November 10, 2025
Governments impose taxes known as tariffs and duties on goods that are manufactured abroad and imported for use or sale within their borders. Tariffs are used to generate revenue, protect domestic industries and jobs, enhance national security, and serve as bargaining power in trade negotiations. But as global trade grows more competitive and tariff rates rise, so too does tariff evasion, an expanding fraudulent practice that harms Americans and impedes fair competition.
In 2025, the U.S. government greatly expanded the tariffs it charges on goods imported from numerous countries. Almost half of all goods that enter the U.S. are now subject to tariffs. These tariffs, which vary by product and country of origin, in some cases exceed 100% of the imported products’ value. While business owners, CEOs, consumers, economists, and politicians have differing views on the effectiveness of U.S. trade and tariff policies, tariffs are legal obligations that must be paid. When importers evade these obligations, they not only cheat the government and American citizens out of billions in revenue but also gain an unfair advantage over competitors who play by the rules and abide by the law.
The Widening Tariff Gap
According to economists at Goldman Sachs, importers evaded payment of an estimated $125 billion in tariffs on goods imported into the U.S. in 2023. The difference between the total amount of tariffs owed and the total amount paid is referred to as the “tariff gap.” While tariff gap data for 2025 is not yet available, with the U.S. government’s expansion and escalation of tariffs this year, tariff evasion schemes are increasing in prevalence, and the tariff gap is widening. Studies show that when tariff rates rise, tariff evasion increases disproportionately. Tariff cheaters, on average, lower the tariff amounts they actually pay by a substantially higher percentage than the amount of the tariff rate increase – i.e., for every 1% tariff increase, the tariff gap widens by 3%.
Common Tariff Evasion Schemes
To evade payment of some or all the duties and tariffs owed on goods, many importers engage in fraudulent schemes including these more common schemes:
- Understating the value of the goods that are being imported in documentation that importers are required to submit to U.S. Customs (i.e., Entry Summary (Form 7501) and commercial invoices)
- Misclassifying the goods being imported in required documentation submitted to U.S. Customs (i.e., falsely reporting that the good is another product that has a lower tariff or duty rate)
- Lying about the country of origin in required documentation submitted to U.S. Customs (i.e., falsely reporting that the good was manufactured in another country for which the tariff rate is lower)
- Smuggling goods into the U.S. without disclosing their entry to U.S. Customs.
Using the False Claims Act to Hold Companies Engaging in Customs Fraud Accountable
There is a powerful tool to hold companies that engage in customs fraud accountable and protect fair competition: the False Claims Act. The False Claims Act makes it unlawful to knowingly avoid payment of a financial obligation to the U.S. government. Companies that evade payment of owed tariffs and duties violate the statute. A person who violates the statute is liable to the government for three times the total amount of owed duties and tariffs they did not pay, plus interest, and is also required to pay substantial penalty for each fraudulent import transaction.
Incentives for Whistleblowers
To better enable the government to combat fraud that harms the country, Congress included a qui tam provision in the False Claims Act. This provision allows companies and individuals to bring whistleblower or qui tam actions on behalf of the U.S. government against companies that have engaged in customs fraud. To encourage those with information about companies that have engaged in customs fraud to come forward and assist the government in recovering the unpaid duties and tariffs, the law rewards whistleblowers a substantial share – typically 15% to 30% depending on multiple factors ‒ of the recovery the government obtains as a result of the whistleblower’s information and lawsuit.
Whistleblowers who expose tariff evasion under the False Claims Act not only aid in recovering funds owed to the United States, but they also help uphold trade integrity and fair competition.
The False Claims Act has been an overwhelmingly effective fraud enforcement tool, recovering over $78 billion for the government and American taxpayers since 1986, and has been successfully used on numerous occasions to combat tariff evasion. This success is largely due to whistleblowers using the statute’s qui tam provision to hold those who engage in customs fraud accountable.
About the Author
Casey Preston represents plaintiffs across the country in qui tam actions brought under the False Claims Act against companies that engage in fraudulent conduct that causes economic harm to federal and state governments.