The second Trump administration’s aggressive tariff policy is playing out in more than just the Commerce Department. Framed under the administration’s commitment to fight “waste, fraud, and abuse,” the U.S. Department of Justice (“DOJ”) has signaled a new special interest in pursuing tariff evasion and customs fraud with one of its most powerful investigatory, civil and criminal enforcement tools: the False Claims Act (“FCA”). With the tariff landscape continuing to shift rapidly and unpredictably, businesses and their owners should take special care not only to develop and maintain effective compliance measures, but to be prepared to defend against onerous and costly investigation and enforcement efforts.
Recent Spike in Announced Customs Enforcement Actions Involving the FCA
While the government’s use of the FCA to pursue customs-based claims is not entirely new, recent months have seen a flurry of activity applying the FCA in the trade space. These cases have arisen across the country – from New Hampshire, to California, to Pennsylvania – and often stem from whistleblower complaints brought under the FCA’s qui tam provisions, which allow individuals, often current or former company insiders with alleged knowledge of potential trade violations to bring claims on behalf of the United States in exchange for a share of any potential payout.
Since March 2025, DOJ has announced three new settlements of FCA claims based on alleged customs evasion:
- A $6.8 million settlement with two subsidiaries of MGI International LLC for alleged misidentification of imported resins’ country of origin;
- A $4.9 million settlement with Grosfillex Inc., the American arm of a French parent company, for alleged mischaracterization of aluminum furniture parts as “kits” to evade antidumping and countervailing duties; and
- An $8.1 million settlement with Evolutions Flooring Inc. for alleged incorrect identification of manufacturer identity and country of origin of imported wood flooring.
In addition, DOJ recently announced its intervention in customs-evasion FCA lawsuits against Barco Uniforms Inc. and its operators, Kenny and David Chan; and against Global Office Furniture, LLC, and its owner, Malcolm E. Smith. While historically, the government has often refrained from joining such cases itself (there are more than a dozen other pending cases brought by qui tam plaintiffs) or intervened only for settlement purposes, its recent announcements indicate a more forceful, hands-on approach and signals a willingness to litigate these actions directly.
Also this year, the 9th Circuit Court of Appeals affirmed a $26 million jury verdict in Island Industries Inc. v. Sigma Corp. based on evasion of customs duties imposed by a decades-old antidumping order applicable to certain goods from China. Most significantly, the appellate court found that Sigma’s failure to diligently carry out basic compliance efforts was sufficient evidence to support the jury’s verdict that Sigma violated the FCA with the required level of intent (i.e., with actual knowledge, deliberate ignorance or reckless disregard).
Retooling DOJ to Further Prioritize Customs Enforcement
These recent announcements coincide with a broad recalibration of DOJ’s white-collar investigation priorities to include trade policy enforcement, as we’ve previously discussed. DOJ’s Civil Division and the Civil Division components with the United States Attorney’s Offices have responsibility for FCA investigation and litigation. Those civil attorneys often work closely with their DOJ counterparts in the Criminal Division’s Fraud Section and the Criminal Divisions of the United States Attorney’s Offices to pursue Administration priorities. The Civil Division is no stranger to complex enforcement actions, and new structural changes to DOJ Criminal Division’s Fraud Section will bolster the Administration’s tariff enforcement by further leveraging the Criminal Division’s experience and expertise; DOJ’s Market Integrity and Major Frauds Unit is set to incorporate attorneys from the Consumer Protection Branch to form a new Market, Government, and Consumer Fraud Unit (“MGCF”), thereby consolidating a multidisciplinary team of experienced white-collar crime prosecutors under a single roof. Moreover, MGCF will reallocate resources from its predecessor units to focus on specific Administration priorities, including customs fraud and tariff evasion. Although the MGCF will focus on criminal matters, it will no doubt work in parallel with the DOJ Civil Division to collectively seek out opportunities to utilize the FCA.
DOJ continues to emphasize its desire for tips and FCA actions by whistleblowers, and for self-disclosure of potential wrongdoing by companies. The revised DOJ Corporate Whistleblower Awards Pilot Program expressly aims to supplement the FCA’s qui tam provisions by offering significant financial awards to corporate whistleblowers providing incriminating information in certain domains—now including “trade, tariff, and customs fraud.” And DOJ regularly touts the purported benefits of self-disclosure. For example, when announcing the MGI resolution noted above, DOJ stressed that “when companies self-disclose misconduct, cooperate fully with the government’s investigation, and take meaningful corrective action, they can receive credit.” That said, self-disclosure is not a decision to be made lightly, and it presents its own risks and pitfalls because what constitutes “full” cooperation and “meaningful” corrective action is often up for debate.
Takeaways
The second Trump administration has shown its intent to wield its substantial prosecutorial and civil investigatory powers to advance its tariff agenda. Already, the Administration is dedicating increased personnel towards this end, alongside more aggressive use of anti-fraud legal tools like the FCA to actively go after suspected customs evasion. To avoid adverse government action, while remaining prepared for it, businesses and their leadership should:
- Monitor the evolving tariff landscape and update internal customs controls as necessary. While the ever-shifting customs regime can be hard to follow, Foley Hoag maintains an active Federal Actions Tracker to log the administration’s major actions—in trade specifically and across the board.
- Periodically assess your compliance risk and establish, review, and maintain practical customs compliance mechanisms to ensure their effectiveness. An effective compliance program not only helps to prevent conduct that could trigger government investigations or whistleblower complaints, but may also provide a basis for reduced penalties if violations do occur.
- Be prepared to respond to investigative inquiries and to act on discovered customs violations. Strategic cooperation with investigations and careful consideration of the voluntary disclosure of potential violations are important tools that may be used to get ahead of a potential problem and mitigate harmful consequences, but they are not without risk. The complex considerations are easier to navigate with the help of legal counsel.
