Briefing. The Trump administration continues to raise the stakes for importers and other actors in the international trade space. Bloomberg Law reports that the Department of Justice has tasked its MIMF (Market Integrity and Major Frauds) Unit with investigating fraud schemes by companies dodging U.S. tariffs. The MIMF Unit is already well-versed in financial fraud investigations, is set to grow significantly with the addition of prosecutors previously assigned to consumer protection matters, and now is shifting resources to tariff evasion cases.
Background. In just the first six months of President Trump's second term, there has been a deluge of new tariff schemes, including a universal 10% ad valorem tariff rate applicable to all foreign-origin goods, product-specific tariffs, and additional country of origin-specific tariffs. These drastic shifts in the tariffs landscape and uncertainty going forward have motivated importers (who shoulder the tariff burden) and their supply chain partners to aggressively seek ways to minimize tariff exposure, leading to increased risks of noncompliance.
The MIMF Unit, which is set to add a significant number of attorneys previously dedicated to consumer protection fraud, will be renamed the market, government, consumer fraud unit and focus on trade fraud and other white collar cases that cause harm to investors and consumers. The new tariff-related mandate is the most recent move by the Trump administration in a series of escalating steps to shift resources toward customs enforcement. In a speech given earlier this year, Deputy Assistant Attorney General Michael Granston expressed the Department's intent to "aggressively" enforce the False Claims Act and to particularly target "illegal foreign trade practices" to align with the administration's tariffs agenda. The Department also named trade and customs fraud (including tariff evasion) as a high-impact area of priority for investigation and prosecution of white collar crimes, and expanded its whistleblower policy to include "violations by or through companies related to trade, tariff, and customs fraud." These recent moves by the Department of Justice to invest in the enforcement of cases involving customs fraud are compounded by the existing mechanisms for customs enforcement traditionally wielded by Customs and Border Protection ("CBP"), e.g., the 592 civil penalties statute (19 U.S.C. §1952). CBP in turn has developed systems for flagging changes or inconsistencies in an importer's shipments, and CBP import specialists assigned to manage importer accounts closely review entry documents for compliance issues.
Preparing for Enforcement. As the administration continues ramping up enforcement resources in the trade space, importers should similarly take stock of their import profile and internal controls and make improvements if warranted. This includes assessing practices related to:
- Conducting regular audits of your country of origin determinations and marking;
- Assigning proper customs valuations by capturing dutiable costs, assessing lawful opportunities for reducing dutiable value, and eliminating riskier alleged practices such as "double booking" (also sometimes described as "double invoicing");
- Ensuring third party due diligence compliance, including any shipping companies that promise to lower tariff exposure;
- Reviewing Harmonized Tariff Schedule classifications to ensure correct and optimal codes and tariff rates apply;
- Mapping and analyzing supply chain patterns.
A robust compliance program—including, e.g., a customs compliance manual and procedures, a dedicated team to facilitate imports that are compliant under the law, regular customs-focused trainings, and internal auditing mechanisms—can help to bolster a company's claim that it exercised reasonable care in its importations and met its obligations under the law. To the extent potential errors are discovered, conducting an appropriate investigation can help companies assess risks, decide whether to voluntarily disclose the conduct to the government, and implement appropriate remediation to mitigate future risks.
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