How Willful Blindness and DDP Terms Can Trigger U.S. Customs Liability
One of our international trade lawyers once had a client who claimed to have shifted its manufacturing operations from China to Vietnam. Given the growing scrutiny from U.S. Customs and the steep penalties for origin fraud, our attorney strongly urged the client to verify the move through an on-site inspection. The client agreed — and sent our lawyer to visit the Vietnamese facility.
What he found confirmed his worst suspicions.
The so-called Vietnamese "factory" wasn't producing anything. It was a shell — an empty front used to route Chinese-made goods through Vietnam in order to falsely declare a new country of origin. A textbook illegal transshipment operation.
When our lawyer reported his findings, the client responded with outright denial. They didn't want to hear it. We promptly withdrew our representation.
A few years later, the owner of that company was convicted of customs fraud and sentenced to two years in federal prison.
This wasn't a case of innocent misunderstanding. It was willful blindness — the deliberate refusal to confront facts once they become inconvenient. At its core, it was a textbook example of cognitive dissonance.
This is Part 2 of our two-part series on how your Chinese supplier's tariff advice — especially under DDP terms — can land you in serious legal trouble, including jail time. If you haven't yet read Why Following Your Chinese Supplier's Tariff Advice Could Land YOU in Jail, start there.
Cognitive Dissonance: The Psychology Behind Compliance Failure
When I was in college, I took an international politics course focused on how cognitive dissonance shapes major world decisions. What I learned in that class has stuck with me ever since.
Cognitive dissonance is the psychological tension that arises when we hold two or more conflicting beliefs, attitudes, or behaviors. This tension is uncomfortable, and we human beings are wired to resolve it, often not by changing our behavior, but by justifying or ignoring it.
I see this all the time in compliance work. Executives will say:
"This deal seems a little off, but our competitors are doing the same thing."
"I'm not the importer of record, so I can't be held liable."
"The supplier said it's fine — they've been doing this for years."
These are red flags — not just legally, but psychologically. And when I hear clients heading down this path, I try to stop them by saying:
"My grandmother smoked two packs of cigarettes a day and lived to 96. But this doesn't mean smoking is a good idea."
Surviving a few lucky shipments does not make a fraudulent strategy safe.
1. How Cognitive Dissonance Leads to Risky Decisions
- Conflicting beliefs: Knowing something may be illegal or risky but continuing anyway.
- Discomfort: The internal tension caused by that contradiction.
- Rationalization: The attempt to justify or smooth over the behavior, rather than change it.
2. How Businesspeople Rationalize Risky Decisions
- Changing beliefs: "Maybe this doesn't technically break the rules."
- Justifying actions: "Everyone in the industry does this."
- Avoiding the truth: "Let's not look at the documents."
Like the smoker who knows it's harmful but keeps smoking anyway, many importers know their DDP or transshipment scheme is risky — yet they go along with it. But when U.S. Customs and Border Patrol ("CBP") or the Department of Justice ("DOJ") step in, those mental gymnastics do not matter.
Reality Check: Cognitive dissonance can explain your choices — but it won't protect you in court.
Why Avoiding Lawyers Is the Most Expensive Mistake
One of the most common — and costly — mistakes companies make in the trade and compliance world is avoiding lawyers when they're needed most.
What many businesspeople fail to appreciate is that even a mediocre lawyer is better equipped than a non-lawyer to determine what the law actually says — and, more importantly, how it will be enforced.
Too often, non-lawyers view "the law" as a single statute or regulation — a simple yes-or-no checklist. But in reality, most legal and compliance questions involve a dense web of overlapping laws, regulatory interpretations, agency guidance papers, and decades of case law. Understanding how all those pieces interact — and how enforcement agencies actually apply them — is precisely what we lawyers are trained to do.
Yet, time and again, executives defer to a supplier's advice, a freight forwarder's "experience," or their own gut feeling. Not because they truly believe these sources are more reliable than qualified legal counsel — but because they fear and do not want to hear what a real lawyer will tell them.
They worry that the lawyer will confirm the risk and suggest that they stop taking it. They fear hearing what they already sense to be true. And so, they avoid the conversation entirely.
This too is willful blindness — and in today's ever-toughening enforcement environment, it's a very dangerous form.
Key Point: Avoiding legal advice doesn't protect you—it exposes you. And when DDP pricing defies logic, odds are you're inheriting more liability than you bargained for.
