The DOJ just settled another customs fraud case — $2.1 million for undervaluing imports from China. But that's not the story. The story is the enforcement machine behind it: a cross-agency task force, record-shattering penalties, and whistleblowers with a financial incentive to turn you in. If your declared values don't hold up to scrutiny, 2026 is not the year to find out.
On April 30, 2026, the Department of Justice quietly announced that a U.S. company agreed to pay at least $2.1 million to settle allegations that it had systematically undervalued imports from a China-based manufacturer for more than three years. The company had submitted invoices to CBP that underreported purchase costs and repeatedly left out the value of components incorporated into packaged goods shipped from China — reducing its tariff obligations entry after entry.
A few years ago, this might have resulted in a prior disclosure, some back duties, and maybe a penalty under 19 USC 1592. Instead, the DOJ brought it as a False Claims Act (FCA) case — the same statute used to pursue defense contractor fraud and Medicare billing schemes. And the $2.1 million settlement? That's modest by recent standards. In December 2025, the same task force secured a $54.4 million settlement with Ceratizit USA LLC over unpaid duties on tungsten carbide products from China — the largest customs fraud resolution in False Claims Act history.
Welcome to the new era of customs enforcement.
The Trade Fraud Task Force: What Changed
In August 2025, the DOJ and the Department of Homeland Security launched the Trade Fraud Task Force, a cross-agency enforcement unit that coordinates the DOJ's Civil Division, Criminal Division's Fraud Section, U.S. Attorney's Offices nationwide, CBP's Office of Trade, and Homeland Security Investigations (HSI).
This isn't a press-release initiative. The Task Force has already produced six FCA settlements tied to customs fraud in its first year, totaling more than $86 million. It has pursued both civil and criminal cases — including wire fraud and conspiracy charges against executives at a Colorado company that disguised the origin of Chinese forklifts and sold them to U.S. government agencies as "Made in the USA."
The message from DOJ is explicit: customs duty evasion is fraud against the United States, and it will be prosecuted with the same tools used against healthcare billing schemes and defense contractor scams.
Why the False Claims Act Changes Everything
Here's what makes the FCA different from traditional customs penalties — and far more dangerous for importers.
Under 19 USC 1592, CBP can assess penalties at three levels: negligence, gross negligence, and fraud. The maximum penalty for fraud is the domestic value of the merchandise. For gross negligence, it's four times the duty loss. For negligence, it's two times. These are serious, but the process stays within the customs system. You deal with CBP. You might file a prior disclosure. Your broker helps you sort it out.
The False Claims Act is a different animal entirely.
| Feature | 19 USC 1592 (CBP) | False Claims Act (DOJ) |
|---|---|---|
| Who investigates | CBP Office of Trade | DOJ + DHS + HSI + CBP jointly |
| Penalty calculation | Up to domestic value (fraud) | Up to 3x the government's damages + $11,000+ per false claim |
| Criminal exposure | Separate criminal referral required | Task Force runs civil and criminal tracks simultaneously |
| Whistleblower incentive | None | 15-30% of recovery paid to whistleblower |
| Statute of limitations | 5 years | 6-10 years |
| Scope | Entry-level penalties | Every false entry is a separate "claim" — penalties multiply fast |
The whistleblower provision is the accelerant. Under the FCA's qui tam mechanism, any person — a former employee, a competitor, a disgruntled supplier, your own customs broker — can file a sealed complaint with the DOJ alleging customs fraud. If the government intervenes and recovers money, the whistleblower gets 15-30% of the settlement.
In the Ceratizit case, the whistleblower received $9.75 million. That's not a theoretical incentive. That's life-changing money — and everyone in your supply chain knows it.
The Six Cases That Define the New Enforcement Landscape
The Trade Fraud Task Force's first year produced a pattern that every compliance team should study:
| Company | Amount | Allegation |
|---|---|---|
| Ceratizit USA LLC | $54.4M | Evaded duties on tungsten carbide products from China |
| Stone importer (unnamed) | $12.4M | Customs fraud on stone products |
| Flooring company | $8.1M | Duty evasion on multilayered wood flooring from China |
| Plastics company | $6.8M | Customs-related false claims |
| Furniture maker | $4.9M | Duty evasion on furniture imports |
| Latest settlement (April 2026) | $2.1M+ | Undervalued imports from China, omitted component costs |
Notice the pattern: China-origin goods, undervaluation or misclassification, and in most cases the conduct stretched back years before anyone caught it. These weren't one-off mistakes. They were sustained practices that someone — often a whistleblower — eventually flagged.
The total FCA recovery across all categories in fiscal year 2025 was $6.8 billion — the largest in the statute's history. Customs fraud is still a small fraction of that, but it's the fastest-growing category. DOJ has signaled that trade compliance is a "durable focus" for FCA enforcement in FY 2026 and beyond.
How CBP Is Finding You: AI-Powered Enforcement
The enforcement surge isn't just about DOJ attorneys reading whistleblower complaints. CBP has invested heavily in AI-powered supply chain mapping that can identify anomalies across millions of entry records — including patterns consistent with undervaluation, transshipment, and misclassification.
