Tariffs are a core element of the second Trump Administration’s economic policy, and the Administration has made clear that it views the FCA as an important tool to advance that policy, using it to target trade fraud, circumvention, and evasion. On August 29, 2025, the DOJ announced the creation of a multi-agency Trade Fraud Task Force (Task Force), designed to “aggressively pursue enforcement actions against any parties who seek to evade tariffs and other duties.” The Task Force signals a significant escalation in the Administration’s efforts to increase trade-related enforcement under the FCA, in furtherance of the Administration’s America First Trade Policy. This initiative also builds on other efforts by the Administration to target trade fraud, and it portends an increase in both civil and criminal investigations and actions. Businesses engaged in cross-border trade would be wise to reevaluate existing tariff compliance schemes to avoid costly FCA enforcement actions.
Making trade fraud an enforcement priority
Since January 2025, the Administration has repeatedly signaled its intent to invest significant resources in identifying and prosecuting trade fraud through the FCA and other statutes. In May 2025, the DOJ’s Criminal Division announced it was designating trade and customs fraud as “high-impact” enforcement priorities. At the same time, it expanded its Corporate Whistleblower Awards Pilot Program to reward individuals who report corporate violations related to “trade, tariff, and customs fraud.”
In August 2025, the Administration launched the Task Force. The Task Force is designed to increase collaboration and data sharing among DOJ and Department of Homeland Security (DHS) components to target parties circumventing or evading tariffs imposed under various trade statutes. The DOJ’s press release explains that the Task Force is intended to “bring robust enforcement against importers and other parties who seek to defraud the [U.S.]” To this end, the DOJ encouraged whistleblowers – who can include disgruntled employees, stakeholders, or domestic competitors – to refer potential FCA violations to the DOJ. The press release even includes a link to report potential violations via the DOJ’s Corporate Whistleblower Program and “encourages whistleblowers to utilize the qui tam provisions of the [FCA]” to file claims directly on behalf of the government.
In parallel, Customs and Border Patrol (CBP) – which has independent authority to issue significant penalties for misclassification and fraud under the customs penalty statute, 19 U.S.C. § 1592 – has been taking its own steps to ramp up trade fraud detection. In May 2025, CBP made explicit that declaring an incorrect value on customs forms is considered trade evasion and that the agency will “pursue any violations to the fullest extent possible.” And in October, the supply chain Artificial Intelligence (AI) company Exiger announced that it had been awarded a multi-million dollar CBP contract to modernize the detection of “illicit transshipment across global supply chains,” and other activities designed to evade tariffs, trade restrictions, and sanctions.
Taken together, the message from the second Trump Administration is clear: Trade fraud is a top enforcement priority, and both the DOJ and CBP are willing to expend significant resources to detect and deter tariff evasion.
How trade fraud enforcement under the FCA works: Reverse false claims
Traditional, non-trade-related FCA cases typically assert that the defendant knowingly presented a false or fraudulent claim for payment by the government. By contrast, in a trade fraud FCA case – a so-called “reverse” FCA action – the government or whistleblower alleges that a defendant submitted a false claim or statement to the government with the intent to lower the amount of duties that are otherwise owed to the government.
While less common than traditional FCA cases, the prevalence and significance of reverse FCA claim lawsuits has been on the rise. In February 2025, for example, the Fourth Circuit held that a health care company’s alleged violations of its own Corporate Integrity Agreement (CIA) were sufficient to give rise to a reverse false claim. The panel held that, because breach of the CIA triggered stipulated monetary penalties to be paid to the government, the alleged violations were sufficient to create an unpaid “obligation” within the meaning of the FCA.
In the context of trade, the DOJ uses the FCA to pursue importers that make knowingly or recklessly false statements that enable the importer to avoid paying tariffs or customs duties.
Industry awareness of FCA investigations
Trade fraud enforcement was already increasing in recent years, with the DOJ announcing multiple major settlements in trade-related FCA cases in 2025. Major importers of products ranging from wood flooring, to countertop products, to plastic resin, to tungsten carbide products, have agreed to multi-million dollar settlements, with the DOJ announcing in several cases that relators would receive seven-figure portions of the settlements – and enforcement actions show no sign of slowing down. On the contrary, with the DOJ actively encouraging potential relators to stand in the shoes of the government, tariff-related qui tam actions are primed to serve as a key enforcement tool for the administration.