The Trek Leather Case and the Myth of Outsmarting U.S. Trade Law
It is scary how many businesspeople (like 90 percent?) believe that if they're not listed as the official importer of record (a/k/a "IOR"), they're somehow immune from any civil or criminal liability for the import. This belief is not just wrong — it's dangerous. U.S. courts have made clear that you do not need to be the importer of record to be held personally or even criminally liable for customs violations.
1. The Trek Leather Case: Personal Liability Without Being the Importer of Record
The Federal Circuit's 2014 landmark decision in United States v. Trek Leather, Inc. and Harish Shadadpuri,767 F.3d 1288 (Fed. Cir. 2014), was a wake-up call for importers and everyone involved in U.S. customs compliance. The case made clear that it is not just the importer of record who may be held personally liable for customs violations under 19 U.S.C. § 1592.
Initially, the government pursued criminal fraud charges against both the company and its president, Harish Shadadpuri, alleging a scheme to undervalue imported goods by omitting fabric "assists." While Trek Leather ultimately admitted to gross negligence, leading the government to drop the fraud count against both defendants, Mr. Shadadpuri denied all wrongdoing. Nevertheless, the Court of International Trade found him personally liable for gross negligence under Section 1592. This decision was unanimously (10-0) upheld by the Federal Circuit Court, which held that Mr. Shadadpuri had introduced goods into U.S. commerce by helping create false documentation and directing which entity would act as importer. That conduct, it ruled, was enough to trigger liability—even though he was not the importer of record.
The court also made clear that it was not Mr. Shadadpuri's title, but his conduct, that created liability. This sets a precedent that individuals—regardless of their corporate role—can be held accountable if their actions contribute to customs violations.
2. What Trek Leather Teaches About Individual Liability
- Personal liability under Section 1592 is not limited to importers of record.
- The term "introduce" includes the act of preparing or submitting false documents—even if someone else formally enters the goods.
- Gross negligence or even mere negligence is enough to violate Section 1592.
- Import managers, customs compliance staff, logistics professionals, and executives should all evaluate their potential exposure.
The implications are especially important in Delivered Duty Paid (DDP) transactions, where the foreign seller usually handles entry and duty payment. U.S. buyers may assume they're insulated from customs liability, but Trek Leather makes clear that if they participate in—or benefit from—false declarations, they can be held accountable.
The law doesn't just look at who signed the paperwork—it looks at who orchestrated the transaction and who stood to gain from it.
Liability Beyond the Importer of Record: The Reach of 19 U.S.C. § 1592
U.S. customs law extends liability well beyond the importer of record. One of the most powerful enforcement tools in the government's arsenal is 19 U.S.C. § 1592 — a statute that dramatically broadens the net of accountability. I suggest you read 19 U.S.C. § 1592 and add it to your red flag list.
Section 1592 prohibits "any person" from, by means of fraud, gross negligence, or negligence, entering or introducing (or attempting to enter or introduce) merchandise into U.S. commerce through any materially false statement, act, or omission, whether written or oral.
The phrase "any person" is both deliberate and expansive. It means liability is not confined to the party formally listed as the importer of record. Over decades, U.S. Customs and Border Protection (CBP) and the courts have interpreted this statute to apply to:
- U.S. buyers and purchasers of imported goods
- Corporate officers and employees who influence customs declarations
- Third-party agents or service providers involved in orchestrating the import
- Any individual or entity that causes, directs, or facilitates the submission of false or incomplete information
This broader reach is especially relevant in Delivered Duty Paid (DDP) transactions, where U.S. companies often allow foreign suppliers or freight forwarders to control the customs process. Even if the U.S. buyer is not the named importer of record, if they participate in or turn a blind eye to misrepresentations—such as false origin, undervaluation, or misclassification—they can face liability under 19 U.S.C. § 1592.
This legal framework has only grown more expansive in today's high-enforcement environment. Nowhere is this more apparent than in the realm of U.S. customs law.
Recent enforcement trends and evolving case law make one thing unmistakably clear: U.S. customs liability follows conduct, not just who is listed on the paperwork. Under U.S. law, corporate officers, purchasing entities, and other actors involved in the import process may face civil—and, in some cases, criminal—liability, particularly in transactions governed by Delivered Duty Paid (DDP) terms.
This legal framework is explored through key statutes, case law, and compliance psychology to show how buyers become liable—even without importer of record status.
The objective is simple: to dismantle the dangerously persistent myth—often reinforced by cognitive dissonance—that if you're not the supplier or the named importer of record, the federal government can't reach you.
A growing body of case law, including the decisions discussed below, further illustrates the breadth of this liability and shows how buyers become accountable—even without formal importer of record status.
