The Trump administration’s landmark announcement of steep tariffs in April 2025, followed by extensive negotiations, has significantly reshaped the landscape of international trade. In response to this new regime and to underscore its gravity, the Department of Justice (DOJ) issued a crucial May 2025 Memorandum on White Collar Crime, explicitly designating cases involving “trade and customs fraud, including tariff evasion,” as a top priority for investigation and prosecution.
Despite this clear stance from the Department of Justice, schemes designed to unlawfully circumvent these tariffs have regrettably seen a noticeable increase. These illicit practices are multifaceted and exploit various loopholes in the complex system of international commerce. One prevalent method involves the deliberate underreporting of the value of imported goods to U.S. Customs and Border Protection (CBP), allowing importers to pay a reduced tariff duty. This often entails the fraudulent sale of goods to a related entity at an artificially low price, with the true difference in value being settled outside the scrutiny of government regulators.
Another sophisticated evasion tactic gaining traction is transshipment. This involves rerouting goods through a third-party country before their final destination in the United States. The purpose of this detour is to leverage that third country’s more favorable tariff rates with the U.S., often by re-packaging or making insignificant alterations to the goods. A compelling example of this trend was observed in April 2025, when a 21% decrease in Chinese exports to the U.S. was mirrored by an equivalent rise in Chinese exports to Southeast Asian nations, many of which enjoy more advantageous U.S. tariff arrangements.
It is crucial to understand that these methods of tariff avoidance are neither novel nor permissible. Engaging in deceitful declarations on CBP importation forms—whether regarding a product’s country of origin, its manufacture, or the affiliation between importer and exporter—can lead to severe legal repercussions. Such actions can form the foundation for criminal prosecution or trigger civil False Claims Act (FCA) actions. Even in instances where outright fraud is not proven, negligence or gross negligence in the accurate completion of customs declarations can still result in substantial civil penalties for both importers and their authorized agents.
The Department of Justice predominantly leverages specific criminal statutes to combat tariff fraud effectively. Key among these are 18 USC §541 and 18 USC §542. Section 541 criminalizes the importation of goods with understated weight, incorrect classification of quality or value, or the payment of less than the legally mandated duty. Complementarily, Section 542 prohibits the knowing sale or trade of imported goods introduced into U.S. commerce through any fraudulent document or false statement, even if the United States did not suffer a direct loss of lawful tariffs.
Violations of these critical sections carry significant penalties, including fines that can reach up to $250,000 and potential imprisonment for up to two years. Furthermore, if the act of tariff fraud involves the use of mail or electronic communications—such as the digital submission of a false customs declaration—it can escalate into charges of mail fraud or wire fraud. In cases where an organized enterprise is found to be engaged in a systematic pattern of such illegal activities that impact interstate or foreign commerce, there is also the theoretical risk of charges under the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Beyond government-led prosecutions, tariff violators are also susceptible to private whistleblower actions, known as “qui tam” suits, under the False Claims Act. These FCA suits can lead to the imposition of treble damages and considerable penalties. The DOJ actively encourages whistleblowers to come forward with information that can bolster government-prosecuted FCA cases. A recent instance in South Carolina saw the government file an FCA case seeking over $6 million in fines and penalties against an alleged tariff evader, initiated by a whistleblower’s disclosures. Even if the government opts not to pursue a relator’s case, the whistleblower retains the right to independently pursue the case in court. Whistleblowers can be employees, observers, or even competitors seeking to capitalize on knowledge of wrongdoing.
Given that tariff compliance is now a high-priority enforcement area under the current administration, businesses are strongly urged to exercise extreme diligence and uphold the most rigorous standards of compliance with all customs laws and regulations. Should any problems or irregularities be suspected, immediate consultation with legal counsel and prompt, thorough internal investigation are absolutely essential. Furthermore, if violations are indeed uncovered, a timely and voluntary self-disclosure to the Department of Justice could potentially lead to leniency and, in some circumstances, even non-prosecution, underscoring the importance of proactive legal adherence in the face of heightened regulatory scrutiny.
