A serious step up in civil and criminal enforcement of customs laws, including tariff evasion, is imminent. In a May 12 memorandum, the Department of Justice’s new Chief of the Criminal Division, Matthew Galeotti, counted as one of the “most urgent” threats to the country “[t]rade and customs fraud, including tariff evasion.” Earlier in the Administration, in a February 2025 speech, Michael Granston, Deputy Assistant Attorney General for the DOJ’s Commercial Litigation Branch identified, as a key example of new enforcement activity, efforts to enforce payment of customs duties on imported goods and reiterated that enforcement against “illegal foreign trade practices” would be a priority for the Administration.
Per the recent Galeotti Memo, “[t]rade and customs fraudsters, 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 frauds will ensure that American businesses are competing on a level playing field in global trade and commerce.”
The Galeotti Memo also added tariff evasion to the list of areas subject to DOJ’s Whistleblower Program, which offers monetary awards in exchange for original information leading to successful recoveries by the government.
To fully understand the broad scope of potential civil and criminal liability through the tariff process, it is necessary to have a basic understanding of the mechanics of the process, as even early steps may have a significant impact on the likelihood and outcome of a civil or criminal enforcement action and the possible penalties that could result.
Tariff Increases Under the New Administration
Tariffs imposed, or likely to be imposed under the new Administration, will be the highest in over a century, providing strong incentives for importers to avoid paying the increased costs. President Trump initially raised baseline tariffs on Chinese imports to 145%, which have since been lowered to 30%. Trump also imposed a 25% tariff on Canada and Mexico, but later granted indefinite exemptions for goods compliant with the USMCA, the United States–Mexico–Canada Agreement, which replaced NAFTA. The Administration also subsequently added a 25% tariff on steel, aluminum, and automobiles from all countries.
On April 2, a day President Trump called “Liberation Day,” the Administration announced a minimum 10% tariff on all U.S. imports, effective April 5, and higher tariffs—dubbed “reciprocal tariffs” —on imports from 57 countries. These reciprocal tariffs, ranging from 11% to 50%, were scheduled to take effect on April 9, but were almost immediately suspended for 90 days for all countries except China. The 10% minimum tariff on all imports and the 25% sector-specific tariffs remain in effect.
Tariff Collections and Procedures
A tariff is a duty imposed by the government on imported goods and is paid by the importer. Before goods are shipped to the U.S., by sea, air, rail or truck, importers file paperwork electronically with U.S. Customs and Border Protection (“CBP”) with, among other things, details about the imported goods, including valuation, classification (by category of item under the Harmonized Tariff Schedule (HTS)), and country of origin. Once the shipment arrives, CBP customs inspectors review the paperwork before clearing the goods for release. Agents perform spot checks and random inspections to ensure the shipment contains what it is supposed to.
After the goods are cleared for release, the cargo is often moved to a warehouse for storage. The importer, directly or through a customs broker, then files additional paperwork with CBP setting forth detailed information about the shipment—again including country of origin, valuation, and classification within the tariff schedule—on a CBP Form 7501. This form includes an express representation that the information provided is true and correct. CBP relies on this information to compute the amount of tariffs due. All of the documentation and information provided to CBP later becomes critical to any government investigation.
The importer then has 10 or 30 days to pay its tariff bill. The importer can pay CBP directly or pay its customs broker who will in turn pay CBP. CBP officials spot-check the payments and may later audit some transactions to ensure proper duties were paid.
Traditional Customs Enforcement
The government’s principle enforcement mechanism for tariff evasion has historically been through 19 U.S.C. § 1592. Section 1592 authorizes CBP to not only recover tariffs underpaid, but also impose penalties that start at two times the amount underpaid up to the domestic value of the merchandise, depending on the importer’s level of culpability. Increasing penalties under the statute apply to violations ranging from negligence, to gross negligence, and ultimately to fraud. Although private parties can file allegations of customs violations with CBP (e.g., via CBP’s e-allegations portal), only CBP can bring an enforcement action under Section 1592.
Following a CBP investigation, and through procedures set forth in Section 1592, CBP may issue a “penalty claim” against the alleged violator. CBP must provide the importer with notice and an opportunity to object before issuing a penalty claim and a reasonable opportunity after the claim to seek remission or mitigation of the monetary penalty. Representations by the importer during this process may also be important in a subsequent government investigation.
At the conclusion of these proceedings, CBP must issue a written statement setting forth its final determination and the findings of fact and conclusions of law upon which its penalty determination is based. Review of this determination by either party occurs in the Court of International Trade—an Article III court tasked with hearing disputes primarily concerning tariffs and import duties—and ultimately on appeal to the United States Court of Appeals for the Federal Circuit.
Common Schemes to Avoid Paying Tariffs
As tariffs increase, importers and businesses dependent on imported goods will increasingly look for ways to avoid or minimize tariff payments and other customs-related costs. Companies purchasing imported goods could also be liable for substantial civil penalties, or even criminal law, for customs violations, including potentially for misconduct or false statements by suppliers, sourcing agents, and other third parties involved in the importing of goods. To avoid exposure to these violations, it is necessary to be aware of the more common tariff evasion practices. These include the following:
- Valuation: Tariffs are typically calculated as a percentage of the value of the imported goods. Importers may intentionally understate the value of the imported goods when declaring them to customs officers, whether in formal CBP forms or via supporting documents, such as purchase or manufacturing agreements.
- Country of Origin: Per federal regulations, the “country of origin” of imported goods is where the goods were manufactured, grown or underwent “substantial transformation” into the final product being imported. Because tariffs depend heavily upon the country of origin of the imported goods, importers may try to route goods from a high-tariff country through a lower-tariff country on the way to the United States, falsely presenting the goods as originating from the lower-tariff country. This practice is known as “trans-shipment.”
