What Every Multinational Company Should Know About … The Rising Risk of Customs False Claims Act Actions in the Trump Administration

On February 20, 2025, the Deputy Assistant Attorney General for the Commercial Litigation Branch at the U.S. Department of Justice (DOJ), Michael Granston, emphasized using the False Claims Act (FCA) to address U.S. Customs & Border Protection (Customs) violations at the Federal Bar Association’s annual qui tam conference. According to Granston, the Trump administration will seek to “aggressively” deploy the FCA as a “powerful” enforcement mechanism against importers that take steps to evade customs duties, including all the new tariffs being imposed by the Trump administration.

The application of the FCA for underpayments of customs tariffs is already a growing trend. The increased tariffs and attention will combine to increase the number of FCA actions targeting tariff underpayments and the potential amount of recoveries. The U.S. government has unparalleled access to detailed import data covering nearly all imports, giving it the ability to run algorithms to see discrepancies and anomalies that might indicate the underpayment of tariffs. The FCA also can be enforced by whistleblowers who file qui tam suits in the government’s name, in hopes of receiving a share of the recovery in successful cases. Taken together, these factors mean the scene is set for a vast expansion of the use of the FCA as a tool to combat tariff underpayments.

Against this scrutiny, importers should ensure they accurately determine and pay all tariffs, including the new Trump tariffs. The remainder of this article summarizes the heightened risks that the FCA poses in the Trump administration, as well as some practical steps companies can take to minimize the risk of an FCA action.

The Application of the False Claims Act to Customs Violations

The False Claims Act, 31 U.S.C. § 3729 et seq., is a special form of civil remedy used by the government to recover funds the government paid as a result of fraud — typically, a false statement or document that supports a demand for government monies. The FCA allows the government to recover treble damages plus penalties up to $28,619 for each violation. Thus, the FCA authorizes the government to seek not only any tariff underpayments but also three times the amount of the underpayment and penalties for each instance of underpayment. Needless to say, the FCA poses enormous financial risk to importers.

The statute also enables private individuals to act as whistleblowers (or “relators”) by filing qui tam actions on behalf of the government. If the action is successful, the relator can receive up to 30% of the money recovered in the litigation, plus attorney’s fees, with the rest going to the government. This potential for recovery has spawned an active plaintiffs bar that encourages the filing of qui tam actions.

Indeed, the 979 qui tam actions filed by relators in the fiscal year ending in September 2024 constituted a 37% increase over the prior year and a 60% increase over 2019 filings. In addition, the government also originated 423 investigations on its own — almost triple the number the government originated five years ago. Further, the government reported that it recovered almost $3 billion in settlements and judgments in 2024, which followed a nearly-as-high recovery of $2.8 billion recovered in 2023.

In his speech, Granston explained the FCA could be a powerful tool in recovering under-reported tariffs. With the Trump administration announcing an array of new tariffs, the amount of tariffs imposed — and the risk of FCA actions — are both certain to increase. The emphasis on tariffs and trade continued at the conference. Jamie Ann Yavelberg, director of the Fraud Section of the Civil Division, identified tariff evasion as a “key area” for enforcement, with a focus on false statements about country of origin, declared value of goods, and the number of goods involved.

The following are examples of the Department of Justice’s use of the FCA to address underpayment of customs duties and show the broad range of customs issues that can support an FCA action:

• One importer paid almost $22.8 million to settle FCA allegations that it misclassified its vitamin products to avoid paying the full amount of customs duties due, as well as its failure to pay back duties owed after correcting certain misclassifications.
• Another importer paid $22.2 million to settle FCA allegations that it misrepresented the nature, classification, and valuation of its imported construction products to evade antidumping and countervailing duties, as well as improperly claiming preferential treatment under free trade agreements, with the relator receiving $3.7 million.
• A third importer paid $45 million to resolve allegations that it misrepresented the country of origin on goods that should have been declared to be of Chinese or Indian origin, thereby evading high antidumping and countervailing duties imposed on the entries from those countries.
• A fourth importer paid $5.2 million for allegedly evading antidumping and other duties by falsely describing wooden bedroom furniture imported from China as “metal” or “non-bedroom” furniture on documents submitted to CBP while also manipulating images of their products in packing lists and invoices, directing their Chinese manufacturers to ship furniture in mislabeled boxes and falsifying invoices to try to evade detection.
• Finally, another importer paid $4.3 million for allegedly failing to include assists (customer-provided production aids) in the declared value of its entries.