Additional Cases Confirming Broad Import Liability
A growing body of case law confirms that customs liability in the United States extends far beyond the importer of record. The following cases illustrate how corporate officers, employees, and U.S. purchasers can face liability under 19 U.S.C. § 1592 and related statutes — even when they are not the named importer.
1. Golden Ship Trading Company: Negligence and Personal Liability
Facts: In United States v. Golden Ship Trading Co., a U.S. importer, and its employee, Joanne Wu, were involved in importing T-shirts falsely labeled with an incorrect country of origin. The mislabeling appeared designed to evade duties and higher tariff rates. Wu contended that she had been misled by the foreign exporter and argued that she had exercised reasonable care in relying on their representations.
Holding: The Court of International Trade (CIT) rejected Wu's defense, finding both Wu and the company negligently liable under 19 U.S.C. § 1592(a). The court emphasized that the statute applies to "any person" — not just the named importer — and explicitly does not exempt employees or corporate officers, even if they were acting within the scope of their employment. Wu's failure to exercise reasonable care, even without intent to defraud, was sufficient to establish liability.
Significance: Golden Ship confirms that individuals who prepare or submit false customs documents can be held personally liable, even absent fraudulent intent. Her passive reliance on the exporter and broker did not absolve her of liability.
Reasonable care is an affirmative legal duty—not a passive defense. Negligence alone is enough to trigger penalties — and personal liability is not off the table. Importers cannot blindly rely on their foreign suppliers or their brokers. "Reasonable care" requires active verification—not just going along with what others prepare.
For importers and compliance teams, the lesson is clear: ensure robust documentation, verify claims, and maintain internal controls—because ignorance is not a defense.
2. Byer California: DDP, False Claims, and Turning a Blind Eye
Facts: Byer California, a women's apparel wholesaler, sourced merchandise from an overseas vendor under Delivered Duty Paid (DDP) terms. The vendor undervalued shipments on customs documentation to reduce the duties owed. Despite red flags — including suspiciously low declared values, problematic paperwork, and even a bribery attempt when concerns were raised — Byer continued to do business with the supplier, reaping the benefit of reduced costs.
Enforcement Action: The U.S. Department of Justice (DOJ) pursued enforcement under the False Claims Act (FCA), alleging that Byer knowingly avoided paying duties owed to the U.S. government — a form of liability known as a "reverse false claim" — i.e., knowingly avoiding payment to the government.
Byer settled the case for $325,000 and acknowledged that it failed to act, despite having actual knowledge of fraudulent declarations.
Significance: This case is a cautionary tale for U.S. buyers using DDP terms. It shows that liability under the False Claims Act — which includes treble damages and per-violation penalties — can attach when a company knowingly benefits from a vendor's customs fraud, even if the vendor is technically the importer of record. The DOJ explicitly cited Byer's "turning a blind eye" as a basis for enforcement.
The message from this case is clear. DDP doesn't eliminate legal risk — it can obscure it. And when that risk materializes, it's often the U.S. buyer left holding the bag.
3. Other Relevant Legal Principles and Enforcement Trends
Beyond case law, other legal doctrines and tools reinforce the government's wide enforcement reach.
- Aiding and Abetting: Under 19 U.S.C. § 1592(a)(1)(B), individuals can be held liable for aiding or abetting a customs violation if they knowingly assist another party in committing a prohibited act. This could include providing false information for import purposes or knowingly participating in schemes like double invoicing.
- Liability of Corporate Officers, Employees, and Agents: As seen in Trek Leather and Golden Ship, liability can attach to individuals within a company. Even third-party agents like customs brokers or freight forwarders could face § 1592 penalties if they actively conspire in fraud, beyond penalties specific to brokers under 19 U.S.C. § 1641.
- Criminal Liability: For egregious violations, such as knowingly participating in schemes involving false invoices or transshipment to disguise origin, individuals can face criminal charges under statutes like 18 U.S.C. § 542 (entry of goods by false statements) or § 545 (smuggling).
- Enforce and Protect Act (EAPA) Investigations: CBP aggressively uses EAPA to investigate duty evasion, particularly transshipment to avoid antidumping/countervailing duties (AD/CVD). EAPA allows CBP to find that imports by one party (e.g., a foreign supplier or shell importer) were intended to benefit another U.S. company, the ultimate consignee or purchaser. CBP can then impose remedies, which may lead to CIT litigation or § 1592 penalty actions against the benefiting U.S. party.
