Fake Pallets, Real Penalties: How A $549.5 Million Settlement Redefined Customs Fraud Enforcement Under The False Claims Act

This post was last updated by the author(s) on August 10, 2026

On May 12, 2026, the U.S. Attorney’s Office for the Central District of California announced that False Claims Act (FCA) defendant Perfectus Aluminum Inc. and related entities had agreed to pay $549.5 million to resolve customs fraud allegations tied to antidumping and countervailing duty evasion on materials shipped to the U.S. from China. This resolution—achieved after a criminal jury conviction and parallel civil qui tam cases—is the largest trade-related False Claims Act settlement in history. It underscores how the FCA’s qui tam mechanism can expose duty-evasion schemes and return significant funds to both the government and inpidual relators (the ones who bring claims to the government’s attention in the first place). Relators in Perfectus’s consolidated civil case will receive 17.5% of the proceeds returned to U.S. Customs and Border Protection (CBP). As this settlement strongly suggests, the False Claims Act provides a viable avenue for whistleblowers with customs fraud claims to secure justice—and often significant compensation in the form of a relator award.

A Government Priority Unlike Any Other

Tariffs are back at the center of American trade policy, and so is customs fraud. Under the current administration, enforcing import duties has become a top-tier law enforcement priority, with billions of dollars in evaded tariffs squarely in the government’s crosshairs. Import taxes are one way of leveling the playing field for domestic industries. Duty evasion harms compliant businesses and U.S. economic security, and agencies like the U.S. Customs and Border Protection (CBP) collaborate closely with the U.S Department of Justice (DOJ) and other partners to regulate and monitor companies that ship products into the U.S.

In 2025, the government formalized this focus. The Department of Justice and Department of Homeland Security launched a joint Trade Fraud Task Force, and the DOJ expanded its Corporate Whistleblower Awards Pilot Program to expressly cover trade, tariff, and customs fraud.

The numbers are striking. In a single day — December 18, 2025 — DOJ announced three separate resolutions totaling over $100 million in customs duty evasion cases. The DOJ reported a record $6.8 billion in False Claims Act recoveries in fiscal year 2025 — the largest annual total in the statute’s history — with customs and trade fraud emerging as one of the fastest-growing areas of enforcement. A record 1,297 qui tam whistleblower lawsuits were filed that year alone.

The message to importers was unmistakable: the government is watching, it has the data, and it will act. And the momentum is accelerating into 2026.

Common Customs Fraud Schemes

Fraud takes many forms, but the most prevalent schemes include:

Transshipment Fraud. Goods manufactured in a high-tariff country (typically China) are rerouted through a third customs territory — Vietnam, Malaysia, Taiwan, Mexico — and re-labeled to conceal their true origin. This is one of the most widespread schemes targeting Section 301 tariffs and anti-dumping duties.

Misclassification of Goods. Importers assign incorrect Harmonized Tariff Schedule (HTS) codes to reduce the applicable duty rate. A steel component might be classified as a “machine part”; a textile product labeled as a different fiber type.

Undervaluation. Companies declare artificially low invoice values to CBP, reducing the customs duty calculated on the shipment’s stated value.

Country-of-Origin Fraud. False marking of goods — either mislabeling or omitting origin marks entirely — to qualify for lower tariffs or evade anti-dumping orders.

Shipment Splitting. Deliberately breaking up large orders into smaller shipments to stay below duty thresholds or de minimis exemptions.

Why the False Claims Act Is the Most Powerful Tool Against Customs Fraud

Several avenues exist for reporting customs fraud, but the False Claims Act remains one of the most effective tools available to whistleblowers. Originally enacted during the Civil War to combat fraud against the federal government, the FCA has evolved into the government’s primary civil anti-fraud statute and has recovered tens of billions of dollars for taxpayers.

In the customs context, the FCA is particularly powerful because it reaches not only affirmative misrepresentations, but also efforts to avoid paying money legally owed to the government. Under the FCA’s “reverse false claims” provision, companies that knowingly evade customs duties, tariffs, antidumping duties, or other import-related obligations may face substantial liability.

