Manufacturers See Rising FCA Risk With U.S. First Laws

The False Claims Act (FCA) has long served as one of the government's most powerful tools for policing fraud in public procurement and beyond, but recent enforcement activity shows that it is now being deployed with increasing force against manufacturers accused of violating domestic preference and tariff laws. The Buy American Act (BAA), Build America, Buy America Act (BABA), and the Trade Agreements Act (TAA) have all emerged as points of this enforcement push. As the government continues to provide high levels of funding through the Infrastructure Investment and Jobs Act (IIJA), defense strategies, and other related spending initiatives, manufacturers should anticipate that even routine transactions will be closely scrutinized for compliance. For companies supplying goods to federal agencies, the stakes are high. Failure to accurately certify the origin of materials, or to maintain effective compliance systems, risks not only contractual disputes but treble damages, statutory penalties, and potential exclusion from future contracting opportunities.

President Trump made "Buy America" a hallmark of his first term, expanding the scope of domestic preference rules and elevating them from a procurement issue to a policy goal. President Biden largely continued and even deepened these priorities, particularly through the BABA and IIJA. Now, in his second term, Trump has reiterated his "America First" agenda and made clear that domestic sourcing requirements will be enforced. For manufacturers, that means compliance expectations are not likely to soften anytime soon, and the FCA provides the Department of Justice (DOJ) with a unique mechanism to pursue violations.

Under the FCA, any person who knowingly submits, or causes to be submitted, false claims to the government is liable for three times the government's damages plus a per-claim penalty that is linked to inflation. Because many federal contracts require bidders and suppliers to attest that their products qualify as "domestic end products" under the BAA or fall within an exception under the TAA, even minor inaccuracies can form the basis for FCA liability. This is particularly troubling for manufacturers because supply chains today are complex and globalized. Components are often sourced from multiple countries, and determining the precise composition and country of origin for compliance purposes requires great analysis. The risk of error is high, and yet the law may treat even unintentionally inaccurate certifications as actionable misrepresentations.

Heightened FCA Enforcement

Two July 2025 settlements underscore DOJ's escalating use of the FCA to police tariff evasion and customs fraud tied to imports from China. In the first, two subsidiaries of a multinational plastics manufacturer paid $6.8 million after voluntarily disclosing misreported country of origin and valuation data for resin imports, with DOJ crediting their cooperation but stressing disclosure does not eliminate liability. The next day, a U.S. furniture company paid $4.9 million to resolve allegations it evaded antidumping and countervailing duties on aluminum components, with a whistleblower receiving nearly $1 million.

In May 2025, the DOJ announced a $300,000 civil settlement with a Connecticut-based company that had violated the BAA and TAA by supplying foreign end products to federal agencies. While the settlement was modest in size compared to some of the million-dollar healthcare or defense industry FCA cases, it shows the government's willingness to bring actions against even small companies and routine contracts. No supplier is too small to escape scrutiny, and DOJ is prepared to pursue violations wherever they are found. Importantly, the violation was not tied to defective goods but to misstatements in certifications, reinforcing that paperwork errors can be just as dangerous as performance failures.

The government's priorities have also been reinforced through public messaging. At the Federal Bar Association's Qui Tam Section Conference in February 2025, senior DOJ officials Michael Granston and Jamie Yavelberg emphasized that domestic preference laws and customs-related fraud are high on the government's agenda. They pointed specifically to schemes involving rerouting products through intermediary countries (re-exportation), mislabeling components to indicate a false country of origin, or undervaluing goods to minimize tariff liabilities. This integration of customs enforcement with the FCA vastly increases the range of conduct that can expose manufacturers to liability.

The financial consequences of FCA enforcement have also grown more severe. In July 2025, the minimum civil penalty per false claim increased to $14,308, with the maximum rising to $28,619. When combined with treble damages, these penalties create a multiplier effect that can quickly transform relatively small dollar violations into serious problems for manufacturers. A company that supplies hundreds or thousands of units under a contract could face millions of dollars in exposure even if only a small portion of those items are alleged to have been misrepresented. In fiscal year 2024 alone, DOJ reported more than $2.9 billion in recoveries under the FCA.

