During the many months of President Donald Trump imposing, or threatening to impose, tariffs on some of the country’s largest trading partners — both friend and foe — some foreign suppliers have implemented plans to evade the new levies in various ways. U.S. companies report an increase in offers, often from China-based shipping firms, of fraudulent solutions that would avoid or reduce tariffs for importers. Shipping companies are contacting U.S. importers indicating that they have avoided tariffs or paid lower tariff prices for others in the past and offering to do the same. The Department of Justice (DOJ) has taken notice, and according to an internal memo, the department’s criminal division will "prioritize investigating and prosecuting" tariff evasion and other trade and customs fraud.
For manufacturers and other businesses engaged in cross-border transactions, the federal government’s focus on tariff evasion and other trade and customs fraud means trade compliance programs become all the more important. We provide key takeaways on compliance risk assessments and best practices for companies below.
U.S. Government Response and Limitations
Methods to avoid tariff and customs payments vary widely and include schemes such as altering shipment information, underreporting product values, and transshipment of cargo where the seller routes goods through third countries to disguise the country of origin. According to the government, these practices are costing the U.S. billions of dollars in tariff revenue and putting compliant companies at a disadvantage compared to those that engage in fraudulent practices.
The DOJ’s criminal division is being restructured to include resources from DOJ’s civil divisions to identify "trades and customs fraudsters, including those who commit tariff evasion," according to a fact sheet that outlines the Trump administration’s goal to restore tariffs under Section 232 of the Trade Expansion Act of 1962.
Over the past six months, the U.S. has imposed significant country-specific tariffs targeting China, Mexico, and Canada, among others, and sector-specific tariffs impacting imports of materials and products such as steel, aluminum, automobiles under Section 232. (You can read our previous alert about how businesses can prepare for an evolving tariff future here.)
Companies that implement appropriate compliance measures now will be well-positioned for future inquiries.
Tariff and Customs Actions Leverage Whistleblowers and Award Voluntary Disclosure
The DOJ has expanded its Corporate Whistleblower Awards Pilot Program to include tariff, trade, and customs fraud, further incentivizing internal or competitor‑originated reporting, providing an additional manner of obtaining information that supports a False Claims Act (FCA) action against those involved in tariff fraud. Whistleblower lawsuits are often leveraged by the government as further evidence to substantiate both civil and criminal enforcement actions.
The DOJ recently settled a civil fraud lawsuit against a U.S.-based company that imports and sells products from China. The settlement resolved claims that the company had underpaid customs duties owed on Chinese imports by misclassifying the products under the Harmonized Tariff Schedule (HTS). The $22.8 million settlement followed the government’s joining a whistleblower lawsuit filed under seal pursuant to the FCA. More recently, the DOJ made two settlements in quick succession. On July 24, 2025, the DOJ announced that a $4.9 million settlement was reached with a U.S. furniture company for misstating anti-dumping/countervailing duties (AD/CVD) status on aluminum imports — also flagged through whistleblower reports.
The DOJ’s expanded Corporate Enforcement and Voluntary Self‑Disclosure Policy (CEP) offers enhanced leniency for self‑disclosures related to customs/trade fraud. On July 23, 2025, the DOJ announced that it had completed a $6.8 million FCA settlement with a global plastics distribution company for underpaying U.S. Customs and Border Protection (CBP) duties by misreporting the country of origin and the value of certain materials produced in China. In this case, the company voluntarily disclosed the errors in 2024, conducted a thorough internal investigation, and implemented appropriate remedial actions. The company received credit according to department guidelines for disclosure, cooperation, and remedial undertakings in the DOJ’s investigation and prosecution of the case.
Risk Assessment and Internal Compliance Measures
Companies that import goods directly or that receive goods from foreign countries through a distribution network must be aware of compliance obligations necessary to mitigate the risks of tariff and customs fraud and avoid DOJ enforcement. Below are a number of key compliance policies and procedures to focus on.
Governance and Oversight
A trade compliance program is necessary to demonstrate the company’s dedication to avoiding fraud. Some key takeaways for companies include:
Maintain a documented import/export compliance policy addressing customs duties, tariff classifications, and anti-fraud procedures. This includes transaction monitoring, internal reporting obligations, documentation and recordkeeping requirements, and self-reporting procedures.
