By Hanna Gorelick & Howard Rosenkrantz

During his 2024 presidential campaign, Donald Trump made tariffs a cornerstone of his foreign and domestic policy.^[1] With new 25% tariffs now imposed on Mexico and Canada, along with an additional 10% tariff on imports from China, the threat of additional tariffs against these, and other countries and trading partners, has not subsided.^[2] In addition to these measures, President Trump has announced a policy to charge reciprocal tariffs, meaning to tax foreign goods at the same rate other nations apply to American products.^[3]

Due to the large volume of goods being imported into the United States, only a small portion can be inspected by Customs and Border Patrol (CBP) officials. The U.S. customs system relies on importers to accurately report the type, value, and country of origin for the merchandise brought into the country.^[4] The added cost of doing business due to tariffs may incline companies to circumvent all or a portion of the increased import duty by falsifying the value, type, and / or country of origin when reporting to the government. These misstatements could give rise to violations of the False Claims Act (FCA). 

§3729(a)(1)(G)^[5] of the FCA, known as the reverse false claim, imposes liability on those who avoid paying money to the government. This section is commonly applied to customs violations when goods are undervalued, misclassified, or undeclared.^[6] The U.S. Department of Justice (DOJ) and CBP have traditionally brought enforcement actions for avoidance of duty obligations. During a recent False Claims and Qui Tam Enforcement conference, DOJ Deputy Assistant Attorney General Michael Granston emphasized that the FCA is a tool for customs duty evasion.^{[7] [8]} Many in attendance at this conference were plaintiffs’ attorneys, indicating that the DOJ is encouraging them to pursue FCA claims, even if the government declines to intervene.

The DOJ has been active in this area even before President Trump’s election and has pursued several notable cases.

• In August 2024, Alexis, LLC (“Alexis”) a womenswear company, settled claims of alleged customs fraud for $7.7 million. The government alleged that Alexis misreported to CBP the value of imported apparel.^[9]
• In August 2024, Precision Cable Assemblies, Inc. (“PCA”), Global Engineered Products (“GEP”), Inc. and their principals settled claims of alleged customs fraud for $10 million. PCA sells wire harness, battery cables, and other wiring products. GEP sells power distribution products. PCA and GEP allegedly submitted falsified invoices significantly undervaluing the goods imported from China to the Government.^[10] 
• In November 2023, KingKong Tools agreed to a $1.9 million settlement over allegations of customs fraud for mislabeling its products as made in Germany when they were made in China, to avoid paying higher tariffs.^[11]

Many other recent cases involved falsification of invoices, misclassifying goods, undervaluing imports, and splitting imports into multiple packages – a process known as structuring – to pay lower customs duties.

With Michael Granston’s remarks in conjunction with the Trump administration indicating it will use the FCA aggressively, it is likely that the government will pursue customs duty violation under the FCA. 

Given the likely increase in enforcement, companies should be proactive in monitoring any potential wrongdoing within their organizations. The following should be key areas of focus:

• Provide comprehensive training for employees on protocol and legal requirements
• Regularly monitor representations made to CBP, including those by third parties on the company’s behalf
• Enhance diligence procedures for onboarding and oversight of service providers and suppliers
• Ensure robust controls in import policies and procedures
• Strengthen the whistleblowing function by reviewing hotline effectiveness and addressing reported tips
• Ensure proper record-keeping compliance:
  • Verify that goods are coded, quantified, and valued correctly
  • Organize records by department for easy access and oversight
  • Maintain clear links between records and import declarations
• Enforce document retention policies to prepare for potential government investigations

The possibility of circumventing import duties will likely increase as tariffs are imposed in various sectors of the economy, causing companies to face more pressure to minimize the added costs of doing business. Therefore, proactive measures should be taken to minimize the potential problems. Strengthening internal policies and controls, and conducting ongoing monitoring of these processes, are essential.

[1] Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China – The White House
[2] https://www.wsj.com/livecoverage/trump-tariffs-canada-mexico-china-stock-market-today-03-04-2025
[3] https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-announces-fair-and-reciprocal-plan-on-trade/
[4] https://www.cbp.gov/travel/international-visitors/know-before-you-visit/customs-duty-information
[5] Other sections on the FCA impose liability on those who have submitted false claims or made a false record or statement to receive payment from the Government.
[6] https://www.justice.gov/d9/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer
[7] Agenda | False Claims and Qui Tam Enforcement
[8] Daniel Wilson, “DOJ Official Flags ‘Aggressive’ FCA Approach Under Trump,” Law360, February 20, 2025.
[9] https://www.justice.gov/usao-sdfl/pr/us-attorney-lapointe-announces-76-million-settlement-civil-false-claims-act-lawsuit
[10] https://www.justice.gov/usao-edwi/pr/two-brookfield-wisconsin-based-companies-and-their-owners-pay-over-10-million-resolve
[11] https://www.justice.gov/usao-ndga/pr/king-kong-tools-settles-claims-customs-fraud-19-million#:~:text=By%20falsely%20describing%20the%20tools,China%20Pacificarbide%2C%20Inc.