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Tariffs and False Claims Act: The New Frontier of U.S. Customs Enforcement
U.S. Customs and Border Protection (CBP) collected $24.37 billion in duties, taxes, and fees on $893.15 billion worth of imported goods in Fiscal Year 2024. These figures are expected to rise dramatically following President Donald Trump’s recent implementation of emergency tariffs on multiple trading partners, potentially ushering in a new era of customs enforcement through the False Claims Act.
The False Claims Act prohibits knowingly avoiding obligations to pay money owed to the federal government, including customs duties. With these new tariffs in place, the government is expected to increase scrutiny of importers’ compliance with customs regulations.
In early February 2025, President Trump signed three executive orders imposing sweeping emergency tariffs on goods from Canada, Mexico, and China. The China tariffs went into effect on February 4, while implementation for Canada and Mexico remains on hold until March 4. Additionally, on February 10, Trump issued a presidential proclamation imposing a 25% tariff on all aluminum and steel imports from every country under Section 232 of the Trade Expansion Act.
These executive orders, issued under the International Emergency Economic Powers Act, the National Emergencies Act, and the Trade Act of 1974, authorize the president to impose duties for national security reasons. The new rates include an additional 25% duty on imports from Canada and Mexico, an extra 10% on energy imports from Canada, and an additional 10% on Chinese imports.
Importantly, these tariffs will be charged “in addition to any other duties, fees, exactions, or charges” already in place, compounding the financial impact on importers. The executive orders for Canada and Mexico also exclude goods from de minimis treatment, which normally provides duty-free exemption for imports valued under $800 imported in a single day.
The federal government has powerful enforcement tools to ensure compliance with these new tariff regimes. Under the False Claims Act, importers may be held liable for “knowingly” misstating or omitting duties owed upon import. The legal threshold for “knowingly” includes acting in “reckless disregard” of the truth, with no specific intent to defraud required for a violation.
What makes the False Claims Act particularly potent is its qui tam provision, allowing whistleblowers—including company employees—to file lawsuits against importers to trigger government intervention. These whistleblowers can receive rewards ranging from 15% to 30% of any settlement amount recovered by the government.
Recent enforcement actions demonstrate the government’s willingness to pursue customs violations across diverse industries. In October 2024, the Department of Justice filed a lawsuit against a former solar company executive seeking $1.1 million for allegedly misclassifying solar panels as LED lights. A furniture importer paid $798,334 in December 2023 for misrepresenting the value of Chinese-manufactured merchandise, while a January 2023 settlement resulted in $22.8 million in payments for misclassification of vitamin imports from China.
During Trump’s first administration, the DOJ secured a $22.2 million settlement with a German company and its U.S. subsidiaries for misrepresenting imported construction materials. Currently, the DOJ is pursuing over $11 million in duties and up to $62 million in penalties from a Florida company for allegedly avoiding special duties on aluminum wire shipments—a case initially brought under the Biden administration but continuing under Trump’s second term.
Attorney General Pam Bondi has reaffirmed the Department’s commitment to False Claims Act enforcement, stating during her confirmation hearing that the Act is “so important” in part because of the “money it brings back to our country.”
Activities that could trigger False Claims Act litigation include underreporting duties owed, transshipment through third countries to evade tariffs, misclassifying imported goods to secure lower tariff rates, and structuring shipments to stay below certain dollar thresholds.
With increased tariffs and heightened enforcement likely, importers across all industries should evaluate their customs compliance programs. Companies would be wise to foster a culture where potential whistleblowers feel comfortable raising concerns internally rather than filing qui tam actions, and to thoroughly review customs declarations for accuracy.
As the new tariff regimes take effect in the coming weeks, businesses involved in international trade face not just higher duty costs but also significantly increased compliance risks and potential legal exposure.
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16 Comments
Leveraging the False Claims Act to bolster customs enforcement is an intriguing legal tactic. However, the downstream effects on importers, supply chains, and consumer prices will be important to monitor.
Absolutely. The unintended consequences of this approach could be significant, and it will be vital to track how it unfolds in the coming months and years.
Using the False Claims Act to crack down on customs duty evasion is a novel approach. While it may boost tariff collection, I’m curious to see how it affects importers and the overall trade environment.
That’s a good point. The unintended consequences of this policy shift could be significant, and it will be important to monitor its impact on businesses and consumers.
The potential expansion of the False Claims Act into customs enforcement is an interesting legal development. I wonder how this will impact trade relationships and the flow of goods across borders.
Indeed, it will be important to see how this new approach to customs enforcement is implemented and what the broader implications might be for international trade.
The rise in tariff collection is notable, though it remains to be seen if this approach will achieve the intended economic goals. Increased customs duties could create challenges for importers and consumers alike.
You raise a good point. The downstream effects of these tariffs on industries and consumers will be crucial to monitor going forward.
The increased customs duties and tariffs are noteworthy, but their long-term impact on trade and the economy remains to be seen. I’m curious to see how importers and industries adapt to this new enforcement regime.
That’s a great point. The adaptability and resilience of businesses in the face of these policy changes will be crucial in determining the ultimate outcomes.
Interesting to see the False Claims Act being used as a tool for customs enforcement. While it may boost tariff collection, the broader implications for trade relationships and supply chains are worth monitoring closely.
Agreed. The potential disruptions to international trade and the flow of goods could have significant ripple effects that will be important to track over time.
The surge in customs duties collected is noteworthy, but the long-term effects on trade and the economy remain to be seen. I wonder how this will influence importers’ strategies and the competitiveness of US industries.
Agreed. The broader implications of this policy shift will be crucial to follow, as it could have far-reaching impacts on international trade and domestic markets.
Interesting to see the False Claims Act being leveraged to enforce tariffs. I wonder how this will impact importers and the broader trade landscape. The increased customs duties could significantly impact certain industries.
Yes, it will be important to see how companies adapt to the new tariff regime and customs enforcement. Compliance will be critical to avoid potential penalties.