Fraud, in the customs context, is the highest culpability level under 19 U.S.C. § 1592. It requires that the importer voluntarily and intentionally violated a material legal requirement, either by means of a materially false statement, document, or act, or by a material omission.
Legal standard: The Court of International Trade has defined customs fraud as requiring "clear and convincing evidence" of:
- A material false statement, document, omission, or act
- Knowledge of the falsity
- Intent to deceive CBP
This is the same evidentiary standard used in common-law fraud — substantially higher than the "preponderance of the evidence" standard applied to negligence and gross negligence cases.
Penalty cap: Under § 1592(c)(1), the maximum civil penalty for fraud is the domestic value of the merchandise — not just the duties owed. For high-value merchandise, this can dwarf the underlying loss of duties. For example, a $1M shipment with $50,000 in unpaid Section 301 duties could face a $1M fraud penalty.
Examples of conduct CBP has charged as fraud:
- Misrepresenting country of origin to evade Section 301 or antidumping duties (transshipment schemes)
- Submitting fictitious invoices to lower declared value
- Misdescribing merchandise to obtain a lower-duty HTS classification
- False USMCA certifications of origin
- Concealment of buying commissions, royalties, or assists
- Splitting shipments to qualify for the Section 321 de minimis exemption
Prior disclosure under § 1592(c)(4): For fraud, a successful prior disclosure caps the penalty at 1× the loss of duties, taxes, and fees, with interest — removing the domestic value exposure entirely. This is the single largest financial benefit of prior disclosure.
Relationship to criminal liability: Customs fraud findings under § 1592 are civil and do not automatically trigger criminal prosecution. However, the same facts may also support criminal charges under 18 U.S.C. § 542 (entry by false statements, 2 years' imprisonment) or 18 U.S.C. § 545 (smuggling, 20 years' imprisonment), prosecuted by the U.S. Attorney's Office, often in parallel with civil 1592 proceedings.