Overview
The first eight months of President Trump’s second term have resulted in a substantial increase in duty liability on virtually every import from almost every country in the world. And these additional duties have been added to existing duty liability, both from normal customs duties, Section 301 duties from the first Trump administration, and dozens of existing antidumping and countervailing duty orders. This increased liability means that companies involved in import transactions face a heightened risk of potential liability, either because of negligence in the import process or because of improper efforts to reduce customs duties.
The increased risk to importers is evident in two specific areas: the recent announcement by the US Department of Justice (DOJ) of a Trade Fraud Task Force to combat potential customs fraud, and increased awards under the False Claims Act (FCA) arising out of improper reporting of customs duty liability. Both developments increase the risk of liability to all parties in the import process. We summarize these developments below.
Launch of Trade Fraud Task Force: Likely as a direct result of these increased tariff rates, US Customs and Border Protection (CBP) has reported 160% increase in the number of complaints of potential tariff evasion.
On August 29, 2025, the DOJ announced a cross-agency initiative with the Department of Homeland Security designed to strengthen detection and prosecution of trade-related fraud. The Task Force, which launched with a dedicated email address and online form for reporting misconduct, underscores the government’s commitment to rooting out duty evasion, misclassification, and other customs violations. This coordinated infrastructure not only expands DOJ’s investigative capacity but also lowers the barrier for whistleblowers and competitors to bring potential violations to the government’s attention.
The task force is in a number of structural initiatives the DOJ has undertaken to step up its enforcement of customs fraud. In May, the Department announced "trade and customs fraud, including tariff evasion" as a priority enforcement area, and soon after amended its Corporate Whistleblower Awards Pilot Program to cover corporate trade, tariff, and customs violations. And in July, the DOJ restructured its Market Integrity and Major Frauds (MIMF) Unit to form the Market, Government, and Consumer Fraud Unit, bringing in significant personnel from the Consumer Protection Branch to focus on criminal enforcement of trade and customs fraud. Taken together, these actions signal the Department’s commitment to devoting substantial resources and prosecutorial power to this area.
Increased Use of the False Claims Act: One of the mechanisms through which increased enforcement could occur is through the increased use of the False Claims Act (FCA).
The FCA is the federal government’s primary civil enforcement statute for combating fraud involving the payment of federal funds and programs. A distinctive feature of the FCA is its qui tam provision, which permits private whistleblowers, known as "relators," to bring actions on behalf of the United States and – importantly – to share in any resulting recovery. The statute encompasses a broad range of misconduct, including not only knowingly or recklessly submitting false claims or statements to obtain payment by, or to avoid a payment to, the federal government, but also "causing" the submission of such claims/statements.
Critically, FCA liability is not confined to importers of record; it extends to any party (including individual owners, executives and employees) that knowingly/recklessly participates, or conspires to participate, in a fraudulent scheme that results in the submission of false claims or statements to the federal government. Moreover, the FCA imposes joint and several liability of up to treble the amount of evaded duties. This expansive reach distinguishes the FCA from the narrower enforcement authority of CBP, which extends only to importers of record and imposes only single damages, thereby making it a greater source of potential liability for parties throughout the supply chain.
A clear example of the potential impact of the FCA was the announcement in mid-August of the resolution of a case against Allied Stone Inc., a Dallas-based importer and distributor of countertop and cabinetry products, and its president. Through this resolution, Allied Stone and its president have agreed to pay a total of $12.4 million to resolve allegations that they violated the FCA by evading Section 301, antidumping, and countervailing duties on quartz surface products imported from China.
In addition to its relatively large settlement amount, this case is noteworthy for three specific reasons.
- The Relator Was an Employee of the Defendant. The relator was an employee of one of the corporate defendant’s US divisions, underscoring the importance for companies engaged in the importation of goods from China and other high-tariff countries to implement and strengthen robust compliance programs. Such programs should include effective mechanisms for responding to internal reports of potential tariff evasion.
- Numerous Duty Schemes Were Unlawfully Avoided. In previous years, most imports – even those from China – were subject to only limited duties. Today, imports – and in particular, imports from China - are subject to a wide range of potential duty programs, which can significantly increase the amount of a potential claim. In this case, the defendants were alleged to have engaged in the evasion of antidumping, countervailing, and Section 301 duties owed to the United States by misclassifying these entries and by reporting an erroneous country of origin.
- Duty Circumvention Was Easy to Detect. The relator documented her observations in connection with two separate construction projects, during which she noted that defendants procured most of their stone materials in a non-transparent manner. Although she did not have access to the entry summaries submitted to the government, she observed other substantial irregularities in the shipping processes. She compiled contemporaneous records, including communications, order forms, and shipping documents, to substantiate her claims. A central piece of evidence was photographs (which were included in the complaint) of the shipping crates used for quartz products, which highlighted discrepancies in labeling and packaging as compared to crates for other stone products. For example, crates containing granite included detailed labels with information regarding the country of origin and type of stone, whereas crates containing quartz products omitted such identifying information. Moreover, quartz products were allegedly packaged differently – using additional layers of paper and plastic – in an apparent effort to conceal the nature of the contents. These methods of concealment underscore the importance of a compliance program that does not operate on autopilot, but rather includes hands-on surveillance and monitoring, including physical spot audits/inspections of both packaging and the contents of the shipments themselves.
The Allied Stone settlement is consistent with a series of recent FCA enforcement actions addressing customs and duty evasion, including those involving Grosfillex Inc. and Barco Uniforms Inc.
All of these developments suggest that companies operating in high-tariff sectors should expect an increasingly aggressive enforcement environment, with both whistleblowers and government agencies better positioned than ever to bring FCA cases and other enforcement actions.
