When a manufacturer, importer, distributor, or other company knowingly misrepresents imported merchandise in order to avoid duties owed to the United States, the conduct may create liability under the False Claims Act.
The False Claims Act can also reach conduct in which a person knowingly conceals or improperly avoids an obligation to pay money to the United States.
Under 31 U.S.C. § 3729(a)(1)(G), liability may attach when a person knowingly makes or uses a false record or statement material to an obligation to pay the United States, or knowingly conceals, avoids, or decreases that obligation.
In a customs case, the money being avoided may be tariffs, ordinary customs duties, antidumping duties, countervailing duties, or other amounts legally owed when goods enter the United States.
The Department of Justice specifically recognizes that False Claims Act liability can arise when someone improperly avoids an obligation to pay the government. This False Claims Act overview explains the government’s enforcement authority and whistleblowers’ role in bringing these cases in more detail.
How Tariff Fraud Works
Import duties often depend on facts the importer provides about the product being brought into the United States.
Those facts can include:
- What the product is
- Where the product was manufactured
- How the product should be classified
- What the product is worth
- Whether special tariffs or trade remedies apply
- Whether the merchandise qualifies for an exclusion or preferential treatment
U.S. Customs and Border Protection expects importers to exercise reasonable care in determining the proper classification and valuation of imported merchandise. CBP warns that incorrect classification or valuation can increase duties and that failures involving reasonable care may lead to additional enforcement consequences. See CBP’s Tariff Classification guidance.
Country-of-Origin Fraud
A company may falsely represent that merchandise originated in a country subject to lower tariffs when it was actually manufactured elsewhere.
Country of origin can be enormously important when goods from a country like China face tariffs or other trade restrictions that do not apply to the intermediary country.
Transshipment
Transshipment schemes involve routing products through a third country to obscure their actual origin, but merely transiting through another country does not alter the manufacturing location. Fraud occurs when this intermediary country is used to misrepresent the merchandise’s origin or evade duties owed to the United States. A prominent example is the Ceratizit USA case, where Chinese tungsten carbide products were incorrectly labeled as originating from Taiwan after being shipped through Taiwan. The company resolved the allegations by paying $54.4 million.
Read the DOJ announcement about the Ceratizit settlement.
Tariff Misclassification
Imported merchandise is classified under the Harmonized Tariff Schedule, with different classifications resulting in varying duty rates. Misclassifying goods to achieve lower duty rates can lead to significant risks for the company. Additionally, the Customs Rulings Online Search System (CROSS) enables businesses and the public to research published customs classification rulings.
Undervaluation
Many customs duties depend on the declared value of imported goods. Companies may reduce their duty costs by reporting lower values through methods such as using fake invoices, hiding transactions with related companies, or misrepresenting the actual value of the goods.
Antidumping and Countervailing Duty Evasion
The United States can impose antidumping duties on foreign goods sold at unfairly low prices and countervailing duties when government subsidies disrupt competition. These duties may be significant and encourage importers to conceal details about the merchandise. The Department of Commerce provides information on antidumping and countervailing duty proceedings.
Product Manipulation
Sometimes, the supposed plan involves altering how a product looks or is described so that it seems to escape a tariff rule.
This idea was behind one of the biggest customs-related False Claims Act settlements ever.
Perfectus Aluminum: $549.5 Million
In May 2026, Perfectus Aluminum Inc. and related companies agreed to pay $549.5 million to settle claims of wrongdoing related to tariffs on aluminum products brought in from China.
The Department of Justice stated that more than 2.2 million aluminum products were wrongly labeled as finished aluminum “pallets,” which were supposed to be exempt from tariffs.
The government claimed that these so-called pallets were made by spot-welding aluminum pieces together and that customers did not actually buy them as pallets.
Find Corporate Waste wrote about this case here:
Perfectus Aluminum to Pay $549.5M in Major False Claims Act Trade Fraud Settlement
This settlement highlights the importance of accurate product descriptions and manufacturing records, along with the country indicated on import forms.
False Claims Act Liability for Avoiding Duties
Most people associate the False Claims Act with a company submitting a fraudulent bill to the federal government.
Examples include:
- Medicare fraud
- Medicaid fraud
- Defense contracting fraud
- Government procurement fraud
- Pandemic-relief fraud
Customs cases may also involve defendants keeping money that should have been paid to the government, known as a reverse false claim. This distinction highlights the importance of the False Claims Act in trade enforcement, as customs fraud can result in lost revenue for the Treasury without a traditional invoice being submitted for payment.
DOJ’s Trade Fraud Task Force
Federal enforcement in this area has grown a lot.
On August 29, 2025, the Department of Justice and the Department of Homeland Security formed a team called the Trade Fraud Task Force.
This Task Force joins efforts from DOJ’s Civil Division, Criminal Division, and the Department of Homeland Security to tackle schemes related to:
- Tariff evasion
- Customs-duty evasion
- False country-of-origin representations
- Prohibited imports
- Smuggling
- Conduct harming domestic industries
The DOJ encouraged whistleblowers with credible information about trade fraud to utilize the False Claims Act’s qui tam provisions. Since then, the Trade Fraud Task Force has reported exceeding $1 billion in recoveries, penalties, forfeitures, and publicly charged losses.