But because the statute requires that new qui tam actions be filed under seal, importers may not immediately know that they are the subject of an FCA suit or investigation, effectively shortening the window of time they have to investigate and address any allegations. Proactive efforts to reinforce customs compliance and augment supply chain recordkeeping are therefore crucial to keeping up with the shifting enforcement landscape.
Primary risk areas
Companies face increased vulnerability to trade-related FCA liability in three primary areas: (i) misclassification; (ii) country of origin determinations and transshipment; and (iii) undervaluation.
Misclassification
The tariff system typically employs classification categories under the Harmonized Tariff System of the U.S. to determine the proper duty rate. Companies that misclassify goods – whether intentionally or merely recklessly – such that the goods end up in a lower or exempted category will be vulnerable to FCA actions. Independent of the FCA, even negligent misclassification can result in very significant customs penalties under 19 U.S.C. § 1592.
Country of origin determinations
False country of origin determinations that result in unpaid duties – particularly those involving the transshipment of goods through third countries in a manner that obfuscates their true origin – will also likely face enforcement scrutiny. When a good does not come entirely from a single country, trade law employs a “substantial transformation” test to determine the proper country of origin. If, for example, a good is initially created in Country A and is substantially transformed after reaching Country B, it is properly classified as originating from Country B. But if no substantial transformation occurred, improperly classifying that good as originating from Country B would risk FCA liability. And with tariff rates currently varying significantly from country to country, coupled with the FCA’s allowance for treble damages, the monetary penalties imposed in these types of actions could prove substantial.
Undervaluation
Finally, because import duties are typically driven by the value of goods, companies alleged to have reduced applicable tariff rates by undervaluing goods to customs officials will be at risk of FCA enforcement.
In all three areas, companies acting as the importer of record may be held liable not only for their own employees’ actions, but also for actionable failures to vet false information provided by upstream parties like suppliers and sourcing agents. Third party diligence and visibility into supply chains is therefore critical to companies’ overall compliance schemes. Playing the “my supplier told me” blame game will not satisfy relevant legal standards if importers have had notice of some fact making the supplier’s representation questionable.
Island Industries
The Ninth Circuit’s recent decision in Island Industries Inc. v. Sigma Corporation serves as a case study in how the Administration and qui tam relators may employ the FCA to target tariff evasion. In June 2025, a Ninth Circuit panel affirmed the district court’s decision and upheld a $26 million judgment against Sigma Corporation (Sigma) for violating the FCA by making false statements on customs forms to avoid paying antidumping (AD) duties on imports from China.
Island Industries, a competitor of Sigma, alleged in its qui tam action that Sigma misleadingly described its imports on customs forms and falsely declared that they were not subject to the AD duties. On appeal, the Ninth Circuit upheld the $26 million penalty imposed by the district court. In doing so, the panel made two key findings. First, it held that it had jurisdiction because the FCA and its qui tam provisions authorized suit in District Court notwithstanding the fact that tariff matters are typically litigated before the Court of International Trade. Second, the panel held that the FCA applies to false statements in a customs context even if those statements are also subject to the customs penalty provisions of 19 U.S.C. § 1592. Rather than displacing the FCA, the panel held, section 1592 provides overlapping authority and an alternative route for recovery.
Given the Ninth Circuit’s holdings and the Administration’s current enforcement priorities, Island Industries is poised to be a bellwether for increased FCA actions targeting tariff evasion. As companies involved in importing activities face this new enforcement landscape, they would be wise to examine their current trade compliance programs to isolate points of potential liability.
Looking ahead
Companies engaged in cross-border trade should conduct internal assessments to determine whether their current suite of compliance policies remain sufficient in this new era of tariff enforcement. Conducting risk-mapping, screening, and due diligence to identify potential risks stemming from trade and tariff issues is paramount. Preparing a customs compliance manual with detailed import procedures, and training key personnel on its components, can further help companies avoid inadvertent errors in the customs process.
Additionally, companies would be wise to implement robust supply chain traceability programs and to structure supplier agreements to require that contractors provide supporting documents relating to labor, material, and manufacturing stages upon request. Moreover, because self-reporting can be a major mitigating factor in both civil and criminal proceedings, companies should revisit any relevant voluntary self-disclosure policies. Finally, in the event of a subpoena or inquiry into customs duties or import practices from the DOJ’s Civil Frauds section or the civil division of a U.S. Attorney’s Office, companies should contact counsel experienced in FCA investigations and litigation, as this may be an indication that a whistleblower has filed a sealed FCA qui tam action, adding a different kind of complexity to a thorny problem.