- Classification: Tariffs in the U.S. are based upon categories classified under the Harmonized Tariff Schedule. Importers may be tempted to misclassify imported goods by moving them from a higher tariff category to a lower or exempted tariff category, thereby lowering the tariff amount due.
As described below, these misrepresentations may result in serious civil or criminal consequences, not only for the importer directly involved, but also potentially for companies and individuals buying the goods or otherwise involved in the transactions.
Civil False Claims Act Enforcement
Recent statements by the Department of Justice suggests that the government will increasingly seek to use the False Claims Act (“FCA”) to punish and deter tariff violations. In general terms, the FCA imposes severe civil monetary penalties on any person who knowingly submits, or causes another to submit, a false claim to the government, or knowingly makes a false record or statement to get a false claim paid by the government. Most relevant to tariff evasion is a section of the FCA known as the “reverse false claims” provision, which provides liability where one acts improperly to avoid paying money, e.g., tariffs or other customs duties, to the government.
The FCA is to Section 1592 customs enforcement what a slingshot is to a machine gun. First, penalties under the FCA can be immense. If found liable, a defendant can be ordered to pay three times the amount of underpaid tariffs, plus civil penalties of up to $28,619 per false claim. Second, unlike 19 U.S.C. 1592, private parties that act as whistleblowers—known as “relators”—can bring a case, known as a qui tam, under the FCA against an importer for tariff evasion.
Whistleblowers who bring a successful qui tam action receive a portion of the recovered funds—up to 25% if the government intervenes, and up to 30% if the government does not, and can also recover attorneys’ fees and expenses. The incentive for reporting customs violations is therefore substantial. Whistleblower claims may be made not only by a company’s own employees, but also by competitors who stand to gain financially both from the whistleblower incentive award and from eliminating the competition.
Third, DOJ has at its disposal far more powerful and intrusive investigative tools than what is available to CBP under Section 1592. These include, in the civil context, civil investigative demands (CIDs) to compel the production of records and testimony and, in the criminal context, search warrants and the full force of a federal grand jury.
Criminal Enforcement of Tariff Violations
As the May 12 Galeotti Memo makes clear, the DOJ has also set as a priority the criminal enforcement of customs and tariffs violations. In pursuing criminal charges, the government has a wide range of criminal statutes that may be applied. Listed below are just some of the criminal statutes that could be applied to tariff evasion schemes:
Criminal False Claims Act, 18 U.S.C. § 287. This statute makes it a crime to make or present to the government any claim knowing that claim to be false, fictitious, or fraudulent. The statute also makes the knowing avoidance of an obligation to the government, e.g., tariffs or import duties, a crime. Punishable by up to five years’ imprisonment.
Wire Fraud and Conspiracy, 18 U.S.C. §§ 1343 & 1349. Wire fraud is a far reaching statute that could, if applied, criminalize nearly any transaction that involves fraud or deceit, and utilizes interstate or foreign wire communications. Practically any efforts to avoid paying tariffs through false representations will involve interstate or foreign wire communications. Punishable by up to 20 years’ imprisonment.
International Emergency Economic Powers Act (IEEPA), 50 U.S.C. §§ 1701–1705. The IEEPA grants the President broad authority to regulate economic transactions when there is an unusual and extraordinary threat to the United States that originates, in whole or substantial part, outside the country. Many of the Administration’s recent tariffs were imposed pursuant to the IEEPA, including tariffs on imports from Canada, Mexico, and China. Punishable by up to 20 years’ imprisonment.
False Statements, 18 U.S.C. § 1001. Individuals and corporations can be prosecuted for knowingly making materially false, fictitious, or fraudulent statements or representations to federal authorities. As described above, the tariff process includes the submission of detailed written information to CBP both before goods arrive in the United States and afterwards. False statements charges could be brought against a company and individual employees for intentionally making materially false statements in paperwork submitted to CBP, including as to country-of-origin, valuation, or classification of imported goods. Punishable by up to five years’ imprisonment.
Smuggling, 18 U.S.C. § 545. This statute broadly makes it a crime to knowingly and willfully import merchandise into the U.S. contrary to law. Just last year, DOJ brought smuggling charges against a Miami businessman who evaded nearly $2 million in tariffs on Chinese truck tires by shipping them through countries such as Canada and Malaysia and representing to CBP that the tires originated in those countries. Punishable by up to 20 years’ imprisonment.
Conspiracy, 18 U.S.C. § 371. This federal statute makes it a crime to engage in a conspiracy to commit a crime or defraud the United States. A conspiracy is just an agreement between two or more people to commit a federal crime or defraud the United States. Because most schemes involve a combination of two or more people, this statute is frequently used to prosecute tariff evasion. Punishable by up to 5 years’ imprisonment.
Conclusion
The new highly volatile U.S. tariff regime, together with an increased emphasis on protection of domestic manufacturing and U.S. economic interests, will likely result in substantially increased enforcement, both civil and criminal, in the area of trade and customs fraud, including tariff enforcement. The government has at its disposal powerful tools to pursue customs investigations, including the civil False Claims Act and broad criminal statutes.
The Galeotti Memo and other recent statements by other DOJ officials make clear that tariff evasion will be a priority for the Department. While the first targets of this enforcement will likely be importers directly involved in tariff evasion, recent statements by DOJ and others in the Administration suggest that companies with supply chains relying on imported goods will also be subject to enforcement actions if the evidence shows they were operating without robust policies, procedures, and monitoring to ensure that they are not participating or knowingly benefiting from unlawful conduct. Developing a compliance program to avoid this exposure is neither difficult nor costly, and a small price to pay to avoid later government scrutiny.