Key areas where FCA cases are most likely to arise include:

• The misclassification of goods, to move them from a higher to a lower tariff classification.
• The misclassification of goods, to move them out of the coverage of the new Trump tariffs such as those imposed on aluminum and steel derivative products.
• Incorrectly declaring the wrong country of origin, to avoid the Section 301 tariffs imposed on China or on countries subject to the new tariff proclamations such as China, Canada, or Mexico.
• Failing to pay antidumping or countervailing duties, which often have very high tariff rates.
• Failing to accurately declare the correct value of goods.
• Failing to include assists (production aids provided by the customer) or royalties within the declared value.
• Failing to have a customs transfer pricing study in place, if this results in the undervaluation of goods imported from an affiliated company.
• Failing to correct past entry information if Customs notifies the importer of a change that impacts the duty rate, such as by issuing a Form 28 Request for Information or Form 29 Notice of Action. When this occurs, Customs expects that importers will use the Post-Summary Corrections Process to correct all analogous prior entries and to pay back duties on those prior entries.

Another factor that increases FCA risk is that Customs maintains two additional whistleblower programs of its own — one under the Enforcement and Protect Act (EAPA), for reporting of antidumping and countervailing duty evasion, and an eAllegations portal for all other claims of tariff evasion. It remains to be seen whether the new administration will mine these sources for FCA enforcement purposes.

Practical Steps Importers Can Take to Minimize Potential FCA Actions

Given the likelihood of increased enforcement, as well as the sharply rising levels and types of tariffs, importers should prioritize customs compliance, as any underpayments raise the specter not only of customs penalties but also potential FCA damages and penalties.

Customs-Related Steps

In a high-tariff environment, the stakes for compliance miscues are substantial and include potential penalties and interest for underpayments as well as FCA risks. Some key areas to consider for ongoing customs compliance include the following:

• Inaccurate classifications can result in incorrect duties or penalties, so confirm your company has procedures to correctly classify goods using the correct Harmonized Tariff Schedule (HTS) codes and maintains a regularly updated import classification index to reflect new products or changes in tariff codes.
• Confirm that your organization maintains a detailed customs compliance manual that outlines procedures for classification, valuation, origin determination, recordkeeping, interactions with brokers and Customs, and other relevant matters that impact the accuracy of information reported to Customs and can create underpayments.
• Review and ensure there are procedures to track and properly report assists, royalties, or other non-invoice costs that might affect the declared value of imported goods. Misreporting these costs could lead to underpayments of duties and penalties.
• Ensure that there are procedures to regularly review entries after entry to identify potential errors in valuation, origin declarations, classification, or other entry-specific items that impact how much duties are owed.
• Regularly use post-summary corrections as a means of correcting error, as most entry-related information can be corrected until liquidation without penalty (generally, around 314 days after entry).
• In addition to post-entry checks, more detailed customs audits can uncover underlying issues that can lead to customs penalties. Major importers should consider conducting regular customs audits, pulling a judgmental sample of entries for thorough examination to determine if there are areas that contain errors.
• Ensure your company maintains procedures for overseeing customs brokers and freight forwarders, including written protocols that are consistently followed to ensure there is proper oversight of customs brokers and freight forwarders.
• Customs traditionally has not imposed penalties if an importer initiates a voluntary self-disclosure before the government begins its investigation. Importers should be aggressive in using voluntary self-disclosures to minimize the likelihood of customs penalties and related FCA liability risks.
• Request confidential treatment for your company’s import data. Much of the information filed as part of the entry process is available for review by companies, such as PIERS and Panjiva, which aggregate import data and sell it to the public. By filing a government confidentiality request and keeping it up to date, your company can limit the ability of third parties (including competitors and whistleblower law firms) to analyze import data to discern trading patterns, supply chains, and exposure to high-risk regions or high-tariff products.

