Overview
On February 20, the US Supreme Court issued a landmark decision in Learning Resources, Inc. v. Trump, holding that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. As discussed in a prior alert, the Court's majority opinion concluded that the executive branch exceeded its authority when it used IEEPA to impose both the 'reciprocal' tariffs justified by trade deficit concerns and the 'drug-trafficking' tariffs imposed on Canada, Mexico, and China.
The administration has already pivoted to alternative statutory authority—namely, Section 122 of the Trade Act of 1974—to impose new duties going forward. However, for the period during which IEEPA tariffs were collected, and to the extent avoided, the Supreme Court's decision may change the landscape for False Claims Act (FCA) investigations and litigation centered on alleged tariff avoidance.
The FCA as an Enforcement Tool for Customs Fraud
The FCA is one of the federal government's most powerful civil enforcement statutes. Codified at 31 U.S.C. § 3729 et seq., the FCA imposes liability on entities or individuals who knowingly submit (or cause another to submit) false claims for (or other statements in support of) payment by the government. The statute authorizes treble damages and substantial per-claim civil penalties, and its qui tam mechanism allows private individuals known as "relators" to bring actions on the government's behalf and recover up to thirty percent of the damages, if successful.
In the customs context, the FCA most often comes into play through its "reverse false claim" provision, 31 U.S.C. § 3729(a)(1)(G). Whereas claims under the FCA are often based on using false documentation to obtain money from the government, a reverse false claim is premised on one's use of false documentation to avoid paying money to the government. Under § 3729(a)(1)(G), liability may attach to anyone who:
knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.
The FCA defines "material" in § 3729(b)(4) as "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property." In the reverse false claims context, materiality concerns whether the alleged false statement or concealment would have mattered to the government's ability to identify, assess, or collect a valid obligation.
Under this administration, the Department of Justice (DOJ) has increasingly emphasized customs‑related enforcement under the FCA. In 2025, DOJ announced a multi‑agency Trade Fraud Task Force in partnership with US Customs and Border Protection (CBP) and the Department of Homeland Security. Through that effort, DOJ has signaled heightened scrutiny on companies for the evasion and underpayment of tariffs and duties.
In the United States, importers are required to submit detailed entry documentation to CBP when goods enter the country. The importer is responsible for filing an "entry summary" with CBP that declares the "value, classification and rate of duty applicable to the merchandise" being imported.[1] The entry must also include "such other information as is necessary" for CBP to properly assess duties.[2] Especially given that importers must certify the accuracy of the information they provide under § 1484(d), errors or misstatements that lead to underpayment of duties may serve as the basis for FCA enforcement actions.
The primary reporting requirements for which FCA claims commonly arise include:
- Tariff Classification. Tariff rates for imported merchandise vary based on their Harmonized Tariff Schedule (HTS) classification, and determining the appropriate code can be complex. Additionally, antidumping and countervailing duties (AD/CVD) are initially based on the merchandise's HTS classification. An incorrect HTS classification can result in underpayment of duties and may trigger a government investigation.
- Country Of Origin. Country‑specific tariffs depend on the product's origin, which is not always obvious for goods that undergo production in more than one country or are assembled using components manufactured in other countries. In these cases, the United States applies a fact-specific "substantial transformation" test to determine the country of origin of the merchandise. Given increased tariff exposure for merchandise imported from certain countries, such as China, incorrect declarations concerning country of origin carry significant FCA enforcement risk.
- Valuation. Some additional duties are ad valorem, meaning that they are calculated as a fixed percentage of the merchandise's total declared value. Undervaluation can therefore reduce duties owed and may form the basis for allegations of customs fraud.
Reporting inaccuracies in any of these categories may lead to the underpayment of duties and potential FCA exposure. Moreover, unlike administrative liability under CBP, which almost invariably extends only to the importer of record, the FCA imposes joint and several liability on anyone who knowingly "causes" the submission of false documentation that results in tariff avoidance, and also contains a conspiracy provision. Thus, FCA liability can extend beyond just the importer of record to include other knowing participants, such as the exporter, customs agent, non-U.S. manufacturer, and other members of an imported product's supply chain.