Here's what that looks like in practice:
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CF-28 Requests for Information: CBP's targeting systems flag entries where declared values deviate significantly from expected ranges for specific HTS codes and countries of origin. You get a CF-28 asking you to justify your declared value with commercial invoices, purchase orders, and payment records.
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CF-29 Notices of Action: If your response doesn't satisfy CBP, they issue a CF-29 proposing to change your declared value — and you owe the difference in duties, plus interest.
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Focused Assessments: For repeat issues, CBP conducts a full audit of your import operations, examining your internal controls, valuation methodology, and compliance procedures over multiple years.
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Referral to DOJ: If CBP's findings suggest knowing or reckless conduct, the case gets referred to the Trade Fraud Task Force for FCA investigation.
The AI systems are particularly effective at catching related-party valuation issues and assists — two areas where importers frequently get valuations wrong, sometimes deliberately and sometimes through genuine confusion about what the rules require.
The Valuation Mistakes That Get You Caught
Customs valuation under 19 USC 1401a requires that the declared value of imported merchandise be the transaction value — generally the price actually paid or payable for the goods when sold for export to the United States. Sounds simple. It isn't.
Here are the valuation errors that most commonly trigger enforcement:
1. Omitting assists. If you provide materials, tools, dies, molds, engineering work, or design services to your foreign supplier — and those items are used in producing the imported goods — their value must be added to the transaction value. The $2.1 million settlement specifically cited the failure to include "the cost of items incorporated into packaged goods."
2. Dual invoicing. Maintaining one set of invoices for CBP and another reflecting the actual purchase price. This is the clearest path to a fraud finding, and CBP's data analytics can now cross-reference your declared values against industry benchmarks, competitor filings, and even your own financial statements.
3. Related-party manipulation. When the buyer and seller are related (common ownership, corporate family), transfer pricing that doesn't reflect arm's-length transactions will draw scrutiny. CBP requires importers to demonstrate that the relationship didn't influence the price, using one of several test value methods.
4. Ignoring post-importation payments. Royalties, license fees, and subsequent payments to the seller that are a condition of the sale must be included in the transaction value. Many importers miss this, especially when the payments flow through a different entity than the one on the commercial invoice.
5. Misapplying first sale. The first sale rule lets importers use the price in an earlier sale in a multi-tiered distribution chain, reducing the dutiable value. But CBP has tightened documentation requirements, and claiming first sale without proper evidence is now a red flag.
What to Do Right Now: Five Actions for Every Importer
1. Audit your declared values against actual costs. Pull your last 12 months of entries and compare declared values to what your accounting system shows you actually paid. If there's a gap, you have a problem — and it's better to find it yourself than to let CBP or a whistleblower find it for you.
2. Map your assists and include them. Document every material, tool, mold, die, or service you provide to your foreign supplier. Work with your customs broker to ensure these are properly added to your declared values. This is the single most common valuation error, and it's the one CBP targets most aggressively.
3. Review related-party transactions. If you're importing from a subsidiary, affiliate, or any entity with common ownership, make sure your transfer pricing methodology holds up under customs scrutiny — not just tax scrutiny. The standards are different.
4. Consider a prior disclosure. If you discover a valuation error, 19 USC 1592(c)(4) allows you to file a prior disclosure with CBP, which significantly reduces penalty exposure — typically to one times the duty loss for negligence, with no penalty if you disclose before CBP starts looking. A prior disclosure won't protect you from the FCA, but it demonstrates good faith and can influence whether DOJ pursues the case.
5. Treat your compliance program like an insurance policy. Document everything: your valuation methodology, your broker instructions, your internal review procedures. Under the FCA, the government must prove you "knowingly" submitted false claims. A well-documented, reasonable compliance program is your best defense against a finding of knowledge — and your best argument for reduced penalties if something does go wrong.
What's Coming Next
The Trade Fraud Task Force is not slowing down. DOJ has publicly stated that customs enforcement is a priority for FY 2026, with particular focus on:
- Tariff engineering schemes that use misclassification to avoid Section 301, Section 232, and IEEPA duties
- Transshipment through third countries to disguise Chinese origin
- De minimis abuse under Section 321, where shipments are structured to stay under the $800 threshold
- Country-of-origin fraud, particularly for goods subject to antidumping and countervailing duty orders
CBP is also expanding its use of data-sharing agreements with foreign customs authorities, making it harder to maintain different valuations for export and import declarations.
And the whistleblower pipeline is filling up. With FCA qui tam filings hitting a record 1,297 in FY 2025, and customs cases delivering million-dollar rewards, the financial incentive for insiders to report valuation fraud has never been stronger.
The Compliance Imperative
The old calculus — that undervaluation was low-risk because CBP didn't have the resources to catch it — is obsolete. The Trade Fraud Task Force has changed the enforcement model from reactive to proactive, from administrative to prosecutorial, and from government-initiated to whistleblower-driven.
The companies paying $2.1 million, $8.1 million, and $54.4 million in settlements all had the same thing in common: they treated customs valuation as an afterthought until it became a federal investigation. Tools like TariffLens can help you flag valuation inconsistencies before they become audit findings — but the real work starts with taking your declared values as seriously as the DOJ now does.
This article is for informational purposes only and does not constitute legal, tax, or customs advice. Consult a licensed customs broker or trade attorney for guidance specific to your situation.