The False Claims Act (FCA) has emerged as an instrumental tool in the regulatory landscape, especially as new tariffs are enforced. With the Trump administration’s strategic focus on aggressively utilizing the FCA, businesses importing goods to the United States should be prepared for more stringent oversight. The FCA’s significance stems from its ability to facilitate government and private litigants in pursuing tariff-related claims without the stringent requirement of proving specific intent to defraud, thus broadening the scope of potential liability under the act.
Importers are required to submit detailed customs forms, known as “entry summaries,” to the Customs and Border Protection (CBP), which are crucial for the assessment and collection of tariffs. Misrepresentation on these forms, such as misstating the country of origin or undervaluing goods, can lead to substantial civil and even criminal penalties under the FCA. An important aspect of the FCA is its “reverse false claims” provision, which addresses false statements made to reduce or evade governmental obligations, including tariffs. Consequently, actions such as misreporting countries of origin, undervaluing imported goods, and misclassifying products can lead to significant settlements, as evidenced by the $8.1 million settlement involving Evolutions Flooring for falsely declaring Malaysia instead of China as the import origin to evade higher duties.
The recent settlement underscores the risk of non-compliance but also highlights the opportunistic role compliant companies can play in maintaining industry fairness. In an intriguing development, the case was initiated not by a traditional whistleblower but by a competitor, Urban Global, showcasing how businesses can leverage the FCA’s qui tam provisions to challenge rivals that fail to comply with tariff regulations and benefit directly from any recoveries.
Legal professionals should therefore be vigilant, both in defending against potential claims and considering proactive use of the FCA against competitors. The FCA litigation-enforcement hybrid approach often demands coordination among multiple agencies, including the DOJ, and may lead to criminal charges under statutes such as 18 U.S.C. § 541, § 542, and § 545, which relate to fraudulent tariff practices. See the DOJ announcement for more details on the Evolutions Flooring settlement.
As the tariff landscape continues to evolve, in-house legal teams should ensure robust compliance mechanisms are in place. This includes staying informed, regularly auditing compliance practices, and fostering a culture of whistleblowing and internal disclosures. Given the act’s broad application, even minor compliance lapses could precipitate significant financial liabilities. Thus, while introducing compliance risks, the FCA enforcement dynamics also provide businesses the opportunity to ensure equitable competition and protect against unfair market practices.
For additional insights and regulatory guidance, see the Bloomberg Law article.