In March 2025, in a similar blog post to this one, Nithya Nagarajan and Robert Romashko forecasted that False Claims Act (“FCA”) enforcement would increase under the current tariff-focused trade policy regime. Sure enough, the Department of Justice (“DOJ”) recently announced two FCA resolutions involving allegations of failure to pay customs duties and evasion of antidumping and countervailing duties.
Generally, an FCA violation can arise when a party knowingly presents a false claim thereby (1) receiving money from the federal government to which they are not entitled or (2) avoiding an obligation to pay money to the federal government. The second theory is known as “reverse false claim.” These duty-based violations fall into that category. And of course, an FCA violation requires the submission of a false claim. In cases involving customs duties, that submission comes in the form of a custom declaration
In one case, two subsidiary companies agreed to pay $6.8 million to resolve their civil liability under the FCA for “knowingly failing to pay customs duties on certain plastic resin imported from the People’s Republic of China (PRC).” As the DOJ press release explains, “[t]o enter goods into the United States, an importer must declare, among other things, the country of origin of the goods, the value of the goods, whether the goods are subject to duties, and the amount of duties owed.” These companies “failed to declare the correct country of origin and value on certain entries of plastic resin products manufactured in the PRC and, as a result, failed to pay the proper duties owed.”
In the other case, a company agreed to pay $4.9 million to resolve allegations of FCA violations related to “evading antidumping and countervailing duties (AD/CVD) on items made of extruded aluminum originating from the People’s Republic of China.” “Antidumping duties protect against foreign companies ‘dumping’ products on U.S. markets at prices below cost, while countervailing duties offset foreign government subsidies.” According to the settlement, “the company knowingly submitted, and caused to be submitted, false customs forms, claiming that certain furniture parts made of extruded aluminum were not subject to AD/CVD.” The company also “attempted to camouflage the aluminum extrusions by packaging the parts as sham furniture ‘kits.’” Still more, the company “knowingly failed to correct customs forms it had submitted previously, even after learning that they falsely stated that certain extruded aluminum parts were not subject to AD/CVD.
Both cases illustrate that the DOJ “will pursue those who seek an unfair advantage in U.S. markets by attempting to evade paying the customs, duties, or tariffs on foreign imports meant to level the playing field for U.S. manufacturers.” The FCA is one of many different ways government regulators can pursue wrongdoing in this area.
The first case also illustrates how consequences for these violations can be mitigated. Namely, the parent company mitigated the consequences of the two subsidiaries’ failures to pay customs duties in these ways:
[M]aking a timely voluntary self-disclosure of the potential violations; performing a thorough and independent internal investigation; preserving, collecting, and disclosing facts not known to the government but relevant to its investigation; conducting an analysis of potential damages that was shared with the government; and implementing appropriate remedial actions, including disciplining personnel and making improvements to compliance procedures.” As a result, the companies received credit under the DOJ’s guidelines.
On the other hand, in the second case, the allegations arose from a whistleblower who was a former employee of the company. Once a whistleblower reports wrongdoing, the company then loses the opportunity to self-disclose and significantly reducing its ability to mitigate the consequences.
Some key takeaways from these cases include:
- Effective compliance programs are essential. If, as in the first case, a company has employees that are violating customs requirements, strong compliance programs with internal controls will flag such issues and give the company an opportunity to assess, correct and self-disclose.
- Effective compliance programs include a culture that promotes whistleblowers reporting potential misconduct internally to the company first, again providing that opportunity to assess, correct and self-disclose.
- As discussed in the March piece referenced above, DOJ and other relevant agencies “will pursue those who gain an unfair trade advantage in U.S. markets, including those who knowingly evade or underpay duties owed on foreign imports.” Husch Blackwell has highlighted criminal enforcement in this recent article and the FCA is one of the civil options available to DOJ and others.
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