Multinational Companies Face Customs Enforcement and False Claims Act Risks: Key Insights (Part II)

U.S. Customs enforcement actions and False Claims Act investigations have intensified in recent years, creating significant compliance challenges for multinational companies operating in American markets. This enforcement trend represents a growing risk area that demands executive attention and proactive management strategies.

The surge in enforcement actions stems from heightened scrutiny of import documentation, tariff classifications, and country of origin declarations. Customs and Border Protection (CBP) officials have increasingly targeted companies with complex global supply chains, particularly those with manufacturing operations in countries subject to higher duty rates or trade restrictions.

“Companies that fail to implement robust compliance programs face not only substantial financial penalties but also potential supply chain disruptions that can devastate their U.S. operations,” explained Amanda Wilson, a trade compliance attorney who specializes in customs enforcement matters. “What we’re seeing is a much more aggressive stance from federal authorities.”

Recent enforcement actions highlight the scope of these risks. In 2022, several major retailers faced multi-million-dollar penalties for misclassifying imported goods under incorrect Harmonized Tariff Schedule codes. In another notable case, a manufacturing company paid over $15 million to resolve allegations it had misrepresented the country of origin for components assembled in China but labeled as originating elsewhere.

False Claims Act (FCA) cases have added another layer of risk, as qui tam whistleblowers increasingly target customs violations. These cases often begin with internal employees identifying documentation discrepancies or witnessing deliberate circumvention of proper import procedures. The financial incentives for whistleblowers, who can receive up to 30% of any government recovery, have fueled this trend.

“The intersection of customs enforcement and the False Claims Act creates a perfect storm for unprepared companies,” noted Michael Johnson, former federal prosecutor now specializing in FCA defense. “The combination of government enforcement resources and motivated whistleblowers means that compliance shortcuts almost inevitably come to light.”

Industry sectors facing particular scrutiny include electronics, textiles, furniture, and industrial equipment – areas where complex assembly operations may involve components from multiple countries. Companies in these sectors often navigate complicated rules of origin determinations that can trigger substantial duty differences based on where manufacturing steps occur.

Enforcement has also intensified around antidumping and countervailing duty orders, which impose additional tariffs on goods deemed to be unfairly priced or subsidized. These specialized duties can exceed 100% of product value in some cases, creating strong financial incentives for evasion through transshipment or misclassification schemes.

The COVID-19 pandemic and subsequent supply chain disruptions have further complicated compliance efforts. Many companies reconfigured their supplier networks rapidly without fully implementing corresponding updates to their customs documentation processes. These hasty adjustments have created vulnerability gaps now being exploited during CBP audits and investigations.

“We’re seeing companies that made emergency supply chain shifts during the pandemic now facing questions about documentation accuracy from that period,” explained customs broker David Chen. “Even well-intentioned changes can create compliance problems when proper protocols aren’t followed.”

Effective risk mitigation requires multinationals to implement comprehensive compliance programs that include regular training, documentation audits, and clear accountability structures. Companies should also conduct thorough due diligence on suppliers and logistics partners, as third-party actions often create liability exposure.

Technology solutions have emerged to help manage these risks, with sophisticated tracking systems that verify component origins and manufacturing processes. These tools can help companies demonstrate good-faith compliance efforts should questions arise during enforcement actions.

Legal experts advise companies to conduct privileged internal reviews of their customs practices before problems emerge. Such proactive assessments can identify potential exposure areas and create opportunities for voluntary disclosures, which typically result in reduced penalties compared to violations discovered during government investigations.

As enforcement trends continue to intensify, multinational executives must recognize that customs compliance deserves strategic-level attention rather than relegation to purely operational departments. The financial and reputational consequences of violations can impact shareholder value and trigger secondary effects including supply chain disruptions, debarment from government contracts, and heightened scrutiny for future imports.