By: Allison Cook
A tariff is a tax imposed by a government on goods imported from another country. The importer of the goods is responsible for the tariffs on those goods. To calculate the amount owed, the importer uses three factors (1) the value of those goods, (2) the country of origin, and (3) the Harmonized Tariff Schedule (“HTS”) code that the U.S. International Trade Commission has assigned to that type of product.
Aside from being a source of revenue, governments use tariffs to control the flow of goods in and out of the country and encourage domestic industry. Tariffs are a significant and growing source of federal revenue, generating a record $195 billion in fiscal year 2025.
The U.S. Customs and Border Protection (“CBP”) is charged with enforcing tariffs. But CBP can only physically inspect roughly 3% of ocean cargo containers that transport goods to the United States. Thus, the payment of tariffs is essentially an honors system. And as rates climb, so does the temptation to cheat them. Thus, whistleblowers are often the only way that customs fraud comes to light.
The False Claims Act reaches this conduct through its “reverse false claims” provision, which imposes liability on anyone who “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay” money to the government. 31 U.S.C. § 3729(a)(1)(G).
If you work in importing, logistics, or trade compliance, there are a few red flags that may signal fraud. The most common schemes fall into a few buckets.
- Undervaluation, often through “double-invoicing,” where the importer keeps a true invoice for itself and hands CBP a second, lowball invoice to shrink the duty bill.
- Misclassification, where goods are declared under the wrong HTS code to draw a lower rate than the law requires.
- “Dumping,” where a foreign country sells products into the U.S. market at prices below their fair value or below the cost of production. To counter this practice, the Department of Commerce assesses antidumping duties, which target below-fair-value pricing, and countervailing duties, which cancel out the benefit of foreign government subsidies. Dumping becomes customs fraud when importers evade these lawfully owed antidumping and countervailing duties.
- Transshipment and false country-of-origin claims, where goods are routed through a third country to dodge steep tariffs (such as the Section 301 duties on Chinese goods) or antidumping duties. But this practice (including repackaging or relabeling the goods) does not change the country of origin, unless the goods are “substantially transformed” into a new article abroad.
These are not hypotheticals. In May 2026, Perfectus Aluminum Inc. and related companies agreed to pay $549.5 million to settle FCA allegations that they knowingly evaded antidumping and countervailing duties on Chinese aluminum extrusions by spot-welding more than 2.2 million extrusions into “pallets” and falsely representing them to CBP as finished merchandise, which would not be subject to those duties. Moreover, in December 2025, Ceratizit USA LLC agreed to pay $54.4 million to settle FCA allegations that its products were made in China were transshipped through Taiwan, misclassified under a duty-free tariff code, and sold without required country-of-origin marking.
If you have evidence that a company is engaging in this type of conduct, we can help you take the next step. Reese Marketos LLP is one of the nation’s leading trial firms for False Claims Act and whistleblower litigation, with some of the most significant recoveries in U.S. history. Our lawyers know how to protect whistleblowers and maximize their reward. If you’re considering reporting fraud, we can help.