Compliance and Whistleblower Steps

In addition to the customs-related steps listed above, maintaining a robust corporate compliance program that addresses customs issues and general whistleblowing concerns can help prevent an internal complaint from turning into a qui tam suit. Some measures to consider include the following:

• Maintain an Effective Compliance Program. Maintain a corporate compliance program that meets DOJ’s expectations for effectiveness, and ensure the program is coordinated with a well-tailored customs compliance program. Effective compliance programs are marked by senior leadership support, adequate resources, use of risk assessments, well-developed policies and procedures, tailored trainings, encouragement of internal reporting, and meaningful responses to complaints. Given the heightened risk environment, make sure your company has a compliance officer or team that understands customs issues and can follow up on reports of potential customs violations.

• Encourage Internal Reporting & Whistleblower Protection. Establish a confidential internal reporting mechanism (e.g., hotline). Protect employees from retaliation to encourage internal reporting over external whistleblower actions. Investigate and address complaints promptly and transparently.

• Conduct Regular Training & Education.Train employees on Customs and FCA requirements and the risks of false claims. Effective training is tailored to the roles and responsibilities of given groups of employees.

• Strengthen Internal Controls & Audits. Perform regular post-entry checks and internal audits to identify and correct potential customs violations and underpayments.

• Respond Proactively to Potential Violations.Act quickly if an issue is detected to correct errors, and consider self-reporting to Customs when necessary, both to lock in a no-penalty situation with Customs and to reduce the likelihood of qui tam suits.

• Respond Promptly and Fully to All Customs Forms 28 (Requests for Information), Form 29s (Notices of Action), and Informal Inquiries. Importers should designate an internal employee to be an ACE contact so that your company receives Customs notices at the same time as the customs broker, instead of relying on the broker to forward any notices. Any requests for information or Customs actions should be investigated thoroughly and have a well-supported response (generally required within 30 days).

• Follow Through on Customs Notices. If Customs makes a determination, such as reclassifying a product, then Customs requires that the importer search through its recent imports and reflect the Customs decision for all identical or analogous entries. In some cases, substantial customs penalties or FCA liability have arisen from the failure to do so. Ensure that the full implications of any Customs action are thoroughly understood and that your company uses the Post-Summary Corrections process to reflect any changes mandated by Customs. Consider using a voluntary self-disclosure to reflect changes to older entries.

• Follow Up Thoroughly on Any Civil Investigative Demand (CID) from DOJ or Any Qui Tam Complaint.The receipt of a CID or qui tam complaint always requires the highest level of attention, given the draconian penalties the FCA authorizes. Follow up on the receipt of these items to take swift action to investigate and defend against those claims, using outside counsel with experience in the FCA and customs issues.

By proactively addressing customs compliance, importers can help minimize the risk not only of customs penalties but also the risk of qui tam lawsuits. Especially in a high-tariff environment, customs compliance and taking all available steps to ensure the proper payment of all tariffs lawfully due is essential and needs to be at the top of the list for any risk-based compliance program.

フォーリー・リソーシズ

To help importers cope with the unpredictability of this increased risk of FCA enforcement, Foley’s International Trade, Supply Chain, and False Claims Act Teams offer focused, practical resources to help manage international trade. These include:

• ウェビナー
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  • 2025 In-House Connect Supply Chain & Trade Law CLE Summit: This webinar contained four programs relating to the incoming administration, including tax, trade, supply chain contracting, and supply chain integrity risks as well as coverage of international trade topics relating to Mexico:
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• 書面資料
  • Six-Step Tariff Risk Management Plan:Our white paper and a six-step tariff risk-management program on “Managing Import and Tariff Risks During a Trade War.”
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