The Department of Justice's major frauds unit, known for its work on procurement fraud and market manipulation, is shifting its resources to trade crime enforcement, including long-running frauds, senior executives, and large volumes of alleged losses from unlawful tariff evasion schemes. Several federal agencies help enforce U.S. tariffs, including U.S. Customs and Border Protection. The Department of Justice (DOJ) now plans to play a larger role, with its criminal division identifying trade fraud as a key priority. The major fraud unit, which had approximately 34 attorneys in 2024, is expected to add significant personnel from the consumer protection branch. This new branch will be renamed the market, government, and consumer fraud unit, and will focus on trade fraud and other white-collar crimes affecting investors and consumers.
The new branch will focus on prosecuting tariff evasion techniques, such as misclassifying or undervaluing goods, as well as transshipping, or rerouting goods to a new country and relabeling the country of origin to take advantage of lower tariffs. The Centre for Economic Policy Research published that $27 billion worth of Chinese goods were transshipped to the U.S. in 2023.
Trade attorneys are getting more frequent questions from clients about Delivery Duty Paid (DDP) Incoterms, a scheme where foreign sellers take responsibility for the delivery costs and duties payable for shipments. This is not inherently unlawful, but can be manipulated by the foreign seller to reflect values for goods that are lower than what CBP regulations require. In the event that CBP determines that DDP transactions involve faulty product values, they can pursue action against the party in the United States receiving the goods, even though the DDP terms put the requirement for compliance on the foreign sellers.
President Trump announced new tariffs on several trading partners, including a 40% levy on goods deemed to be transshipped through Vietnam, which will go into effect on August 1, 2025. Similar language is being applied in other trade deals announced by the Trump Administration, showing the commitment of the Trump Administration to crack down on efforts of foreign parties to actively evade the payment of duties on goods manufactured in their countries.
The DOJ will face some limitations in its ability to deter and prosecute unlawful schemes to avoid duties, as bringing actions against the foreign parties for their activities involves jurisdictional hurdles. However, the new branch will focus on finding evidence of American persons and companies colluding with foreign companies regarding tariff evasion.
Individuals providing tips could incentivize companies to disclose their wrongdoing through DOJ's voluntary disclosure policy. Since the implementation of this policy, the DOJ has already received more whistleblower tips and voluntary disclosures relating to trade fraud.
The first Trump administration created a task force in the Department of Justice's Civil Division, which initiated more than 70 investigations. Some critics, including some members of the House Select Committee on China, argue that the U.S. enforcement of non-compliance with Customs regulations is falling short and is hurting those companies that comply with the Customs regulations explicitly. The new tariffs being applied to imports from around the world include complicated rules related to which products are subject to duties and which are exempted based on product type and product country of origin. If this new task force works to ensure that the new and existing Customs regulations are fairly enforced, then those who comply will be rewarded, and those who do not comply will be incentivized to review their procedures to ensure compliance. Questions remain over the effectiveness of enforcement. Planned budget cuts and the redirection of law enforcement resources to immigration will also affect these initiatives.
Buchanan's white-collar defense, compliance, and investigations and international trade & national security groups are available to guide companies through DOJ's new focus on trade crime and investigations. Buchanan's international trade & national security team is also available to help your company assess your current customs compliance policies and procedures, as well as individual import transactions.
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