For whistleblowers, the FCA offers several advantages that are often unavailable through other reporting channels.

First, the statute allows private inpiduals to file lawsuits on behalf of the United States. Rather than relying exclusively on an agency to pursue a complaint, relators may initiate litigation and provide the government with detailed information concerning the alleged fraud.

Second, FCA complaints are filed under seal. This means the existence of the lawsuit is initially kept confidential while the government investigates the allegations. The seal period allows the government to assess the evidence, interview witnesses, and determine whether intervention is appropriate before the defendant is notified of the case.

Third, the FCA contains strong financial incentives for whistleblowers. Successful relators may receive between 15% and 30% of the government’s recovery, depending on various factors, including the extent of the whistleblower’s contribution to the case. In large customs fraud matters involving millions—or even hundreds of millions—of dollars in unpaid duties, potential awards can be substantial.

Finally, the FCA gives the Department of Justice access to powerful investigative tools. Customs fraud schemes frequently involve complex supply chains, overseas manufacturers, intermediary entities, altered invoices, and internal communications that are difficult for regulators to uncover independently. Information provided by knowledgeable whistleblowers can therefore play a critical role in helping the government identify and prove misconduct.

Timing matters, too. Under the False Claims Act’s “first-to-file” rule, only the first whistleblower to bring a particular claim can pursue it and share in the recovery. Because of this, inpiduals who suspect customs fraud are often well served by acting promptly rather than waiting.

The recent Perfectus settlement illustrates these advantages in practice. Multiple relators came forward with information concerning alleged customs duty evasion, filed FCA actions, and ultimately contributed to one of the largest customs fraud recoveries in American history. As customs enforcement continues to expand, the FCA is likely to remain one of the most important mechanisms for exposing trade fraud and rewarding inpiduals who help bring it to light.

Other Avenues to Report Customs Fraud

Other reporting mechanisms exist, including the DOJ Corporate Whistleblower Awards Pilot Program and CBP complaints. Depending on the facts, these programs may provide useful avenues for reporting trade violations. However, based on our experience, unlike the False Claims Act, they generally do not provide a private right of action, and potential awards may be discretionary or dependent on separate agency determinations.

Each of these routes works differently. The Enforce and Protect Act (EAPA) lets an “interested party” ask CBP to open an administrative investigation into antidumping or countervailing duty evasion, and CBP generally decides whether to investigate within 15 business days. CBP’s e-Allegations system lets anyone report suspected trade violations online. And the customs “moiety” statute can pay an informant an award—but that award is capped at the lesser of 25% of the net recovery or $250,000.

A False Claims Act qui tam case, by contrast, has no cap on the relator’s share. That is one reason whistleblowers with high-value customs fraud claims often choose the False Claims Act. The right path depends on the specific facts, and these options are not always mutually exclusive.

Remember, You Don’t Need To Be an Insider to Report Fraud

You don’t need to be an employee of a company engaging in trade violations in order to make a whistleblower report that leads to a financial recovery. Even employees of competitor companies can successfully bring FCA cases. For example, in Island Industries v. Sigma Corp. (9th Cir. 2025), a competitor-relator won an FCA judgment exceeding $26 million over unpaid antidumping duties, a verdict affirmed on appeal. In another example, Tungsten Heavy Powder, Inc. agreed to resolve its FCA case in 2021 by paying more than $5.6 million to the government, 17% of which was allotted to two relator-entities, one of which was a former employee and another of which was a direct industry competitor.

Employees, former employees, and industry peers can all be effective relators. That said, employee-relators often have better access to contemporaneous documents—and documentation is typically decisive. Effective FCA cases typically hinge on documents and data, which in the trade context may include entry paperwork, invoices, shipping records, procurement and sales materials, and internal communications that reveal the truth behind import declarations and representations around manufacturing and shipping.