Ask An Attorney - Trade Fraud
Given the seismic shift in U.S. trade policy brought on by the new Trump Administration, it was not surprising the U.S. Department of Justice (DOJ) announced last month that it would be undertaking a major restructuring of its fraud enforcement strategy. This initiative involves the consolidation of personnel from the DOJ’s Criminal Division’s Market Integrity and Major Frauds Unit (MIMF) and the Civil Division’s Consumer Protection Branch into a newly formed Market, Government, and Consumer Fraud Unit (MGCF). The MGCF Unit will focus on prosecuting trade-related crimes such as misclassification, undervaluation, and transshipment schemes designed to evade tariffs, particularly those targeting imports from China and other countries.
This strategic pivot reflects the Trump Administration’s broader trade enforcement agenda and elevates customs fraud from a primarily civil matter to a criminal priority. The DOJ is equipping the MGCF Unit with experienced trial lawyers and integrating civil and regulatory assets to streamline investigations and prosecutions. The unit is expected to leverage advanced data analytics, collaborate with agencies like U.S. Customs and Border Protection, and utilize statutes such as 18 U.S.C. §§ 542, 545, and 371 to pursue felony charges. The DOJ’s revised Corporate Whistleblower Awards Pilot Program now includes trade fraud, incentivizing insiders to report misconduct with the promise of financial rewards.
The implications for businesses engaged in international trade are significant. Companies may face increased scrutiny, expedited investigations, and the risk of both civil and criminal penalties. The DOJ has already initiated actions under 19 U.S.C. § 1592 and/or the False Claims Act, signaling its intent to aggressively pursue violators. To mitigate risk, companies are advised to strengthen import compliance programs, conduct supply chain audits, and evaluate the benefits of voluntary self-disclosure. The DOJ’s enhanced enforcement posture underscores the importance of proactive compliance and internal controls in navigating the evolving trade regulatory landscape.
Courtesy of Meeks, Sheppard, Leo & Pillsbury LLP