Focus on Customs Violations and Trade Fraud on the Rise

On March 25, 2025, the U.S. Department of Justice (DOJ) announced that it had reached an $8.1 million settlement in a civil False Claims Act (FCA) case based on alleged customs violations by Evolutions Flooring Inc., a San Francisco-based importer of wood flooring, and its owners Mengya Lin and Jin Qian. The defendants agreed to resolve allegations that they violated the FCA by knowingly and improperly evading customs duties on imports of multilayered wood flooring from the People’s Republic of China (PRC).

More specifically, at the direction of Lin and Qian, Evolutions Flooring Inc. knowingly and improperly evaded customs duties, including antidumping, countervailing, and Section 301 duties, on multilayered wood flooring manufactured in the PRC that the company imported between Sept. 1, 2019, and July 31, 2022. Among other things, the United States alleged that the company caused false information to be submitted to US Customs and Border Protection (CBP) regarding the identity of the manufacturers and country of origin of the imported multilayered wood flooring. This was done by incorrectly declaring the country of origin of certain flooring imports as Malaysia-origin to avoid the high duties applicable to China-origin products.

The settlement with Evolutions Flooring Inc. and its owners resolves a lawsuit filed by Urban Global LLC under the whistleblower provision of the False Claims Act. As part of the resolution, the whistleblower, Urban Global LLC, will receive approximately $1,215,000 of the settlement proceeds.

This settlement is the latest in a series of multi-million-dollar settlements and judgments obtained by DOJ in civil FCA cases based on alleged customs fraud.

On May 12, 2025, the DOJ Criminal Division issued a Memorandum regarding its priorities and efforts to address white collar crime. The purpose of the Memorandum is to outline the Criminal Division’s enforcement priorities and policies for prosecuting corporate and white-collar crimes in the new Administration.

Consistent with the enforcement policies and priorities of the Administration, the Criminal Division will prioritize investigating and prosecuting corporate crime in areas that will have the greatest impact in protecting American citizens and companies and promoting U.S. interests. This involves focusing resources on threats to the U.S. economy, American competitiveness, and national security. This includes trade and customs fraud, including those who commit tariff evasion, seek to circumvent the rules and regulations that protect American consumers and undermine the Administration’s efforts to create jobs and increase investment in the United States. Prosecuting such fraud is designed to make certain that US businesses are competing on a level playing field in global trade and commerce.

It should be noted that in listing the top ten “high impact areas” that the Criminal Division will focus on, “Trade and customs fraud, including tariff evasion” is listed as #2. Additionally, “Bribery and associated money laundering that impact U.S. national interests, undermine U.S. national security, harm the competitiveness of U.S. businesses, and enrich foreign corrupt officials” is listed as #9.

The Criminal Division’s Corporate Whistleblower Awards Pilot Program has also been updated to reflect these priority areas of focus.

While the Memorandum does draw attention to the increased focus on Customs fraud & trade violations, it also notes the importance of the agency promoting policies that acknowledge law-abiding companies and companies that are willing to learn from their mistakes and provide those companies with transparency from the Department. Companies that enter into agreements with the Criminal Division agree to implement corporate compliance programs, report relevant misconduct, cooperate with the government, and more. Self-disclosure and cooperation can be mitigating factors.

The DOJ will also review the length of terms of all existing agreements with companies to determine if they should be terminated early. Factors that may lead to early termination include, but are not limited to, duration of the post-resolution period, substantial reduction in the company’s risk profile, extent of remediation and maturity of the compliance corporate program, and whether the company self-reported the misconduct.

The Evolution Flooring Inc. investigation and settlement is just a recent example of the risks resulting from enforcement focus on trade practices – especially those related to country of origin as it relates to current day tariffs. Companies should proactively take steps to ensure they have a robust trade compliance program in place, including document retention, audit trails, communication policies, and protocols for proper classification and origin determination for imported goods. Importers must exercise “reasonable care” to ensure that all information provided to CBP is accurate and complete.

This type of risk is especially heightened if the Government or a private whistleblower has evidence that the company was warned that the information provided is—or might be—incorrect and failed to take necessary steps to correct. Failure to do so could result in substantial financial penalties, False Claims Act liability (which includes treble damages, mandatory civil penalties for each false claim, and attorneys’ fees), as well as potential criminal exposure.

Congressional support for such prioritization is building. Recently, Representative Hinson (R-IA) sponsored the Protecting American Industry and Labor from International Trade Crimes Act of 2025 (H.R. 1869), which would establish a DOJ task force to combat trade crimes, provide training and assistance to other federal, state, and local law enforcement agencies, and require the attorney general to submit an annual report to Congress on the DOJ's efforts.

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.