The Learning Resources Decision and Implications for Defending Against IEEPA-Based FCA Liability
Reverse false claims liability in tariff evasion cases depends on the existence of a legally enforceable obligation to pay duties. The FCA expressly defines "obligation" in 31 U.S.C. § 3729(b)(3) as "an established duty, whether or not fixed, arising from an express or implied contractual, grantor‑grantee, or licensor‑licensee relationship, from statute or regulation, or from the retention of any overpayment."
The Supreme Court's decision in Learning Resources makes clear that IEEPA did not authorize the imposition of tariffs. As a result, the duties associated with those tariffs are not legally valid obligations ab initio. Accordingly, there was no existing, legally valid obligation to which a false statement could be material, nor any legally valid "obligation" that could be improperly avoided or concealed under the reverse false claims provision.
This means that if a pending FCA investigation is predicated on the alleged underpayment or evasion of IEEPA‑based tariffs, companies now have at least two potential defenses, even if the importer believed at the time that the duty was enforceable: (1) the underlying duty may no longer satisfy the statutory requirement of an "obligation"; and (2) any false documentation arguably falls short of meeting the FCA's materiality requirement. The Supreme Court's recent holding in United States ex rel. Schutte v. SuperValu, Inc., 598 U.S. 739 (2023), which held that the FCA's scienter requirement is based on the defendant's subjective belief as to the falsity of a claim, would not pose an impediment to these arguments: Schutte's holding did not address the elements of falsity, materiality, and the reverse false claim provision's "obligation" requirement.
By contrast, whether these defenses allow a defendant to escape liability under the FCA's conspiracy provision presents a more complicated question.[3] Jurisdictions vary on whether an actual FCA violation is required for liability under the conspiracy provision to attach. Although the actus reus of a criminal conspiracy is the agreement itself, such that no proof of an underlying violation is required,[4] whether proof of an underlying FCA violation is required under the FCA's conspiracy provision is an unresolved question.[5] Notwithstanding this legal uncertainty, however, the invalidation of IEEPA tariffs may still provide an additional defense to an alleged FCA conspiracy violation on the grounds that there was no materially false claim, or that such a violation was at the time legally impossible.
Moreover, the invalidation of IEEPA tariffs will directly impact the government's damages calculation. The FCA entitles the government to recover three times its actual losses. If the government's theory of damages is premised on the underpayment or nonpayment of duties that were assessed under IEEPA, the Supreme Court's invalidation of those tariffs undermines that theory; the government cannot claim it sustained financial injury based on duties it never had the lawful authority to collect. Under these circumstances, a defendant would be subject only to per-violation penalties, which currently run from $14,308 to $28,619 per claim. The low value of any such FCA violation might render the pursuit of a judgment under these circumstances not worthwhile, and could be a persuasive argument to make to the government in requesting that it seek dismissal of the case under § 3730(c)(2)(A) and the criteria identified in the DOJ's Granston Memo.[6]
Finally, and perhaps self-evidently, Learning Resources does not eliminate enforcement risk where the government's theory of liability focuses on non-IEEPA tariffs and obligations. Misstatements on CBP entry forms may continue to support FCA liability based on the avoidance of valid obligations that remain untouched by the Supreme Court's decision.