Read DOJ’s July 2026 Trade Fraud Task Force update.
Tariff enforcement has become a significant focus in False Claims Act practice and is now a major federal enforcement priority.
Whistleblowers Can See What Customs Forms Cannot
A customs declaration may look perfectly legitimate.
The information behind it can tell a different story.
Employees in various roles may possess critical information about discrepancies in merchandise origin. For instance, purchasing employees might encounter conflicting documentation regarding the actual manufacturing location, while logistics staff may know about intentional routing through intermediary countries. Accountants might notice price discrepancies reported to Customs, and compliance personnel may raise concerns about incorrect tariff classifications. These insights can be challenging for authorities to uncover through import records alone, highlighting the crucial role of whistleblowers in customs enforcement. Learn more about how whistleblowers protect public funds.
Who Might Discover Tariff Fraud?
Potential sources of information can include:
- Manufacturing employees
- Engineers
- Purchasing personnel
- Import managers
- Customs compliance employees
- Logistics personnel
- Accountants
- Executives
- Customs brokers
- Freight forwarders
- Suppliers
- Distributors
- Former employees
- Competitors
- Domestic manufacturers
The most important evidence often concerns knowledge.
The critical issue is whether internal records show that the company knew its customs representations were false or deliberately ignored information showing that they were inaccurate.
Relevant evidence can include:
- Internal emails
- Supplier communications
- Bills of materials
- Purchase orders
- Commercial invoices
- Customs classifications
- Bills of lading
- Certificates of origin
- Manufacturing records
- Product specifications
- Pricing records
- Internal compliance reports
- Customs-broker communications
- Corporate ownership records
- Internal discussions about tariffs
Canadian Steel Companies: $19 Million Settlement
In May 2026, Farjess Inc., Royal Canadian Steel Inc., and president Feroz Jessani agreed to pay $19 million to settle allegations under the False Claims Act regarding misrepresented customs duties on imported steel. Federal officials claimed that steel was falsely labeled as originating from Canada or the U.S., while it was actually produced in countries like China, Indonesia, Italy, Turkey, or Vietnam. The whistleblower, Shamsh Dhala, a broker for Farjess, received about $3.61 million from the settlement. The case highlights that individuals familiar with commercial relationships can uncover facts not evident from customs declarations. More details can be found in the article titled “Canadian Steel Companies to Pay $19M Over False Claims Act Trade Fraud Allegations.”
Allied Stone: Whistleblower Receives $2.1 Million
Find Corporate Waste highlights the customs-fraud settlement involving Allied Stone Inc., where the company paid $12.4 million to settle allegations related to customs duties. The whistleblower who exposed the fraud received around $2.1 million. This case illustrates the effectiveness of whistleblower enforcement in customs fraud, as industry insiders often have access to critical records regarding pricing and merchandise details.
Read: Whistleblower Receives $2.1M for Exposing Customs Fraud
Redi-Bag USA: Country-of-Origin Allegations
In July 2026, Redi-Bag USA and its CEO agreed to pay $7.3 million to settle allegations under the False Claims Act related to polyethylene retail carrier bags. The Department of Justice claimed that they provided inaccurate country-of-origin information to evade antidumping duties. This case highlights the importance of accurate origin representations, as they can significantly affect the duties imposed based on a product’s manufacturing location.
Everlight Electronics: $5.15 Million
In August 2026, Taiwan’s LED maker Everlight Electronics and its U.S. branch agreed to pay $5.15 million to settle claims related to customs duties on LEDs brought in from China.
Read the U.S. Attorney’s Office announcement.
The settlement also included a $876,146 payment for a whistleblower.
What Find Corporate Waste Examines
Find Corporate Waste uses publicly available records to examine potential fraud involving government programs, federal payments, and obligations owed to the United States.
For manufacturing and customs research, relevant sources can include:
- U.S. corporate records
- Foreign corporate registries
- Company websites
- Subsidiary and parent-company disclosures
- Import records
- Government enforcement releases
- Federal court records
- SEC filings
- Customs rulings
- Tariff classifications
- Manufacturing locations
- Product catalogs
- Supplier relationships
- Government contracting records
- Regulatory filings
The key question is whether evidence shows that a person or company knowingly misrepresented or concealed material information to avoid money owed to the United States.
The False Claims Act and Qui Tam Whistleblowers
The False Claims Act allows private individuals, known as relators, to file lawsuits on behalf of the United States, called qui tam actions. In fiscal year 2025, the Department of Justice reported that settlements and judgments under this act surpassed $6.8 billion, marking the highest annual total in the act’s history, with 1,297 qui tam lawsuits filed. Successful relators typically receive 15% to 30% of the recovered amount, depending on the case specifics. Find more information in Find Corporate Waste’s False Claims Act guide and the DOJ’s FY2025 statistics.