DOJ Shifts Focus of Enforcement Efforts to Tariff Evasion

As the US administration has imposed and modified tariffs on key trading partners, the US Department of Justice has turned its focus to criminally prosecuting companies and individuals for tariff evasion.

Recently, the US Department of Justice (DOJ) has shifted the resources of an investigatory unit that specializes in financial fraud and government procurement schemes to focus on trade-related investigations. Personnel from DOJ’s Consumer Protection Branch—now reorganized to sit in DOJ’s Criminal Division’s Fraud Section—have been enlisted to assist. The newly expanded unit will continue to focus on a broad range of criminal conduct but is now making trade-related crimes a top prosecutorial priority.

DOJ's focus on pursuing tariff evaders aligns with a memorandum published in May that identified “[t]rade and customs fraud, including tariff evasion” as one of 10 priority areas for enforcement. DOJ’s stated goal is to “ensure that American businesses are competing on a level field in global trade and commerce.” As the US tariff strategy continues to evolve, we expect to see an increase in tariff evasion schemes that test DOJ's ability to police the president's tariff agenda.

This substantive focus on tariff evasion schemes will be paired with the DOJ Fraud Section’s long history of significant corporate investigations and prosecutions. The unit, which has been involved in significant corporate resolutions, will likely direct its substantial resources and experience to opening investigations and methodically building such cases. Given DOJ’s recent announcement of corporate enforcement policies that include an expansion of the Criminal Division’s whistleblower pilot program to include tariff and customs fraud, companies and individuals should be aware that more cases are likely on the way.

TARIFF EVASION SCHEMES

For further analysis on tariff developments, refer to our previous publications, including New Tariffs, Old Risks: Antitrust Considerations and Reciprocal Tariffs Affect Most Products From Nearly All Trading Partners.

Tariffs are applied based on factors such as the value of an item, its import classification, and its country of origin. To evade tariffs, importers may purposely misclassify or undervalue the goods or declare them as having a different origin. Recent enforcement actions illustrate these tactics and may signal where DOJ will focus its enforcement efforts.

In March 2024, the US government resolved allegations that an automobile company had misclassified hundreds of thousands of its vans as passenger vehicles by agreeing to a $365 million settlement with the company. If imported as cargo vehicles, the vans would have been subject to a 25% duty. Instead, they were imported as passenger vehicles “with sham rear seats and other temporary features . . . [that] were never intended to be, and never were, used to carry passengers.” The investigation was the result of a coordinated effort between DOJ and US Customs and Border Protection (CBP).

A recent ruling from the US Court of Appeals for the Ninth Circuit also addressed misclassification of goods. In Island Indus. Inc. v. Sigma Corp., No. 22-55063 (June 23, 2025), the court affirmed a jury verdict finding that Sigma Corp. had violated the False Claims Act and owed $8 million for its false statements made to the CBP that mischaracterized “welded outlets” as “steel couplings” in order to evade antidumping duties.

Another common tariff evasion tactic is transshipment, where importers reroute goods on their way to the United States and relabel the package’s country of origin in order to take advantage of lower tariffs. This can result in jail time and restitution. In 2023, a Florida couple was sentenced to 57 months in prison and ordered to pay $42 million in forfeiture for fraudulently declaring that Chinese-origin plywood originated from Malaysia or Russia to avoid antidumping and countervailing duties.

TAKEAWAYS

As the US administration's approach to tariffs continues to shift, we can expect to see an acceleration in illicit schemes as importers deal with the uncertainty and fluctuating duties. DOJ will be looking to aggressively prosecute these schemes. Subject to resource availability, we may also expect increased enforcement efforts through DOJ and CBP collaborations. In recent months, there has been a noticeable increase in civil investigative notices from DOJ on trade issues. Criminal investigations and their ramifications—from imprisonment and fines to severe collateral consequences such as debarment—are now at the top of DOJ’s agenda, and companies should be prepared to respond carefully and appropriately to such investigations.

The risk of criminal and civil investigations and the liabilities arising out of such investigations are further exacerbated by both new and long-standing federal tools to encourage whistleblowing. The False Claims Act continues to be an important enforcement tool for the federal government as relators are incentivized to identify and report violations. At the same time, the CBP has been actively encouraging the trade community to utilize its “e-Allegations” portal, which allows members of the public, including competitors, to report issues regarding import noncompliance.

It remains unclear how effective or long-lasting the administration's enforcement efforts will be, given planned federal budget cuts and the redirection of resources to immigration. All this is playing out against the backdrop of litigation arguing the president lacks authority under the International Emergency Economic Powers Act (IEEPA) to impose tariffs on scores of countries over trade imbalances.

Morgan Lewis will continue to follow developments in this area. For further analysis on this litigation, revisit our previous LawFlashes, including State Attorneys General Challenge US President’s Tariff Authority Under IEEPA and Courts Invalidate President’s IEEPA Tariffs, But Stays Keep Duties on Imports—for Now.

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