The Trump administration's announcement of a panoply of steep tariffs on April 2, 2025, and the associated tariff negotiations that followed, has been met with extensive media coverage and analysis. To emphasize the seriousness of the new tariff regime, the Department of Justice ("DOJ") ' in its May 12 Memorandum on White Collar Crime1 ' announced that it will prioritize for investigation and prosecution cases involving "trade and customs fraud, including tariff evasion." Nonetheless, schemes to evade the tariffs have been on the rise. These illegal practices have included:
- Underreporting the value of imported goods to U.S. Customs and
Border Protection ("CBP") to pay a reduced tariff. This
scheme may involve selling the imported goods to a related entity
at an artificially low price. The difference in price between the
actual value and the value reported to CBP is made up out of the
government regulator's sight.
- Misclassifying the item into a lower tariff category, such as
calling a polyester shirt a cotton one.
- Transshipment, which involves sending goods to a third-party country for re-export to the United States with new packaging or insignificant alterations, to take advantage of the third-party country's more favorable tariff rates. This may well explain why in April, when Chinese exports to the United States fell by 21%, Chinese exports to Southeast Asian countries (with more favorable U.S. tariff rates) rose by the same percentage.2
These types of schemes to avoid tariffs are not new, and they remain illegal.3 Lying in a declaration on a CBP importation form regarding a product's country of origin or manufacture, or about whether the importer is affiliated with the exporter, can form the basis for criminal prosecution or a civil False Claims Act4 ("FCA") action. While Customs...
