The U.S. Department of Justice recently announced the formation of the Market, Government, and Consumer Fraud Unit (MGCF Unit). The MGCF will reportedly sit within the DOJ’s Fraud Section. Although the details of the MGCF Unit’s precise remit are still forthcoming, we expect the MGCF Unit will be empowered to pursue criminal investigations and prosecutions of tariff evasion techniques such as misclassifying or undervaluing goods, as well as transshipping goods to a different country and relabeling the country of origin to take advantage of lower tariffs.
US tariff evasion schemes have always been unlawful under US law. However, the Administration’s focus on the use of tariffs as an economic and foreign policy lever, combined with sudden and sizeable changes in the tariff rates, has made it far more likely that US and multinational companies that engage in practices deemed to be potentially designed to avoid the payment of tariffs could find themselves the subject of increased US government scrutiny. Last week’s announcement was only the latest in a series of recently adopted DOJ policy initiatives that suggest greater criminal (and civil) enforcement related to trade violations.
To this end, on May 12, 2025, the DOJ Criminal Division announced a revised Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy (“CEP”). First off, the CEP prioritized DOJ criminal investigations and prosecutions of cases that involve trade or customs fraud, including tariff evasion, which seems to go hand in glove with last week’s announcement of the creation of the MGCF Unit. The CEP also sought to incentivize corporations to self-disclose criminal conduct by providing guidelines and greater certainty around what benefits they can expect if they do disclose, cooperate and remediate, with the promise of a declination of prosecution in qualifying situations. As a part of the revised CEP, the DOJ also extended its whistleblower bounty program to include tips related to trade, tariff, and customs fraud. Accordingly, profit-motivated whistleblowers – motivated by money or morality – are likely to fuel MGCF Unit investigations. Finally, the revised CEP also stated that the DOJ plans to have a focus on investigating and prosecuting individuals, including management, deemed to have violated the law.
Looking to the FCPA and the significant increase in reports and investigations following the enactment of Dodd-Frank Wall Street Reform and Consumer Protection Act, it is possible that these recent developments and incentives will have a similar impact on the tariff evasion space. On balance, while a claim that conduct amounts to a criminal tariff evasion scheme will likely require a more technical, labor intensive and intricate legal analysis than an average bribery scheme, the presence of a financial incentive for someone who can help put the puzzle together for the DOJ, coupled with the fact that this is a keen Administration policy, counsels:
(i) on the front end, assessing that your Customs compliance processes are adequately documented and functioning to cover the increased complexity of the current tariff regime;
(ii) that any advice related to Customs classification, valuation and tariff preference processes and determinations is maintained and labelled as privileged, where appropriate; and
(iii) that multinationals focus their compliance monitoring and investigative resources on potential tariff-related conduct irregularities, allowing for an early escalation of issues that might be subject to the MGCF Unit. In addition, for companies that have US SEC or other securities reporting obligations, any misclassification or misreporting could also carry with it financial statement impact considerations and potentially SEC or other financial regulator scrutiny. The benefits of proactive monitoring and internal investigations that may result in self-disclosure, have never been more in focus for clients engaged in trade with the United States.
Our Global Trade Investigations Group has extensive experience in cross-border trade investigations, including a long history of working opposite the Fraud Section. Please reach out to us if you would like to discuss how to proactively address these enforcement risks with our team.
