The U.S. Department of Justice (DOJ) recently announced plans to shift its MIMF (Market Integrity and Major Frauds) Unit, which had previously focused on money market and procurement fraud, into a new division tentatively called the Market, Government, and Consumer Fraud Unit. This group will focus on policing instances of tariff payment evasion.
While ever-shifting tariffs can pose confusion and uncertainty for businesses, the move indicates the DOJ's intent to try to enforce tariffs currently in effect. In addition to working with the framework already in place through the U.S. Customs and Border Protection agency, the DOJ plans to find and punish trade fraud with the False Claims Act and qui tam actions filed by whistleblowers.
Evading Tariffs
The Trump administration has made taxing imports a key part of its economic plan. The importing company is obligated to pay the tariff at the port of entry, with the increase most likely to be passed along in the retail costs to their customers.
As with any tax, it is illegal to misrepresent or fail to pay tariffs on imported goods. However, there are some ways companies can try to illegally avoid paying tariffs, such as:
- Misrepresenting where the goods are from or what they are
- Fraudulently undervaluing goods at a port of entry
There are also legal ways to avoid paying tariffs. For example, a company may alter the materials, composition, or design of the imported good to have it classified differently under the Harmonized System, a complete product classification system used by governments worldwide when assessing tariffs. It may also be possible to get a tariff exemption in limited circumstances.
This means a company could potentially legally get around paying the highest possible tariffs. Misrepresenting the nature of the imported goods or undervaluing them is the behavior the Market, Government, and Consumer Fraud Unit will be charged with investigating.
A Tariff-ic Headache
With President Trump having placed so much faith in tariffs, the creation of a tariff enforcement unit feels somewhat inevitable. Regardless, there's a lot at stake for businesses. Reducing taxes is always a priority, but it should be done carefully and legally to avoid running afoul of federal authorities.
If your business has questions about import taxes, you may wish to speak to a law firm familiar with international trade.
Related Resources
- U.S. Import Requirements (FindLaw's Litigation and Disputes)
- What Is the False Claims Act? (FindLaw's Whistleblowers - How Employment Law Shield Workers)
- Everything You Need To Know About Fraud Crimes and Fraud Law (FindLaw's Criminal Charges)