- False Claims Act (FCA): As highlighted by Byer California, the FCA is a powerful tool against those who knowingly submit false claims or improperly avoid paying obligations to the government, including customs duties. "Reverse false claims" target schemes to underpay duties and can lead to substantial financial penalties.
When Conduct Triggers Liability
If a U.S. buyer knowingly benefits from or participates in conduct such as:
- Undervaluation of goods
- Misclassification under the Harmonized Tariff Schedule (HTS)
- False declarations of country of origin
they may be subject to civil penalties under 19 U.S.C. § 1592, and, in more egregious cases, face criminal charges under 18 U.S.C. §§ 541, 542, or 545.
This is particularly true where buyers ignore red flags—such as suspicious pricing, dubious sourcing schemes, or implausible tariff avoidance mechanisms—and choose instead to defer blindly to foreign suppliers or freight forwarders. Courts and federal agencies consistently hold that willful blindness can amount to constructive knowledge, and in some cases, actual intent.
Understanding and Managing Customs Liability in DDP Transactions
Buying and importing products from overseas requires navigating a complicated, ever-changing, and unforgiving international trade landscape, particularly concerning U.S. customs law. While the importer of record typically handles formal entry and related duties like declaring origin, classifying goods under the HTS, and paying tariffs, recent enforcement trends and the expansive definition of "importer of record" by U.S. Customs and Border Protection (CBP) confirm that responsibility and liability can extend far beyond the named party on the paperwork.
Critically, CBP defines an importer of record not simply as the consignee or recipient of goods, but as any owner, purchaser, or party with a financial interest in the transaction. This expansive definition allows CBP to pursue U.S. buyers, distributors, or brand owners—not just foreign suppliers or designated importers of record—when customs violations occur, especially in transactions involving Delivered Duty Paid (DDP) terms.
In the sections that follow, I examine the legal framework that underpins this expanded liability, including key statutory provisions, regulatory guidance, and landmark decisions such as United States v. Trek Leather. I also explore how psychological patterns like cognitive dissonance and willful blindness contribute to compliance breakdowns, and I provide practical strategies businesses can implement to reduce their risk exposure.
Bottom Line: Customs enforcement now targets all parties involved in structuring or benefiting from the transaction.
1. Why DDP Terms Do Not Eliminate U.S. Buyer Liability
Delivered Duty Paid (DDP) terms can give U.S. buyers a false sense of security. Because the foreign seller handles customs clearance and duty payment—and often acts as the importer of record—it may seem like the U.S. buyer is shielded from liability.
But that belief is not just mistaken—it's legally dangerous. Courts and CBP have made clear: liability attaches to conduct, not just to names on forms.
While DDP may shift procedural responsibility to the foreign party, it does not shield the U.S. buyer from liability if they are involved — directly or indirectly — in customs violations. Legal precedents and enforcement actions have made it clear: liability attaches not to the title on a form, but to the conduct behind the transaction.
If a U.S. buyer benefits from or is complicit in activities such as:
- Undervaluation of goods
- Misclassification under the Harmonized Tariff Schedule (HTS)
- False declarations of country of origin
—they may face civil penalties under 19 U.S.C. § 1592, or in more egregious cases, criminal liability under statutes like 18 U.S.C. §§ 541, 542, and 545.
This is particularly true when U.S. buyers fail to question suspicious pricing, ignore implausible tariff avoidance mechanisms, or defer blindly to foreign suppliers or freight forwarders. Courts and federal agencies have repeatedly found that such willful blindness can amount to constructive knowledge — enough to trigger enforcement.
The reality: DDP might shift who fills out the paperwork but it doesn't shift legal accountability.
2. How DDP Shipping Can Involve Fraudulent Declarations
One of the most common—and dangerous—tricks used by foreign suppliers, particularly in China, is offering to ship under "DDP" terms: Delivered Duty Paid.
On the surface, it sounds convenient:
"Don't worry, we'll handle the duties."
But in reality, what they often mean is:
"We'll falsify customs documents, underdeclare the value, misclassify the goods—and hope CBP doesn't catch it."
This is not a gray area. This is fraud.
And when your company accepts those goods, it's not the foreign supplier who becomes CBP's easiest enforcement target—it's you. Whether you are the named importer of record or not, you can be held liable for the accuracy of customs declarations and the full payment of duties.
The Cross-Examination No Executive Wants to Face
Make no mistake: people are going to prison over this. Picture a DOJ prosecutor questioning a U.S. executive:
Prosecutor: You were paying $20 per widget before the tariffs, correct?
