$5.15 Million Settlement Highlights Growing Customs Enforcement Under The False Claims Act

Short summary: A Taiwanese manufacturer has agreed to pay $5.15 million to resolve allegations that it violated the False Claims Act by underpaying customs duties on imported goods. According to the Department of Justice, the company used improper customs practices to reduce duties owed to CBP, resulting in significant lost tariff revenue. The settlement underscores the federal government’s continued focus on customs enforcement and the growing use of the False Claims Act to pursue alleged duty evasion. 

The U.S. Department of Justice recently announced that a Taiwan-led manufacturer agreed to pay $5.15 million to resolve allegations under the False Claims Act and related administrative claims involving customs duties owed on imported goods. While the company did not admit liability, the settlement serves as another reminder that customs compliance remains a significant enforcement priority for the federal government. 

The Case – What Happened 

According to the DOJ, the alleged conduct went well beyond a simple classification error. The government alleged that the company used multiple methods over several years to reduce the customs duties it owed on imports. Specifically: 

• Country of Origin Misrepresentations: From July 2018 through January 2022, Everlight allegedly knowingly misrepresented the country of origin on Chinese-manufactured LEDs. Everlight knew these products were manufactured in China, and then transshipped to Taiwan, before shipping them to the U.S.  Everlight allegedly misrepresented to CBP that the products originated in Taiwan rather than China to avoid paying applicable Section 301 tariffs.  
• Failure to segregate goods: The settlement also resolves allegations that, from January 2022, through November 2025, Everlight continued to import LEDs from Taiwan, some of which were manufactured in China based on the country of origin of the dice of the LED, without further segregating the Chinese-made dice from the Taiwanese-made dice during LED manufacturing

To resolve the allegations under the False Claims Act and related administrative claims, the company agreed to pay $5.15 million. The settlement resolves allegations only, and there has been no determination of liability. 

The settlement also includes the resolution of claims brought under the qui tam, or whistleblower provisions of the False Claims Act by Tao Wang, a former employee of Everlight. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. Wang’s share of the proceeds of the settlement will be $876,146.  

Customs Compliance Is More Than a CBP Issue 

Many importers think of customs compliance as an issue that is handled exclusively by U.S. Customs and Border Protection (CBP). Increasingly, however, customs violations can trigger investigations by multiple agencies, including the Department of Justice. 

The False Claims Act allows the government to pursue companies that knowingly avoid paying money owed to the United States. In the import context, allegations involving undervaluation, misclassification, country of origin, or other customs-related issues can evolve into significant civil enforcement actions, particularly when the government believes duties were intentionally avoided. 

A settlement of this magnitude reinforces several important trends: 

• Customs enforcement continues to extend beyond traditional CBP audits and penalties. 
• The Department of Justice remains willing to pursue customs-related matters through the False Claims Act when appropriate. 
• Companies involved in international trade should expect increased scrutiny of their import compliance programs, documentation, and internal controls. 
• “Treble damages” are available under the False Claims Act 

As enforcement efforts continue to expand, importers should view customs compliance as an enterprise-wide risk management issue rather than simply an operational function. 

Don’t End Up on the Wrong Side of an Enforcement Action – Diaz Trade Law Can Help 

Customs enforcement is becoming increasingly sophisticated, and companies should ensure their compliance programs evolve alongside the government’s enforcement priorities. 

Diaz Trade Law assists importers with customs compliance reviews, tariff classification, valuation and country of origin issues, internal investigations, prior disclosures, CBP audits, False Claims Act-related customs matters, and strategies designed to reduce enforcement risk before issues escalate. 

As the Department of Justice and CBP continue to prioritize customs enforcement, companies should take this latest settlement as another reminder that proactive compliance remains one of the most effective ways to protect their business. 

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