US increased use of false claims act for customs fraud
Date of publication: March 12th, 2025
Recent statements by US Department of Justice (DOJ) officials have indicated the Trump Administration’s desire to aggressively enforce the False Claims Act (FCA) with respect to non-compliance with Customs regulations. Michael Granston, Deputy Assistant Attorney General for the Commercial Litigation Branch for DOJ recently spoke at a Federal Bar Association event. Granston stated that DOJ will focus enforcement of the FCA on the Trump Administration’s policy priorities beyond DOJ’s typical targets, specifically
identifying foreign trade issues and tariffs
. More specifically, officials identified tariff evasion as a “key area” for enforcement, with a focus on false statements about country of origin, declared value of goods, and the number of goods involved.Granston indicated FCA enforcement is consistent with the Administration’s priorities of increasing government efficiency and “rooting out waste, fraud and abuse.” With the constant uncertainty of new global tariffs being imposed (and changing) on what seems like a weekly (if not daily) basis, this area is ripe for action. This will require importers to be more stringent with their global trade and customs compliance.
FCA overview
The False Claims Act, 31 U.S.C. § 3729 et seq., is a type of civil remedy used by the US government to recover funds the government paid because of fraud. This most typically, a false statement or document that supports a demand for government funds. The FCA allows the government to recover three times the amount of the actual damage, plus additional penalties for each violation.
The statute also enables private individuals to function as whistleblowers by filing “qui tam” actions on behalf of the government. If the action is successful, the whistleblower can receive up to 30% of the money recovered in the litigation, plus attorney’s fees, with the rest going to the government. This potential for recovery has encouraged an increasing number of plaintiffs to file these “qui tam” actions more frequently.
Penalties can have high-dollar impact. A few recent examples are as follows:
- In January 2023, a vitamin importer paid $22.8 million to settle a FCA civil fraud for underpaying Customs duties. The suit stated that the importer misclassified its vitamin products to avoid paying the full amount of customs duties due, as well as its failure to pay back duties owed after correcting certain misclassifications.
- In August 2024, two Wisconsin companies agreed to settle FCA claims for $10 million. The government alleged that the companies engaged in a scheme to cause the submission of false commercial invoices to CBP that undervalued goods imported from China. The government further alleged the companies falsified invoices to reduce the prices of the goods generally by 70% and provided those falsified invoices to a broker who in turn submitted them to CBP.
- In August 2024, a womenswear company, agreed to pay $7.6 million to settle FCA claims that it was underpaying customs duties on imported apparel. The government alleged that the company was materially misreporting the value of the imported apparel to CBP for a period of seven years to avoid paying the full amount of customs duties and fees owed on the merchandise.
Key areas of concern for FCA cases
The DOJ can and does pursue criminal and civil investigations against importers who are suspected of intentionally bringing goods into the U.S. in violation of governing trade regulations. The FCA is a particularly powerful tool for this purpose, due to its broad scope. Some of the key areas that companies should pay attention to when it comes to FCA include:
- Misclassification of goods, moving them from a higher to a lower tariff classification.
- Misclassification of goods, to move them out of the coverage of the new Trump tariffs such as those imposed on aluminum and steel derivative products.
- Declaring the incorrect country of origin, to avoid the Section 301 tariffs imposed on China or on countries subject to the new tariff proclamations such as China, Canada, or Mexico.
- Failing to pay antidumping or countervailing duties.
- Failing to accurately declare the correct value of goods.
- Failing to include assists or royalties within the declared value.
- Failing to have a customs transfer pricing study in place, if this results in the undervaluation of goods imported from a related company.
- Failing to correct past entry information if Customs notifies the importer of a change that impacts the duty rate, such as by issuing a Form 28 Request for Information or Form 29 Notice of Action.
It should be noted that in addition to the FCA, CBP maintains two additional whistleblower programs of its own — one under the Enforcement and Protect Act (EAPA), for reporting of antidumping and countervailing duty evasion, and an eAllegations portal for all other claims of tariff evasion. It remains to be seen whether the new administration will leverage these sources for FCA enforcement purposes.
Conclusion
Given the Trump Administration’s focus on new tariffs and the DOJ’s emphasis on using the FCA to fight customs fraud, conducting import diligence and having a robust compliance program focused on classification, value and origin should be a priority, especially for companies with high-risk supply chains.
For more information on how ONESOURCE Global Trade solutions can assist you in managing supply chain risk and regulatory compliance, contact your Account Manager or Customer Success Manager.