DOJ’s New Focus on Customs Fraud – Compliance Alert for Importers

On May 12, 2025, the U.S. Department of Justice (DOJ) issued a memo signaling an enforcement shift: customs and tariff fraud is now a top DOJ priority. DOJ Criminal Division Chief Matthew Galeotti’s memo elevated “trade and customs fraud, including tariff evasion” into the agency’s ten “high-impact” focus areas. Galeotti warned that “trade and customs fraudsters” who evade duties or mislead customs “undermine the Administration’s efforts to create jobs and increase investment” and threaten the U.S. economy and national security. For importers, this marks a sea change – practices like undervaluing goods or misclassifying imports are no longer just civil customs issues, but potential targets of criminal prosecution.

Whistleblower Rewards Now Target Tariff Evasion

The DOJ has expanded its Corporate Whistleblower Awards Pilot Program to cover trade, tariff, and customs fraud. This means insiders can report customs fraud and potentially receive up to 30% of any recovered funds. DOJ is actively encouraging whistleblowers to expose schemes like duty underpayments or false country-of-origin claims, offering substantial financial incentives for tips that lead to forfeitures. This expansion, coupled with DOJ’s message of “Call us before we call you,” is a warning sign companies should expect more tips and investigations in the trade compliance arena.

Criminal and Civil Liability Risks for Importers

Importers and those in their supply chain now face heightened criminal liability under federal statutes for customs fraud. Key laws include 18 U.S.C. § 541 (unlawful import entry by undervaluation or false classification) and 18 U.S.C. § 542 (entry by false statements), each punishable by fines and up to 2 years’ imprisonment. The smuggling statute, 18 U.S.C. § 545, makes it a felony (up to 20 years) to import goods “contrary to law,” which can extend liability beyond the importer of record to others involved. Importers also face civil liability: DOJ has made clear it will use the False Claims Act (FCA) to pursue tariff evasion, treating unpaid duties as defrauding the government. For example, DOJ recently joined an FCA case against a company that allegedly underreported import values to avoid duties, a scheme first exposed by a whistleblowing employee. The FCA allows treble damages, and whistleblowers (or “qui tam” relators) can sue on the government’s behalf, so importers could be hit with both criminal charges and hefty civil penalties for customs fraud.

Common Customs Fraud Schemes

Importers should recognize the kinds of conduct under new scrutiny. Common examples of customs fraud include:

• Undervaluation of goods: Declaring a lower invoice price or quantity to reduce import duties owed.
• Misclassification of products: Using incorrect Harmonized Tariff Schedule codes or descriptions to qualify for lower duty rates.
• Country-of-origin deception: Falsifying or concealing the true origin of goods (for instance, rerouting Chinese-made goods through third countries or mislabeling) to evade tariffs or quotas.

Each of these deceptive practices can trigger enforcement – whether via criminal statutes or FCA lawsuits – now that DOJ has put trade fraud in the spotlight.

New DOJ Policies: Self-Disclosure Incentives and Fewer Monitors

DOJ’s updated enforcement policies also give compliant companies new reasons to come forward. Voluntary self-disclosure of misconduct now virtually guarantees no prosecution if the company fully cooperates, timely remediates, and if no high-level bad actors or other aggravating factors are involved. Even if some aggravating factors exist, prosecutors have discretion to still decline charges due to the company’s cooperation. For companies that self-report but fall a bit short (a “near miss”), DOJ promises a more lenient outcome: a non-prosecution agreement (instead of indictment), no requirement for an outside compliance monitor, and a fine reduced by 75% off the guideline amount. These changes “make clearer the benefits for companies that self-report”, but Galeotti emphasized that those who don’t self-disclose “will not receive these benefits”. Importers should also note that DOJ will impose independent compliance monitors only when truly necessary, tailoring any monitorship to minimize cost and burden on the business. In short, DOJ is offering carrots (declinations and lighter penalties) to firms that proactively report and fix customs violations, while wielding sticks (severe prosecution and whistleblower-fueled investigations) for those that conceal them.

Compliance Best Practices for Importers

In this new enforcement climate, importers and distributors must elevate their trade compliance efforts to avoid becoming DOJ’s next case. Key compliance takeaways include:

• Conduct internal audits of import entries: Regularly review your import documentation and filings for accuracy. Check for any discrepancies in declared values, tariff classifications, and origins, and correct issues before regulators find them.
• Ensure proper classification and valuation: Strengthen procedures to accurately classify products under the correct tariff codes and declare the true transaction value. Maintain thorough documentation (invoices, contracts, bills of lading) to substantiate the declared value and origin of your goods.
• Document and verify country of origin: Implement supply chain diligence , obtain certificates of origin from suppliers, and watch for red flags like abnormal transshipment routes or inconsistent labeling. Keeping detailed records will help prove compliance if questions arise.
• Bolster internal reporting and training: Encourage employees to report any suspected customs improprieties internally before they become whistleblowers. Provide training on import compliance and establish clear protocols for escalation and voluntary disclosure if an issue is discovered.

DOJ officials advise that importers should proactively assess their compliance programs,  including tariff classification and record-keeping controls to mitigate the risk of investigations. By tightening up processes now, companies can catch and fix problems early, reducing exposure to both criminal charges and FCA lawsuits.

Conclusion: The Business Case for Proactive Compliance

For importers, the message is clear: trade compliance is now a DOJ enforcement priority, not just a customs paperwork matter. The business case for proactive compliance has never been stronger. A single scheme to save on duties can result in multimillion-dollar penalties or even prison time for executives. On the other hand, companies that invest in robust compliance, conducting audits, training staff, and self-disclosing issues stand a good chance of avoiding harsh outcomes under DOJ’s new policies. In an era of heightened whistleblower activity and “America First” trade enforcement, honest and transparent importing is the safest course. By taking customs compliance as seriously as anti-corruption or financial reporting, importers can protect their business licenses, avoid costly disruptions, and ensure they remain on a level playing field in the global market. In sum, strengthening compliance now is far cheaper than facing DOJ’s wrath later, making proactive trade compliance not just a legal obligation but smart business strategy.