Tariff Evasion Is Within DOJ’s Crosshairs: Potential Criminal and Civil Consequences for Noncompliance With Increased U.S. Tariffs

The first six months of the current Trump administration have made it clear that tariffs are here to stay and that noncompliance — intentional or otherwise — will be subject to potentially significant criminal and civil liability. Indeed, the administration has committed to an August 1, 2025, deadline for new country-specific tariffs to begin. The scale, speed, and complexity of the changes in the U.S. tariff landscape over the previous six months (which will likely continue) has created an environment ripe for noncompliance. In light of this, it is now more important than ever for companies to have reliable controls in place to help ensure compliance with U.S. customs law, including provisions for identifying and addressing instances of noncompliance, to help avoid becoming the subject of lengthy and costly government investigations and enforcement actions.

This article discusses the categories of tariffs potentially applicable to companies, summarizes the tools the Trump administration intends to use in pursuing criminal and civil enforcement of tariff violations, and provides some insights on actions that companies can take today to help avoid being the target of government investigations and enforcement actions.

Tariffs, Tariffs, Tariffs

Over the past six months, articles imported into the United States have become subject to significant additional tariffs. These include country-specific tariffs that target all articles manufactured in a given country (e.g., tariffs imposed on China, Mexico, and Canada under the International Emergency Economic Powers Act) as well as product- (or sector-) specific tariffs that target a specific category of articles manufactured anywhere (e.g., tariffs imposed on steel, aluminum and derivative/downstream products, and automobiles and automobile parts under Section 232 of the Trade Expansion Act of 1962). The Trump administration has promised to impose significant additional country-specific tariffs starting August 1, 2025, in addition to significant sector-specific tariffs in the near-to-medium term (e.g., on copper and derivative products, semiconductors and derivative products, and pharmaceuticals and derivative products).

The rapidly evolving nature of the U.S. tariff situation makes it difficult for companies to keep up with the changes. Nevertheless, companies that import articles into the United States are legally responsible for their customs compliance activities. This includes reporting accurate data about the imported products to allow the government to accurately assess tariffs/customs duties owed. In general, there are three data elements that determine tariff liability. Reporting inaccurate information related to these three data elements can result in the underpayment of tariffs, which presents enforcement risks for companies.

• Tariff Classification: Sector-specific tariffs are imposed based on tariff classification. The correct tariff classification of a product is not always clear, as certain products may appear to be covered by multiple tariff provisions even though only one classification can be declared upon importation and is technically correct. Declaring an incorrect tariff classification can lead to the underpayment of tariffs/customs duties, resulting in potential government scrutiny.

• Country of Origin: Country-specific tariffs are imposed based on country of origin. Thus, declaring the incorrect country of origin can lead to the underpayment of tariffs/customs duties. Determining the country of origin of a product is not necessarily straightforward, particularly for products that undergo production in multiple countries and/or are assembled in one country using components manufactured in other countries. In such circumstances, the United States uses a subjective, fact-dependent “substantial transformation” test to determine country of origin. The test is informed by court decisions and agency rulings, and importers need to consult the relevant precedent when determining the correct country of origin. With significantly heightened tariffs imposed on products manufactured in certain countries (e.g., China), there is a heightened risk of government scrutiny for declaring an improper country of origin.

• Valuation: The additional tariffs imposed to date are ad valorem in nature (i.e., calculated based on the declared customs value). Declaring an incorrect value upon entry can lead to the underpayment of tariffs/customs duties.

Administrative Enforcement of Tariffs Is Expected to Increase

Administrative enforcement by U.S. Customs and Border Protection (CBP) and/or Department of Homeland Security/Homeland Security Investigations (HSI) is certain to increase. The imposition of increased tariffs in a short period of time means that companies will mitigate by making changes to their supply chains/country of origin, reevaluating tariff classifications, and/or implementing customs valuation strategies (e.g., “first sale”). CBP and HSI will likely be questioning importers about such changes through requests for information, audits, and/or investigations. As a result, companies should be documenting the legal analysis in support of their mitigation strategies in anticipation of questions from the government.

Criminal Trade/Customs Enforcement Is Also Expected to Increase

Recently, the head of the U.S. Department of Justice (DOJ) Criminal Division, Matthew Galeotti, issued a memorandum to all Criminal Division personnel (entitled “Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime”). The memorandum represented the Trump administration’s first comprehensive articulation of white-collar priorities and revised corporate enforcement policies. The memorandum sets forth 10 “high-impact areas” that the Criminal Division will prioritize in investigating and prosecuting white-collar crime. Notably, “[t]rade and customs fraud, including tariff evasion” is listed as one of the high-impact areas the Criminal Division will focus on. Indeed, the DOJ memorandum states in more detail:

The Criminal Division must also focus resources on threats to the U.S. economy, American competitiveness, and our national security. Trade and customs fraudsters, including those who commit tariff evasion, seek to circumvent the rules and regulations that protect American consumers and undermine the Administration’s efforts to create jobs and increase investment in the United States. Prosecuting such frauds will ensure that American businesses are competing on a level playing field in global trade and commerce.

