Intensified Crackdowns on Tariff Fraud Anticipated by Trade Analyst

Intensified Crackdowns on Tariff Fraud Anticipated by Trade Analyst

Increased Enforcement of Tariff Compliance Under the Trump Administration

The Trump administration's second term has seen a significant increase in Department of Justice (DOJ) enforcement actions targeting tariff compliance and evasion. This heightened focus stems from the reorganization and expansion of a specialized Criminal Division unit, now known as the Market, Government, and Consumer Fraud Unit [1][3].

This unit, tasked with prosecuting companies and senior executives involved in tariff evasion schemes such as misclassification of goods, undervaluation, and false country-of-origin declarations, is working closely with the Department of Homeland Security and Customs and Border Protection (CBP) [1][2]. The DOJ's approach now combines aggressive use of civil remedies under the False Claims Act (FCA) and criminal prosecution to pursue serious import and customs fraud cases.

Implications for Importers and Customs Brokers

The increased enforcement by the DOJ poses several implications for importers and customs brokers.

• Heightened Enforcement Risk: Companies are now facing increased scrutiny and enforcement risk not only from CBP but directly from DOJ’s specialized enforcement units targeting complex customs frauds [3].
• Compliance Program Necessity: Companies must develop and rigorously implement comprehensive import compliance programs, including proper classification, valuation, and country-of-origin documentation, to mitigate risks of enforcement actions and penalties [4].
• Self-Disclosure and Cooperation: Early detection and voluntary self-disclosure of tariff compliance violations, combined with thorough internal investigations and remedial actions, can significantly mitigate penalties, as observed in recent DOJ settlements [4].
• Whistleblower Vigilance: Industry insiders and competitors may leverage whistleblower incentives to report suspected violations, thereby increasing legal exposure for non-compliant entities [2].
• Greater Legal Exposure: Enforcement actions increasingly leverage the FCA, which carries substantial financial penalties, signaling stronger consequences for intentional or negligent tariff evasion [1][5].

Rennie Alston, CEO of customs consultant Alston Group, warned that regulators will be enforcing these tariffs more strictly. Alston, who is a licensed customs broker and a member of U.S. Customs and Border Protection's Commercial Customs Operations Advisory Committee, identified Modified Delivery Duty Paid (MDDP) as an evolving tariff evasion tactic. In MDDP, a foreign supplier becomes the importer of record, and the original company continues to buy from them without concern for customs declarations [2].

Alston also stated that the U.S. Department of Justice (DOJ) is playing a more active role in compliance scrutiny, and penalties for customs compliance errors could exceed the value of the merchandise [2]. Alston advised importers to be aware of the potential consequences of misinterpretations on customs documents, as CBP views such compliance errors as intentional. He emphasized the importance of customs brokers in helping importers understand the ramifications of customs document misinterpretations and highlighted that customs brokers play a crucial role in ensuring compliance and avoiding penalties [2].

Alston predicted that circumvention of tariffs will become the primary source of revenue for penalties, surpassing valuation and record-keeping penalties [2]. The DOJ is closely scrutinizing import documents to check for accurate information on merchandise value, origin country, and potential transshipments [2].

Under the Trump administration, it is clear that the enforcement of tariff compliance is becoming more stringent. Importers should respond by strengthening compliance infrastructure, training staff, auditing supply chain documentation, and proactively addressing potential violations to avoid costly legal consequences [4][1][2].

[1] https://www.justice.gov/opa/pr/department-justice-announces-establishment-new-market-government-and-consumer-fraud-unit [2] https://www.justice.gov/opa/pr/department-justice-announces-enforcement-action-against-importer-evading-tariffs-worth-over-100 [3] https://www.justice.gov/opa/pr/justice-department-announces-indictment-and-seizure-over-100-million-worth-counterfeit-goods [4] https://www.justice.gov/opa/pr/department-justice-announces-settlement-california-based-company-and-its-executives-allegedly [5] https://www.justice.gov/opa/pr/department-justice-announces-settlement-california-based-company-allegedly-evaded-more-150

1. The heightened focus on tariff compliance under the Trump Administration, driven by the Department of Justice (DOJ), has significantly influenced various sectors, particularly the industry, where companies are now subject to increased scrutiny and enforcement risk from the DOJ's specialized units, such as the Market, Government, and Consumer Fraud Unit [1][3].
2. Proactive awareness and adaptation are essential for businesses in several areas, including finance, as the DOJ's approach now combines civil remedies under the False Claims Act (FCA) and criminal prosecution to pursue serious import and customs fraud cases, leading to substantial financial penalties [1][5].
3. The reorganization and expansion of specialized enforcement units have extended the impact of the policy-and-legislation changes beyond general news, reaching into crime-and-justice aspects, as enforcement actions increasingly leverage the FCA to prosecute companies and senior executives involved in tariff evasion schemes [1][3].

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