Impact on Manufacturers

Manufacturers are particularly vulnerable to FCA risk for several reasons. The first is the complexity of modern supply chains. Supply chains today are global with raw materials, subcomponents, and final assembly often spanning several countries. Determining whether such a product qualifies as a "domestic end product" under the BAA, or whether it meets TAA country of origin requirements, often requires complex calculations and analysis. Second, manufacturers must navigate overlapping legal regimes. The BAA imposes a general preference for domestic products, BABA tightened sourcing standards for infrastructure projects funded by IIJA, and the TAA introduces a separate framework based on designated trade partner countries. On top of these requirements, the Defense Federal Acquisition Regulation Supplement (DFARS) imposes its own specialty metals and other sourcing restrictions for defense contracts. The overlap in these rules makes compliance tricky, where even a small mistake can quickly accumulate. Third, the certification process itself raises the stakes. Manufacturers are required to represent compliance in bids, invoices, and contract documents. Once made, those representations can form the basis for FCA claims.

Manufacturers should take proactive steps to mitigate their risk. The foundation is a strong compliance program. Companies should establish systems for tracking the domestic content of their products, supported by documentation from suppliers and original equipment manufacturers. Companies should require the components of their supply chain to provide certifications of product content and flow down applicable requirements where appropriate.

Supply chain due diligence is equally critical. Manufacturers should map their supply chains, identify high-risk suppliers, and review country-of-origin documentation. This is particularly important for products sourced from countries that are not TAA-designated, such as China or India. Where questions arise, companies should consider engaging trade compliance specialists or using verification tools. Combined oversight of procurement compliance and customs compliance is powerful. Because DOJ is linking customs fraud and FCA enforcement, manufacturers should ensure that tariff classifications are accurate. A customs violation can become the foundation of an FCA claim.

Another important strategy is self-disclosure. On occasion, the DOJ has reduced penalties when companies voluntarily disclosed violations, cooperated fully, and remediated effectively, although it is not a complete shield. Manufacturers that discover potential misrepresentations should carefully weigh the risks of self-disclosure against the potential greater risk of a whistleblower bringing the matter forward. Government contractors must also consider whether the identified issue rises to the level of a mandatory disclosure under the FAR and DFARS. Given the growing role of qui tam relators in FCA enforcement, sitting on potential violations can be a costly mistake. Employees, subcontractors, and even competitors may serve as whistleblowers, and DOJ has made clear it welcomes their involvement.

Contracting practices should also evolve to reflect heightened risk. Pre-award, manufacturers should carefully verify that representations in proposals are accurate and fully supported by documentation. Post-award, they should establish monitoring mechanisms to ensure that sourcing practices remain compliant throughout performance. Subcontracts must include flow-down clauses that obligate lower-tier suppliers to comply with domestic preference rules, and prime contractors should regularly check subcontractor compliance.

Recent enforcement provides a clear glimpse into DOJ's playbook. The Connecticut case shows that even relatively small suppliers are within DOJ's sights, and that misrepresentations in paperwork, not just performance failures, will trigger FCA liability. DOJ's leadership and the Trump administration have been explicit in identifying domestic-preference fraud and customs violations as enforcement priorities, signaling that cases in this space are attractive.

For manufacturers, aggressive FCA enforcement creates more pressure. Inaccurate certifications can quickly escalate into FCA liability with devastating financial and reputational consequences. By investing in compliance programs, conducting supply chain due diligence, integrating customs and procurement oversight, and considering self-disclosure when problems are identified, manufacturers can significantly reduce their exposure. Companies that prepare now will be best positioned to compete for federal contracts without facing the risk of FCA liability.

Originally published by Industry Today.

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