Identify a designated compliance officer with specific responsibility regarding tariff and customs compliance. The responsible party may be a trade compliance manager or the chief compliance officer with the authority to oversee import/export operations. Small and middle-market companies can retain an independent consultant to serve this function. Whether a full-time employee or an external designee, the designee must have adequate knowledge of tariff, customs, and import/export regulations in order to adequately perform the role and avoid regulator scrutiny. Segregation of duties procedures are also key to maintaining sufficient compliance oversight.
Boards of directors and corporate executives must maintain sufficient oversight over international business operations and imports. Executives must be apprised of compliance procedures, potential or confirmed violations of procedures, and necessary remediation efforts. This requires establishing a reliable reporting line that ensures executives receive material information in a timely manner such that they can provide appropriate direction to personnel. The board of directors must receive regular reports on tariff and customs compliance, investigations, and audit results. The board’s audit committee must report any material issues to the independent auditor and make the appropriate risk disclosure statements in public filings. Smaller or privately held companies may tailor compliance procedures that appropriately fit the size and profile of the firm. The advice of legal counsel can help public and private companies implement right-sized internal controls.
Business Partner Due Diligence
Companies should appropriately vet suppliers and brokers by performing background checks on business partners including freight forwarders, customs brokers, and suppliers. Companies should require suppliers to certify the accuracy of the importation documents, including the correct classification and country of origin information for all imports to the U.S.
A tariff risk analysis should be conducted to identify goods with high tariff rates, AD/CVD, or special trade program eligibility. The potential exposure to misclassification or undervaluation schemes is a necessary part of the risk assessment.
Classification and Valuation Controls
HTS review procedures should be implemented to verify HTS codes before import, and records of the verification must be retained as part of a company’s internal classification database. HTS code application and any coding errors must be conducted periodically by qualified personnel. Companies can bolster their tariff confirmation programs by utilizing the customs broker training and licensing resources available on the CBP website.
Valuation procedures should be implemented to confirm that declared customs values align with the actual transaction price. Similar procedures are necessary to confirm intercompany transfer pricing, an important compliance issue for global companies. Details subject to valuation procedures should include assists, royalties, and freight charges in customs value, in addition to other costs and fees specific to the company’s business and the products imported.
Country of origin verification procedures should check the actual manufacturing location. This includes requiring and periodically validating certificates of origin or free trade agreement documentation.
Segregation of Duties and Authorization
Performing a dual review for customs entries declarations and tariff classifications should be implemented as part of a company’s compliance procedures to maintain adequate checks on imports. This review should be completed by shipping/logistics and finance personnel whose duties are properly segregated in order to avoid conflicts.
Auditing and Monitoring
It is critical to conduct periodic internal customs audits of import entries, supplier invoices, and origin documentation in addition to sporadic "surprise" reviews. Companies should also review customs broker filings for accuracy and compliance with declared values and classifications. Leveraging the use of data analytics to monitor trends in duty payments, HTS codes, and supplier shipments can identify anomalies requiring further investigation.
Reporting and Investigation Procedures
Companies should provide a confidential channel for employees to report suspected customs or tariff violations, allowing whistleblowers to "report up" and encouraging the company to "report out" after an appropriate internal investigation. It is then necessary to establish a clear protocol to remediate and correct errors or violations identified when investigating discrepancies and voluntarily disclosing violations to authorities when appropriate.
External Coordination and Legal Compliance
Central to any compliance program is maintaining clear and frequent communication with outside legal counsel and those with deep experience in tariff and customs compliance requirements. The current tariff regime and associated fraud risks remain unclear and will continue to develop in the coming months. Periodic and systematic fraud risk assessments involving outside legal counsel should be executed as a part of daily business operations. Internal controls focused on tariff and customs extend past your company’s internal procedures and require an upstream review and confirmation of protections throughout the distribution network.
It is also important to have periodic consultations with counsel experienced in international trade laws and foreign regulatory requirements. These global-centric consultations are integral to conducting a thorough review of high-risk transactions and ensuring compliance with the CBP, International Trade Centre, and foreign customs authorities. Do not hesitate to take internal reports or whistleblower allegations to counsel. Those reporting lines may need revisions in addition to data- and personnel-focused controls. Finally, companies should actively engage with legal counsel about when and how to voluntarily disclose the issue. Waiting to complete an internal investigation in the hope that disclosure will not be necessary will diminish any benefits or credits received for self-reporting.
Final Takeaway
Avoiding tariff and customs fraud requires both a proactive approach through implementation of adequate controls and the preparedness to handle potential violations as soon as they arise.
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