The Trump Tariff Regime Brings Risks of Criminal and Civil False Claims Act Enforcement

Disclaimer: This content was accurate as of May 8, 2025, but laws, guidelines, or circumstances may have changed. Please consult more recent updates for the latest details or contact Joyce Adetutu, Jason Fleischer, Jeffrey Jakubiak, Stephen Josey, Michael Joyce, Jim McGovern, or Kathy Pakenham.

Background

On April 2, 2025, President Donald Trump announced a new tariff regime under the International Emergency Economic Powers Act of 1977 (“IEEPA”), citing national security concerns. This regime includes a 10 percent baseline tariff for all countries and higher “reciprocal tariffs” for approximately 90 countries, effective April 5, and April 9, 2025, with additional potential tariffs threatened in the future. The new tariffs would significantly impact corporations, particularly those with supply-chain exposure in China and other Southeastern Asian countries.

As part of the new regime, the Trump administration has already signaled an intent to aggressively pursue customs fraud cases. In a mid-February keynote address at the Federal Bar Association’s (FBA) annual qui tam conference in Washington, DC, Deputy Assistant Attorney General of the Commercial Litigation Branch Michael Granston emphasized that the Department of Justice (DOJ) intends to make “illegal foreign trade practices” a major focus of the next four years. Bearing in mind the national security rationale for the tariff regime and its centrality to President Trump’s agenda, companies should take seriously the possibility that the federal government may seek both criminal charges and civil enforcement actions against violators.

How Corporate Entities May Face Liability

Corporate entities should understand their supply-chain risks and strategize how to minimize exposure for tariff evasion. Companies can run afoul of tariff regulations, even incidentally, in various ways, including:

• Country of Origin: Where goods originate determines the applicable tariffs. Goods are considered to originate from the country where they were manufactured, grown, or underwent substantial transformation. Substantial transformation means that the good underwent a fundamental change in form, appearance, nature, or character. Substantial transformation is determined on a case-by-case basis, using a totality of circumstances standard to determine whether a change in the good’s name, character, or use occurred due to manufacturing or processing operations.
  • Actors throughout supply chains will be faced with powerful financial incentives to route goods produced in high-tariff countries (such as China) through lower-tariff countries before shipping the goods to the U.S., and claiming the goods originated from the lower-tariff country in order to realize substantial savings.
• Classification: The U.S. tariff system typically utilizes categories of classification for goods (e.g., commodities, agricultural goods, etc.) to determine the amount of tariff imposed. One common method of tariff evasion involves misclassifying imported goods by falsely claiming that the goods belong to a lower or exempted tariff category.
• Valuation: Tariffs are often calculated based on the value of imported goods. Companies may attempt to reduce tariffs by understating the value of goods when declaring them to customs officers.

As importers of record, it is important to keep in mind that companies may be held liable for not only their own employees’ actions, but also the actions of sourcing agents, suppliers, third-party partners, and customs brokers. Accordingly, companies need to proactively consider best compliance practices and conduct third-party diligence to effectively manage the potential liability created by the actions of third parties within their supply chains.

Criminal and Civil Statutes Used for Tariff Enforcement

Historically, the U.S. Customs and Border Protection (CBP) is responsible for tariff enforcement. By law, CBP is required to refer any possible civil or criminal violation to the relevant U.S. Attorney’s Office or the DOJ for further investigation and possible prosecution, and the CBP has no obligation to notify the alleged offender of that referral. Without a notice requirement, companies may find that they are quickly ensnared in an investigation without the opportunity to cure any potential wrongdoing, accidental or otherwise. This is certainly a risk that is compounded in the current environment of rapidly evolving tariff regulations.

After a referral, DOJ has several avenues available to prosecute alleged violations of the Trump administration’s tariff regime, including:

