCA to pursue investigations and litigation against companies suspected of tariff or customs avoidance. This may include being ordered to pay three times the amount of underpaid tariffs, in addition to up to $28,619 for each false claim. The FCA also holds those who collude with others to fraudulently underpay the government legally responsible.
One of the most common violations fined under the FCA is the misclassification of imported goods, where companies knowingly reduce their customs duties by categorizing products and product components under a lower tariff rate. For example, in 2023, the DOJ settled a case for more than $22.8 million after a company admitted to misclassifying products to evade customs duties1, and in 2024, the DOJ secured a guilty plea from an importer involved in a transshipment scheme of truck tires from China through other countries to evade antidumping, countervailing duties and tariffs2. For companies to avoid such enforcement actions, they should conduct timely reviews of the changes published in the Harmonized Tariff Schedule (HTS), which sets out the tariff rates and statistical categories for all merchandise imported into the US and diligence country of origin classification including proper assessment of “last substantial transformation” for imported goods that are manufactured in more than one country.
Another enforcement-related risk area for companies to consider is failing to declare the proper value of imports. Although, sometimes an error, the US regulators are aware that some importers may deliberately understate the value of goods to reduce tariffs. This practice not only violates customs regulations but can also trigger FCA claims. A true declared value may include the price actually paid or payable, plus certain mandatory additions (e.g., the value of assists and royalties) and any allowed voluntary deductions. Valuations on the threshold of customs brackets could be an area of focus and scrutiny even when legitimately valued.
There has also been increased FCA activity around the country of origin as the reciprocal tariffs impose different rates based on the country of origin, and companies may engage in “transshipment,” routing goods through lower-tariff countries to misrepresent their origin and evade tariffs. Such actions can lead to FCA liability if they are deemed fraudulent.