The U.S. trade compliance landscape is undergoing a calculated shift, forcing importers to reassess compliance practices, systems, and technology around imported goods and tariff exposure. In early 2025, the emphasis of trade enforcement policy transitioned strategically from national security and export controls (e.g., microchips, military technology, dual-use products) to an increased focus on economic security and import tariffs, with the current administration expanding enforcement capacity and coordination to bring intense scrutiny to tariff evasion and customs fraud.
The crackdown on tariff evasion is no surprise given that import tariffs have become a tremendous revenue source for the government: U.S. Customs and Border Protection (CBP) collected a record-breaking $200 billion in tariff revenue in 2025. With such large sums at stake, the administration launched a cross-agency Trade Fraud Task Force (TFTF), allocating an additional $2 million in funding for the TFTF at the start of 2026.
This task force brings together the civil and criminal investigative arms of the U.S. Department of Justice (DOJ), Homeland Security, and CBP to “enhance efforts to prevent trade fraud that deprives the government of vital revenues, threatens critical domestic industries, undermines consumer confidence, and weakens national security.”
In the same vein, the DOJ expanded whistleblower incentives to encourage the trade community and general public to report suspected trade violations under the False Claim Act (FCA). The FCA imposes treble damages and penalties on those who knowingly and falsely claim money from the United States or knowingly fail to pay money owed to the United States.
This enforcement avenue is paying off: settlements and judgments under the FCA exceeded $6.8 billion in fiscal 2025 — the highest in a single year, with whistleblowers filing 1,297 qui tam lawsuits. In fact, whistleblowers are a force multiplier; depending on the size of the FCA settlement, tipsters’ monetary reward can run into the millions, reinforcing incentives to report tariff evasion.
How Fraudsters (Unsuccessfully) Evade Import Tariffs
With the cost of import tariffs potentially in the millions of dollars, companies are legitimately tasking their trade compliance teams to mitigate tariff exposure. However, some bad actors are pushing the legal boundaries to protect the bottom line.
From undervaluing imported items, misclassifying Harmonized Tariff Schedule (HTS) codes, and creating illegitimate shell companies to misrepresenting country of origin and dodging anti-dumping and countervailing duties, fraudsters are getting creative with tariff evasion tactics.
Illegal transshipment is a particularly deceptive tactic, often used to disguise an import’s country of origin to avoid duties. For example, in addition to knowingly misclassifying HTS codes and failing to pay marking duties, a North Carolina-based distributor of tungsten carbide products agreed to a $54.4 million FCA settlement to resolve a qui tam complaint alleging that the company transshipped Chinese‑origin products through Taiwan, falsely declaring Taiwan as the country of origin to avoid Section 301 tariffs.
In another recent country-of-origin deception, MGI International, a global plastic resin distributor, agreed to pay $6.8 million to resolve an FCA liability. The company mispresented the country of origin on paperwork submitted to CBP to avoid paying duties totaling more than $4.5 million owed on products imported from China.
Notably, while CBP historically relied on administrative remedies (e.g., fines, liquidated damages), the DOJ raised the stakes in 2025, shifting tariff fraud into the civil and criminal arena. In this instance, MGI’s former chief operating officer pleaded guilty to one count of conspiracy to smuggle goods into the U.S. and faces a maximum penalty of five years in prison — a high personal price to pay for attempting to evade import tariffs.
Best Practices to Balance Risk with Profits
As the DOJ scales tariff enforcement via the cross-agency TFTF, pairing civil tools with criminal pathways, companies must prioritize transparency, accuracy, and accountability in their compliance programs. Import tariffs errors can become an FCA exposure — not just a customs penalty — if authorities view duty underpayment as knowingly avoiding an obligation. The key is to separate defensible tariff mitigation strategies from tariff evasion risk.
When properly documented, there are tariff mitigation strategies that can legally reduce exposure:
Binding rulings on classification and origin (reduces ambiguity before entry)
Product engineering that changes classification (applicable only if the product truly changed)
Supplier diversification and lawful origin shifts (with real manufacturing change)
Foreign trade zones (FTZs) and duty drawback (when operationally feasible)
First sale (where legally available and properly structured)
In contrast, high-risk tactics tend to trigger investigations:
Declaring an origin that doesn’t match manufacturing reality, including “pass-through” routing
Reclassifying at scale without technical support, especially when elimination of duty is the outcome
Ignoring marking requirements or treating them as a downstream packaging issue
Next Steps
As tariff volatility and intensifying DOJ pressure push companies to revisit sourcing, classification, and landed cost models, compliance leaders need an import tariff framework that helps them understand their evolving exposure, optimize classification processes to ensure accuracy and auditability, and manage high-risk areas (e.g., Chinese imports) — all at scale.
First and foremost, building a single source of truth for classification and duty factors helps companies mitigate misclassification risk, one of the most common yet preventable failure points. In addition, importers should ensure country of origin links to inscrutable manufacturing steps and supplier attestations, especially for goods potentially affected by Section 301 or antidumping and countervailing duties.
And perhaps most importantly, by calibrating compliance process for auditability with an automated, scalable trade compliance solution, organizations can ensure the accuracy and defensibility to withstand intense scrutiny in today’s rapidly-evolving trade environment.
by Jackson Wood, Director of Industry Strategy at Descartes
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