• False Claims (31 U.S.C. § 3729 & 18 U.S.C. § 287)
  • The False Claims Act (“FCA”) can be prosecuted either civilly or criminally. Both statutes provide that any person who knowingly submits, or causes to submit, false, fictitious, or fraudulent claims to the government is liable.
    • Importantly, under the FCA, the term “knowing” includes “actual knowledge” and “deliberate ignorance” or “reckless disregard” for the truth or falsity of the claim.
  • Companies should be wary of vicarious liability for the actions of their customers, brokers or other agents within their supply chains that may provide false documentation or declarations to CBP concerning country-of-origin, valuation, related parties, or classification while paying improperly low tariffs, customs, or anti-dumping duties.
  • The FCA also allows third parties to sue on the government’s behalf. What may begin as a civil investigation instigated by a commercial rival or internal whistleblower can quickly evolve into a criminal investigation. Either can carry significant consequences.
  • Civil penalties for violations of the FCA can be up to three times the government’s damages, plus additional penalties. While criminal convictions may result in a $500,000 fine per false claim filed and five years’ imprisonment.
• Wire Fraud (18 U.S.C. §§ 1343 & 1349)
  • Wire fraud is the ubiquitous statute that can be used to criminalize nearly any transaction that involves fraud, deception or deceit, and utilizes interstate or foreign wire communications.
  • Interacting with a tariff regime is inherently a transnational activity, and thus almost any scheme to avoid a tariff may be subject to wire fraud prosecution.
  • Individuals who commit wire fraud face up to 20 years in prison in addition to restitution.
• False Statements (18 U.S.C. § 1001)
  • Companies and their employees can be prosecuted for knowingly making materially false, fictitious, or fraudulent statements or representations to federal authorities.
    • DOJ may demonstrate that a company or its employee had knowledge of the falsity of the statement by relying on circumstantial evidence.
  • A company could face false statements charges if it intentionally provides materially false documentation or declarations to CBP concerning matters of country-of-origin, valuation, related parties, or classification.
  • False statements may lead to up to five years’ imprisonment and monetary fines.
• International Emergency Economic Powers Act (IEEPA) (50 U.S.C. §§ 1701–1705)
  • The IEEPA, under which many of the new tariffs fall, criminalizes the willful evasion of regulations issued under national emergency declarations.
  • IEEPA violators may be sentenced to up to 20 years in prison with statutory fines of up to $1,000,000.
• Smuggling (18 U.S.C. 545)
  • Knowingly and willfully importing merchandise into the U.S. contrary to law constitutes smuggling. Smuggling is often charged where importers intentionally mislead CBP about the country of origin, valuation, or classification of goods to avoid certain tariffs.
  • Smuggling convictions can result in up to 20 years’ imprisonment with corresponding monetary fines depending on the value of goods.
• Conspiracy (18 U.S.C. 371)
  • Companies can also be held liable for conspiracy to commit any offense against the United States, to defraud the United States, or to “impair or impede” the lawful functions of the federal government. A conspiracy is simply an agreement among two or more persons or entities to commit an offense.
  • Conspiracy charges have appeared regularly in recent years in the enforcement of sanctions and export laws, and can be easily utilized to address purported tariff-evasion schemes. The length of conspiracy sentences are often connected to the underlying crime that the conspiracy was premised upon. Sentences can range from five to up to 20 years’ imprisonment.

Recent Examples of Criminal Enforcement

On April 18, 2025, DOJ took the notable step of publicly announcing that it had intervened in a qui tam case alleging FCA violations in connection with underpaid customs duties on imported apparel goods. DOJ alleged that Barco Uniforms Inc. (“Barco”) utilized sham invoices that contained false entry summaries to undervalue imported goods purchased by Barco to reduce the duties Barco paid on the products. DOJ’s press release highlights that Barco was warned by a third-party auditor to “double check” duty calculations agreed to with its foreign suppliers. The unusual announcement of its intervention is a clear signal that DOJ views this type of case as a priority area.

Further, DOJ recently revived its use of criminal smuggling statutes to prosecute tariff evasion. In December 2024, DOJ brought criminal smuggling charges against a Miami businessman who had evaded tariffs on Chinese truck tires by shipping the goods through lower-tariff countries, such as Canada and Malaysia, prior to their arrival in the United States, and represented to CBP that the goods originated in these lower-tariff jurisdictions. By defrauding the U.S. government, the defendant avoided nearly $2 million in tariffs on Chinese goods.

Also in 2024, Akua Mosaics, Inc. (“Akua”) and its president, Kenneth Fleming, pleaded guilty to conspiracy to smuggle goods into the United States by falsely declaring to CBP that certain merchandise originated from Malaysia, rather than China, which was subject to substantial anti-dumping duties. As part of the plea, Fleming and Akua admitted that they had conspired with a Chinese national to place “Made in Malaysia” labels on boxes containing tiles manufactured in China, and then shipped said tiles from Malaysia to Puerto Rico, misrepresenting the country of origin. Fleming was ordered to pay restitution of $1,040,000 and was sentenced to two years of probation.

What Steps Can Companies Take?

Companies should conduct internal assessments to determine whether their current suite of compliance policies is sufficient to handle the evolving statutory and regulatory regimes governing the importation of goods. This includes increasing diligence of third-party suppliers and manufacturers, remaining alert to red flags, and strengthening internal reporting systems. Companies must pay particular attention to goods they historically procure from China and other high-tariff countries to ensure that neither their employees nor third parties are taking actions that may put the company at risk of violating the tariff regime.

Non-U.S. entities should be particularly aware of their potential exposure under these statutes. Given the Trump administration’s stated focus on unfair competition by foreign companies, it is expected that DOJ will take a hard line on any tariff violations committed by foreign actors.

How V&E Can Help

The Trump administration has repeatedly demonstrated that it views its tariff regime as an integral part of its national security strategy. Thus, it should come as no surprise when DOJ treats violations of the tariff regime as an offense not sufficiently addressed by monetary penalties. Accordingly, companies should prepare for the possibility that, if the government views the company’s importation practices as tariff evasion, the corporate entity and its executives could be prosecuted criminally, as well as sued civilly, for their actions.

Though a frightening reality in today’s world of international trade, the attorneys at Vinson & Elkins are well positioned to help both companies and individuals navigate these seemingly difficult and complex statutory and regulatory landscapes. Drawing upon years of experience in federal government service and private practice, the Vinson & Elkins team has a wealth of experience handling all manner of crises and maintains favorable relationships with law enforcement agencies, prosecutors, and agents to assist clients in reaching the best possible outcomes when they find themselves in the crosshairs of DOJ, the Department of Homeland Security, or other government regulators.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.