Tariffs Fraud

Tariff fraud is a form of customs fraud where importers or exporters intentionally cheat on the information they provide to border authorities to avoid paying full tariffs, duties, or taxes. It undermines fair trade, causes governments to lose revenue, and gives fraudulent traders an unfair advantage.

Tariff fraud isn’t just a compliance issue anymore—it’s a headline. The Department of Justice has made tariff evasion a criminal enforcement priority, and the press is taking notice.

Recently many in the trade world have sensed for months: enforcement is accelerating. A recent DOJ memo marked trade fraud as a top focus, and whistleblower tips are pouring in—reportedly up more than 150% over last year. DOJ attorneys say they’re especially interested in shipments imported under shell companies, mis declared country-of-origin, transshipment, and anything that looks like a workaround for the Trump-era tariffs now being reimposed and expanded.

So what’s drawing scrutiny? Among the most common red flags:

• Falsifying invoices, entry documents, or product values

• Mis declaring country of origin—especially goods linked to China

• Routing shipments through third countries to mask origin

• Double invoicing and valuation tricks

• Tax evasion tied to unpaid duties

• Using shell companies to import under false DDP terms

Even honest errors can raise red flags. Customs sees them as patterns, not paperwork mistakes.

Common Methods of Tariff Fraud

1. Undervaluation

   • Declaring goods at a lower price than their actual value.

   • Example: Reporting a $10,000 shipment as worth only $3,000.

2. Misclassification

   • Assigning goods to the wrong tariff category that carries a lower duty.

   • Example: Declaring luxury leather handbags as “plastic shopping bags.”

3. Transshipment / False Origin

   • Routing goods through a third country and falsifying paperwork to hide the real country of origin.

   • Used to bypass country-specific tariffs (common in trade wars).

4. Smuggling or Misreporting Quantity

   • Not declaring part of the shipment, or hiding restricted goods among legitimate ones.

5. Fraudulent Free Trade Claims

   • Claiming eligibility under free trade agreements (like NAFTA/USMCA) without meeting the rules of origin.

     
     

Legal & Economic Consequences

• Fines and Penalties – heavy financial penalties for companies and individuals.

• Seizure of Goods – shipments can be confiscated at the border.

• Criminal Charges – serious fraud cases can lead to imprisonment.

• Trade Distortions – honest businesses face unfair competition.

• Revenue Loss – governments lose billions annually due to customs fraud.

  
  

How It’s Detected & Prevented

• Customs audits of invoices, shipping documents, and company records.

• Data analytics to spot anomalies in declared values.

• International cooperation to track suspicious trade flows.

• Technology like blockchain and AI for secure supply-chain verification.

If you need more info please contact us at agfus.com