While criminal enforcement of tariff evasion is not new (and, indeed, it is occurring with regard to antidumping/countervailing duties as well as to the additional tariffs imposed during the first Trump administration), the current administration is certainly more clearly and more strongly articulating its plan to enforce compliance with tariffs.

The same DOJ memorandum announced revisions to the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), which offers incentives to companies to self-disclose misconduct, cooperate with the DOJ investigation related to the self-disclosure, and fully remediate the causes of the misconduct. The memorandum made clear that DOJ will provide more leniency in return for self-disclosures, including related to customs and trade fraud.

In an effort to wield a stick in addition to providing a carrot of additional leniency under the revised CEP, the memorandum also announced modifications to the Criminal Division’s Corporate Whistleblower Awards Pilot Program. The Whistleblower Program is an initiative that creates an opportunity for whistleblowers who provide original information regarding certain types of corporate crime to be eligible for a portion of a financial award should the DOJ successfully bring an enforcement action with a monetary forfeiture greater than $1 million. The recent revisions added areas in which the government seeks to attract tips that align with administration priorities, including related to trade, tariff, and customs fraud. This program is ripe to attract the attention of a company’s competitors as well as current and former employees.

Finally, DOJ recently announced the formation of the Market, Government, and Consumer Fraud Unit (MGCF Unit), which will be part of the Criminal Division Fraud Section. While the MGCF Unit’s role is yet to be fully defined, DOJ has indicated that it will be responsible for criminal investigations involving alleged noncompliance with U.S. tariffs, including misclassifying goods, undervaluing goods, or improperly assigning a country of origin to goods to achieve lower tariff. Individuals seeking to obtain a whistleblower award from DOJ will be incentivized to report potential tariff evasion schemes to DOJ, which could result in investigations by the MGCF Unit.

Taken altogether, these recent policy announcements are a strong warning that the Trump administration intends to focus criminal enforcement resources on tariff evasion.

Civil Trade/Customs Enforcement Expected to Increase

DOJ has also signaled that it intends to increase its use of the False Claims Act (FCA) to impose civil liability for tariff violations. The FCA is a U.S. federal law that imposes liability on individuals and companies that submit false claims to the government, and it is the U.S. government’s primary enforcement tool to address alleged fraud against the government. While the FCA is often used to combat fraud in the government contracting/healthcare industries, it has also been used as a tool to tackle tariff and customs fraud, including related to the first Trump administration’s tariffs on products from China.

In a keynote address at the Federal Bar Association’s annual qui tam conference earlier this year, DOJ Deputy Assistant Attorney General Michael Granston stated that DOJ intends to make “illegal foreign trade practices” a focus of FCA enforcement. At the same conference, the Director of the DOJ Civil Fraud Section, Jamie Ann Yavelberg, identified customs and tariff evasion as a “key area” for enforcement, specifically referencing misconduct surrounding (1) “where a product is coming from,” (2) the product’s “declared value,” and (3) the “number of goods” involved.

While the FCA is frequently used in connection with trade violations, the FCA risk for companies is significantly increased given the Trump administration’s focus on tariffs as an economic and foreign policy tool. Further, DOJ’s likely increasing use of the FCA to combat tariff fraud has the potential to result in significant financial penalties for companies given that the FCA provides for treble damages and civil penalties (in addition to other potential criminal fines and penalties). Finally, the FCA’s qui tam provisions empower private whistleblowers to initiate FCA claims, file suit on the government’s behalf, and receive a monetary award in successful qui tam actions, thereby creating another incentive and avenue for whistleblowers to raise potential trade violations. Indeed, the qui tam provisions — like the DOJ Whistleblower Program noted above — is ripe to attract the attention of a company’s competitors as well as current and former employees.

Takeaways for Companies Subject to Current or Forthcoming Tariffs

In light of the criminal and civil risks discussed above, companies should be taking steps today to minimize the likelihood that they become subject to tariff-related government investigations and enforcement actions. More specifically:

• Companies should review and update, as necessary, their internal controls over customs matters to ensure that they are working as effectively as intended, particularly given all of the changes over the past several months. These controls should be tailored to the company’s updated risk profile and should be periodically tested and updated/improved, as needed, as the Trump administration continues to implement new tariffs.

• Companies should ensure that their broader compliance programs appropriately address the increased risk of tariff-related enforcement. To that end, companies should ensure that their compliance monitoring efforts are addressing the increased risk of tariff enforcement, that their employees are aware of internal reporting avenues to raise trade compliance concerns, that their compliance teams are appropriately investigating and remediating any allegations of noncompliance with tariffs (including involving outside counsel in such investigations when appropriate), and that they are considering whether self-disclosure is potentially beneficial (including with the advice of outside counsel).

• Companies considering acquisitions should ensure that trade and customs are part of their preacquisition due diligence. Conversely, companies considering the sale of all or part of their business should expect potential buyers to conduct appropriate diligence of their current trade and customs practices, including understanding the controls that the company has in place related to trade compliance and any trade issues the company is aware of.

Sidley’s Chambers Band 1 customs practice and Band 2 white-collar practice regularly work together on trade-related enforcement matters, harnessing their collective experience representing clients in all aspects of trade and white-collar matters to provide sophisticated, practical, value-added advice in trade-related enforcement matters.