Federal prosecutors are laying the groundwork to criminally charge companies and individuals that try to evade US tariffs as President Donald Trump readies a fresh round of levies next week.
American customs officials have long sought to thwart attempts to avoid duties using relatively common schemes like changing the country of origin on imports or misclassifying goods on forms. However, such issues historically have been handled through fines or civil settlements and seldom by criminal prosecution.
But now, the Justice Department says it’s adding “significant personnel” to a new unit to focus on trade fraud and other corporate crimes. Meanwhile, prosecutors at US attorneys offices have been requesting records of transactions involving foreign goods during the Biden administration as they look to build cases — setting up a potential blueprint for moving against those accused of shirking new tariffs.
“While some negligent acts or administrative errors may be more appropriately handled civilly, criminal enforcement is appropriate for significant violations of law,” said Matthew Galeotti, who heads the department’s criminal division. “When importers cheat, for example, by undervaluing goods or misstating the country of origin, they avoid the full cost of importing products into the US.”
The Justice Department’s effort aligns with Trump’s April promise of “very severe” consequences for cheating on the tariffs he’s imposing across the globe. It’s unclear how much progress has been made on investigating possible evasion of his administration’s levies. Probes can take many months and some of the new duties are just weeks old, with more slated to begin Aug. 1.
US officials say tariff evasion can cost the government billions of dollars a year in lost revenue. Prosecutors are looking across industries such as steel, aluminum, textiles and consumer goods, Galeotti said. The effort includes a financial fraud unit that was re-tasked to target companies that skirt customs duties.
Prosecutors are looking for potential violations of levies put in place during the Trump administration and those that predate his January inauguration, according to people familiar with the matter.
US attorneys offices outside of Washington have recently requested information about past shipments and communications companies had with others in their supply chains during the Biden administration, said some of the people, who like the others asked not to be identified discussing confidential communications.
Prosecutors traditionally rely on agencies such as Homeland Security Investigations and Customs and Border Protection to bring them egregious examples of tariff evasion that could rise to the level of civil or criminal charges. CBP also appears to have ramped up its scrutiny of companies subject to heightened tariffs.
Ana Hinojosa, a former top customs official who now advises companies on trade, said some clients had recently received “very targeted” requests from CBP for information about goods classification and relationships between sellers and buyers.
“It’s the kind of prep work on companies they suspect could have, best case, made an error, or worst case, committed fraud,” Hinojosa said.
Trump has put into effect a on all imports with some exceptions. There is a 30% tax on products from China and a 50% levy on all steel and aluminum imports, plus lingering threats of higher taxes against major trading partners including the European Union and Mexico.
Those new tariffs have compounded anti-dumping duties that already existed, creating an incentive for companies to reduce their tariff burden, Hinojosa said. But some of the strategies can cross the legal limits into civil and, potentially, criminal liability, she said.
“Trade fraud also deprives taxpayers out of billions in contributions to their coffers and diminishes funds available for important government services,” Galeotti said. He added that trade fraud can also evade sanctions and export controls, especially by foreign entities hostile to US interests.
It isn’t the first time stepped-up enforcement of past wrongdoings has been used to discourage cheating. When the Biden administration prioritized the enforcement of its Russian sanctions, many of the Justice Department’s marquee cases were for violations that occurred years earlier, including during the first Trump administration.
Former federal prosecutor Artie McConnell expects an easy pivot from the Biden-era focus on sanctions evasion and export controls to investigations targeting trade fraud.
“You’re talking about the same agencies, same personnel and same investigative techniques,” McConnell said. “It’s largely the same M-O, transshipping, misclassification, undervaluing, for how tariff evasion is done.”
Photo: A US Customs and Border Protection officer stands in front of a line of trucks waiting for inspection at the Otay Mesa Cargo Port of Entry in San Diego, California.Source: Bloomberg
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