Practical Recommendations for Importers
The Supreme Court's decision in Learning Resources may offer companies currently under investigation arguments that could narrow FCA exposure significantly where IEEPA tariffs are concerned, but it doesn't eliminate that exposure altogether, and it certainly does not diminish broader customs‑related risks—especially as DOJ continues to prioritize trade fraud enforcement. Against this backdrop, companies engaged in international trade should take particular care to:
- Consider the unique circumstances presented by evidence of false customs documentation relating solely to IEEPA tariffs when assessing the merits of a voluntary self-disclosure. Companies evaluating whether to file a voluntary self‑disclosure with CBP should think about the Supreme Court's invalidation of IEEPA‑based tariffs. Where a potential disclosure relates solely to alleged underpayment or evasion of duties imposed under IEEPA, self-reporting may offer limited strategic benefit, and a disclosure could draw unnecessary attention to conduct that may no longer support FCA liability. Companies should carefully distinguish IEEPA-exclusive exposure from exposure tied to valid, enforceable duties before determining whether, and to what extent, a voluntary disclosure is warranted.
- Evaluate exposure under other tariff regimes. Confirm whether any other valid tariffs also avoided as a result of internally discovered false customs documentation, as FCA liability as to other tariffs does not change after Learning Resources.
- Message to personnel that only IEEPA tariffs have been declared invalid and that other tariffs remain in place. Because the Learning Resources decision has been widely publicized, there is an increased risk of misunderstanding about which tariffs were affected. Companies should proactively communicate to relevant personnel—including compliance, trade, finance, and supply‑chain teams—that the ruling invalidated only tariffs imposed under IEEPA. It is important that relevant personnel understand that other tariff and duty regimes remain fully in effect, and existing compliance obligations with respect to those duties continue unchanged.
- Ensure that documentation submitted to the government in support of refunds of paid IEEPA tariffs is accurate and complete. Where companies seek refunds of IEEPA‑based tariffs they previously paid, they should carefully review the documentation submitted in support of those claims for refunds to ensure that all information is accurate, consistent, and fully supported by the underlying records. Given the potential for heightened scrutiny of refund requests, inaccuracies or omissions in refund documentation could create additional compliance or enforcement risk.
- Discovery of the submission of false documentation relating to IEEPA, even if inactionable under the FCA, still underscores a need to strengthen internal monitoring and compliance processes. Companies should reinforce compliance procedures to routinely review their CBP entry documentation to confirm that data submitted to CBP is accurate. This may include internal audits and processes for promptly correcting errors identified post‑entry. Taking these measures may mitigate FCA exposure—especially where DOJ has signaled that FCA enforcement in international trade and customs fraud is a top priority for the administration.
- Monitor the continuously evolving tariff landscape. Given the rapid pace of tariff‑related policy changes, ranging from shifts in statutory authority to litigation over the validity of those shifts, companies should maintain active oversight of tariff developments that could affect their operations.
[1] 19 U.S.C. § 1484(a)(1)(B).
[2] Id. § 1484(a)(1)(B)(i).
[3] See 31 U.S.C. § 3729(a)(1)(C) (A conspiracy violation occurs when a person "conspires to commit a violation of subparagraph . . . (G) of the FCA").
[4] United States v. Hsu, 155 F.3d 189, 203-04 (3d Cir. 1998) ("impossibility of achieving the goal of a conspiracy is irrelevant to the crime itself").
[5] Compare United States ex rel. SW Challenger, LLC v. EviCore Healthcare MSI, LLC, No. 19 CIV. 2501 (VM), 2021 WL 3620427, at *12 (S.D.N.Y. Aug. 13, 2021) (plaintiff must show "at least one overt act performed in furtherance of" conspiratorial agreement); aff'd sub nom. Doe 1 v. EviCore Healthcare MSI, LLC, No. 22-530-CV, 2023 WL 2249577 (2d Cir. Feb. 28, 2023); with United States ex rel. Kasowitz Benson Torres LLP v. BASF Corp., 929 F.3d 721, 728 (D.C. Cir. 2019) ("To succeed on Count Five, which alleges that the defendants violated the FCA conspiracy provision, Kasowitz had to establish an underlying FCA violation.").
[6] DOJ, Factors for Evaluating Dismissal Pursuant to 31 U.S.C. 3730(c)(2)(A) (Jan. 10, 2018)