Defendant: Yes.
Prosecutor: And after the tariffs, you started paying $22 per widget?
Defendant: Yes.
Prosecutor: But the tariff rate went up by 145%, didn't it?
Defendant: Yes.
Prosecutor: So 145% is more than 14 times your 10% price increase?
Defendant: Yes.
Prosecutor: That means someone—either you or your supplier—wasn't paying the full tariff, right?
Defendant: ...Yes.
Prosecutor: And you knew that when the goods were imported?
Defendant: Well... I guess I did....
Prosecutor: And you still accepted the shipment?
Defendant: Yes.
That's not just aggressive lawyering. That's how these cases are built.
Bottom line: DDP can be legitimate, but when it becomes shorthand for:"We'll lie and you pretend you didn't know," it becomes a gateway to prison—not savings.
3. When DDP Convenience Becomes a Compliance Catastrophe
The superficial appeal of DDP shipping — especially when paired with pricing that seems to ignore tariff realities — is often nothing more than a smokescreen. What looks like convenience can quickly become a gateway to serious legal exposure.
Don't be lulled into a false sense of security by promises of frictionless imports and "don't worry, we've got this" assurances from overseas suppliers.
If something goes wrong, both you and your company might be on the hook.
Ignoring DDP red flags can lead to severe consequences. If a U.S. buyer benefits from or is complicit in customs violations like undervaluation, misclassification, or false origin declarations, they may face:
Civil penalties under 19 U.S.C. § 1592
Criminal liability under statutes like 18 U.S.C. §§ 541, 542 (entry of goods by false statements), and 545 (smuggling)
Asset seizures and potential imprisonment
Ignoring DDP red flags can lead to crippling fines, asset seizures, or even criminal prosecution. What may feel like logistical delegation is, in many cases, legal abdication.
The takeaway is simple: When a DDP deal feels too good to be true, it probably is. Demand transparency. Conduct due diligence. Prioritize compliance. Your business, your reputation — and in some cases, your freedom — may depend on it.
4. How to Protect Your Company from DDP Liability Traps
- Treat Unusually Low DDP Offers as Red Flags: If the DDP price doesn't logically reflect post-tariff cost realities, assume it's concealing a compliance issue.
- Demand Transparency and Control: Insist on being the importer of record or, at minimum, require full access to all customs documentation filed on your behalf—even under DDP.
- Engage Your Own U.S. Customs Broker: Do not rely solely on a forwarder selected by your supplier. A reputable U.S.-based broker will act in your best interests.
- Conduct Independent Verification: Verify the declared value, tariff classification, and origin independently. Never blindly trust the supplier's assertions.
- Implement Rigorous Internal Compliance: Train your teams to identify and escalate red flags associated with DDP shipping.
- Have a Strong Contract with Your Supplier: Your agreement should clearly allocate customs compliance responsibilities, require full disclosure of origin and valuation data, and impose indemnification obligations for misstatements or enforcement actions.
- Seek Proactive Legal Counsel: Engage a U.S. trade attorney before problems arise with your DDP shipments.
- Audit Your Supply Chain Ruthlessly: Even under DDP, understand where your goods originate and how they are routed.
- Beware Triangular Shipping: Scrutinize multi-country routing, a common tactic for concealing Chinese origin.
Bottom Line: If you suspect your company may have been involved in problematic DDP transactions, consult legal counsel about a voluntary disclosure to CBP, and do that now because disclosure only helps if it comes before you get caught.
Conclusion: Your Vigilance is Non-Negotiable
The legal landscape of U.S. customs law clearly indicates that liability for violations is not confined to the named importer of record. The "any person" standard under 19 U.S.C. § 1592, coupled with enforcement under the False Claims Act and specific judicial interpretations in cases like Trek Leather and Byer California, means that U.S. buyers, corporate officers, and employees can face severe civil penalties, and in some cases criminal charges, if they participate in, aid, or are culpably negligent regarding customs violations – even in DDP transactions.
Delivered Duty Paid terms do not equate to a risk-free pass on customs compliance for the U.S. buyer. Instead, DDP arrangements should be viewed as carrying inherent risks that demand heightened vigilance, robust due diligence, and proactive compliance measures.
The message from courts and regulators is clear: If you benefit from a customs transaction—or materially influence one—you are accountable for its legality. The prudent path is to treat all import transactions, regardless of Incoterms, with a serious commitment to compliance.
When it comes to customs compliance, silence, convenience, or ignorance won't protect you. Diligence will.
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