Law 360: How Importers Can Minimize FCA Risks Of Tariff Mitigation

Analysis by: Samuel D. Finkelstein, Associate

With the rapid expansion of U.S. tariff policies under the Trump Administration, many businesses are exploring strategies to limit their exposure to tariffs. While tariff mitigation – whether through reassessment of HTSUS classifications, shifting of supply chains to alternate countries, or utilizing the first sale rule – can be lawful if executed correctly, improper tariff mitigation can expose importers to significant liability under the False Claims Act (“FCA”).

The FCA’s qui tam provisions authorize private parties to bring cases on behalf the Federal government against persons make a false claim for payment from, or in the customs duty context, improperly withhold funds owed to, the Federal government. Although the FCA is more commonly associated with false claims for payment from the U.S. government under Federal programs such as Medicare, the FCA has historically been used to prosecute cases of customs duty evasion as well. The FCA is particularly well-suited for customs-related cases, as each inaccurate entry summary filed with CBP can constitute one or more actionable false claims.

Additionally, due the publicly available nature of import data, inside knowledge of a company’s operations is not necessary to identify potential false claims relating to imports. Qui tam FCA cases relating to customs duty evasion may be brought by competitors, current or former employees, or a growing cottage industry of professional whistleblowers who utilize data analytics to identify possible false claims.

In the Expert Analysis published by Law360, Samuel Finkelstein, an Associate at LMD Trade Law PLLC, details the FCA risks that importers face when undertaking tariff mitigation efforts and best practices to minimize these risks.

This analysis can be found in its entirety here.

A PDF of the analysis can be found here.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with LMD Trade Law PLLC or its affiliates.