Heightened False Claims Act Enforcement of Customs and Trade Violations

At a Glance

• The expansion of trade remedies under the Trump administration significantly raises the stakes for FCA claims.
• Employees, former employees, competitors, suppliers and customers have all brought FCA cases that have led to substantial recoveries. There have even been significant recoveries in cases filed by relators who based their allegations strictly on data mining and who did not have firsthand knowledge of their allegations.
• In a February 2025 speech, Deputy Assistant Attorney General Michael Granston declared that the DOJ would continue to enforce FCA violations “aggressively” and singled out tariffs and customs enforcement as an area where the FCA can serve as a “powerful” enforcement tool.

As the Trump administration forges ahead with its trade agenda, including almost weekly new tariffs, and antidumping and countervailing duties orders, heightened False Claims Act (FCA) enforcement is sure to follow. Below, we describe the current landscape, key enforcement trends and steps to mitigate exposure.

The False Claims Act and Whistleblower Enforcement

The FCA is the government’s principal statute for enforcing fraud against the government. In general, it imposes liability against one who knowingly submits or causes to submit false claims to government programs. The FCA’s “reverse false claims” provision imposes liability for knowingly avoiding an obligation to pay money to the government. It has been applied to customs violations, such as against importers who evade duties by undervaluing goods, misclassifying products under the Harmonized Tariff Schedule of the United States (HTSUS) or falsely marking the country of origin.

Significantly, to be liable under the FCA, a party need not have acted with actual knowledge that it was in violation of customs requirements; the statute also imposes liability on those who act with deliberate ignorance or in reckless disregard of the requirements. FCA penalties are significant, consisting of treble damages plus inflation-adjusted penalties that currently range from $14,308 to $28,619 per claim.

The FCA contains unique provisions, referred to as qui tam provisions, which permit private enforcement of the FCA on behalf of the government. The qui tam provisions permit whistleblowers (referred to as “relators”) to file suit on behalf of the United States alleging FCA violations. A relator must file his or her complaint under seal without serving or notifying the defendant of the complaint. While the case is sealed, the U.S. Department of Justice (DOJ) is required to investigate the relator’s allegations. After investigating, the DOJ can intervene to take over the litigation, in which case the relator receives a 15-25% share of any recovery obtained by the United States. If the DOJ declines to intervene, the relator can litigate the case on behalf of the government and is entitled to 25-30% of any recovery. A relator who prevails is also entitled to an award of attorneys’ fees.

There is no statutory restriction as to who can serve as a relator. Employees, former employees, competitors, suppliers and customers have all brought FCA cases that have led to substantial recoveries. There have even been significant recoveries in cases filed by relators who based their allegations strictly on data mining and who did not have firsthand knowledge of their allegations.

Most FCA matters are triggered by whistleblowers rather than by the DOJ acting on its own initiative. According to the DOJ, in 2024, there were 1,402 new FCA matters opened, of which 979 were qui tam complaints filed by relators. The 979 qui tam suits filed in 2024 were the most ever, exceeding the 713 qui tam suits filed in 2023 and surpassing the previous record of 757 qui tam filings in 2013. The DOJ data do not state how many of these qui tam actions or other FCA matters involved trade or customers’ matters as opposed to other forms of alleged fraud against the government.

Focus on Trade Enforcement

Since January 2025, the Trump administration has made trade policy a priority. It has imposed emergency tariffs on Canada, Mexico and China. On February 10, 2025, President Trump signed executive orders expanding national security tariffs on steel and aluminum, and derivative articles. On March 24, 2025, the president authorized the secretary of state to implement emergency tariffs on countries importing Venezuelan oil. More recently, national security tariffs were announced for foreign automobiles and parts, and an investigation is currently pending on copper and lumber imports. Importers are also anxiously awaiting April 2, dubbed by President Trump as “Liberation Day,” which is the date targeted for implementation of the yet undefined reciprocal tariffs. The fact that these recently enacted tariffs are additive raises the “incentive” to evade.

Meanwhile, DOJ officials have signaled aggressive enforcement of customs and trade violations under the FCA. In a February 2025 speech, Deputy Assistant Attorney General Michael Granston declared that the DOJ would continue to enforce FCA violations “aggressively” and singled out tariffs and customs enforcement as an area where the FCA can serve as a “powerful” enforcement tool.

Even under prior administrations, there has been significant FCA enforcement of trade and customs violations, with cases alleging that importers had avoided customs liability by misclassifying goods to move them to a lower tariff classification or to avoid a tariff altogether, declaring an inaccurate country of origin, incorrectly marking the country of origin on products, understating the correct value of the goods, and failing to correct past erroneous entry information, among other things.

In one of the largest FCA cases involving trade and customs issues, an importer paid $45 million to resolve allegations that it misrepresented the country of origin on goods that should have been declared as Chinese or Indian origin, which allowed the company to evade antidumping and countervailing duties. The relator was a competitor who received an award of nearly $7.9 million.

Antidumping and countervailing duties fall within the same larger category of trade remedies as the recent emergency and national security tariffs discussed above. Trade remedies apply higher rates of duty to imports than they are normally subject to (most imported goods enter the United States at a duty-free base rate, known as the general rate of duty, and the simple average duty rate for those subject to a base duty is only 3.3%). Accordingly, the expansion of trade remedies under the Trump administration significantly raises the stakes for FCA claims.

Other recent enforcement examples, all of which were triggered by qui tam lawsuits filed by relators, include the following:

• A wood flooring importer and its two individual owners paid $8.1 million in March 2025 to settle allegations that it evaded antidumping duties, countervailing duties and Section 301 duties by misrepresenting the country of origin of items that were imported from China. The relator, a competitor, received $1.2 million.
• A womenswear company paid $7.7 million in August 2024 to settle allegations that it underpaid customs duties on imported apparel by misrepresenting the value of the imported items. The relator was a former employee.
• Two importers of wiring and power distribution products and two of their principals paid $10.6 million in August 2024 to settle allegations that they understated the value of goods imported from China. The relator, a former employee, received $1.26 million.
• An importer of vitamins paid $22.8 million in January 2023 to settle allegations that it misclassified the items being imported and failed to pay duties after correcting certain misclassifications. The relator received $4.5 million of the settlement amount.
• An industrial engineering company paid $22.2 million in September 2020 to settle allegations that it falsely stated the classification and valuation of imported construction materials to evade antidumping and countervailing duties. The relator received $3.7 million.

Mitigating FCA Risk

Importers can mitigate enforcement risk by reviewing import transactions at high risk for high duties. For those transactions, a self-review would focus on questions such as:

• Are you correctly complying with U.S. country-of-origin determination and marking requirements?
• Have you correctly determined the initial value for imported products, as well as all subsequent adjustments to the value that are reportable to U.S. Customs and Border Protection?
• Have you correctly classified your products?
• Have you separately analyzed whether your product is described by the scope of an antidumping or countervailing duty order?

Other proactive compliance program measures include appointing a person to serve as the company’s trade compliance officer, adopting written policies and procedures relating to customs compliance, operating an internal hotline for employees or others to express compliance concerns, adopting a policy to protect employees who in good faith report compliance concerns from retaliation, and diligently investigating and following up on compliance complaints.

Conclusion

Given the heightened risk of False Claims Act enforcement, including the growing risk of whistleblower actions under the qui tam provisions, importers should take special care to ensure that they have effective internal controls to ensure compliance with U.S. customs laws.