Intensified enforcement: TFTF targets trade violations

January 2026  |  FEATURE | FRAUD & CORRUPTION

Financier Worldwide Magazine

January 2026 Issue

The tariffs introduced under the Trump administration since February 2025 intensified as the year progressed. While some argue that tariffs could help reduce the US trade deficit and support domestic production, others point to the risk of higher consumer prices, inflation and retaliatory tariffs.

A baseline scenario outlined by the Budget Lab in September 2025 indicates that should all current tariffs be maintained in perpetuity, consumers face an overall average effective tariff rate of 17.4 percent. Moreover, all tariffs to date in 2025 raise $2.4 trillion over 2026-35, with $451bn in negative dynamic revenue effects, bringing dynamic revenues to $2.0 trillion.

“If they are maintained, the impact of the Trump tariffs going forward is quite significant,” affirms Jake M. Shields, a partner at Gibson Dunn. “This year alone, the Trump tariffs account for as much as 71 percent of tariffs imposed – raising these duties to the highest levels since the 1930s.

“Some large companies are paying billions of dollars more in tariffs this year, and some smaller ones are having the tariffs erase their profit margins completely,” he continues. “These companies will have to make serious adjustments of one kind or another if the tariffs are not eliminated or reduced significantly.”

Tariff evasion

Given the stringent nature of the US tariff regime, with companies struggling to navigate rapidly changing duty rates, shifting product scopes and overlapping trade restrictions, intentional tariff evasion is now much more likely.

While there are numerous tariff evasion schemes, such as undervaluation, misclassification, false country-of-origin declarations, transshipment and the smuggling of prohibited goods, two main methods are most prevalent. First, undervaluation (companies underreporting the value of their imported goods), and second, misclassification (mislabelling the product’s nature to benefit from lower tariff rates).

With companies increasingly rerouting goods and underreporting values to evade President Trump’s import levies, tariff evasion could cost the US government $40bn annually, with over $200bn in imports potentially affected, according to analysis by Goldman Sachs.

In the face of such potential losses, a sea change in US trade enforcement priorities has occurred, with tariff fraud now viewed as a criminal enforcement priority at the highest levels of the US government – a priority that has led to the creation of the Department of Justice (DOJ)-Department of Homeland Security (DHS) Trade Fraud Task Force (TFTF).

“The TFTF is a reflection of the seriousness that the current US administration is taking to enforcing the tariff regime that it has implemented in recent months,” observes Mr Shields. “US tariffs are at their highest level in almost a century and were raised suddenly. Importers subject to these high tariffs are likely to take measures to avoid paying them in full. Some of these efforts will be lawful. Others may come close to or cross the line.”

Notable shift

Launched in August 2025, the TFTF marks a notable shift in the DOJ’s trade enforcement agenda – it does not establish any new authorities but seeks to leverage those the agencies already have through a greater emphasis on coordination and information sharing.

Historically, tariff enforcement has been the domain of US Customs and Border Protection (CBP) and civil penalty proceedings. However, the DOJ’s involvement adds a criminal dimension that significantly raises the stakes for companies and individuals involved in international trade.

When announcing the TFTF, the DOJ explained that enforcement in this area is a necessary component of implementing President Trump’s ‘America First Trade Policy’ and emphasised that enforcement efforts are focused on protecting “law abiding businesses in the United States” who are “at a competitive disadvantage” as compared to “nefarious importers and their co-conspirators”.

According to Ryan Last, an associate at Troutman Pepper Locke, the creation of the TFTF is driven by a mix of political, economic and enforcement realities. “At the policy level, protecting US industry under the ‘America First Trade Policy’ and tariff revenue has become a central priority of the current administration, and tariff evasion undermines that effort,” he asserts. “From a practical standpoint, the CBP and the DOJ have seen a surge in suspicious trade activity, including undervaluation, misclassification and transshipment patterns, that suggest duty avoidance at scale.”

Essentially, the TFTF will advance the ‘America First Trade Policy’ by pursuing those who violate customs laws through duty and penalty collection actions under the Tariff Act of 1930, actions under the False Claims Act (FCA), and, wherever appropriate, parallel criminal prosecutions, penalties and seizures under Title 18’s trade fraud and conspiracy provisions.

“There is also a recognition that fraud of this kind can drain billions from federal revenue and distort competitive markets,” continues Mr Last. “By bringing DOJ and DHS resources together, the US government seems to be aiming for faster escalation of cases from audit to civil FCA suits and, where warranted, criminal prosecution. The TFTF is a response to both political will and data, where suspicious valuation, misclassification and transshipment practices are now large enough to threaten tariff policy and revenue.”

Essentially, the TFTF will augment existing coordination mechanisms within the DOJ and leverage expertise from both the Civil and Criminal Divisions, as well as the DHS, to aggressively pursue enforcement actions against any parties who seek to evade tariffs and other duties, as well as smugglers who seek to import prohibited goods into the US economy.

Areas of focus

With the rollout of the TFTF still in its relative early stages, it remains to be seen exactly what approaches will be taken to identify and investigate trade fraud. However, there are several areas where interagency investigative and prosecutorial resources will likely be focused.

“As with any enforcement area, the DOJ will likely focus on conduct and actors that are the most culpable and where a prosecution will have the greatest deterrent impact – big industry players and big headlines, with perhaps a focus on imports from China or areas where the domestic industry has faced unfair practices overseas,” suggests Aaron Cooper, a partner at Jenner & Block. “I would also expect the DOJ to analyse federal and industry data concerning imports and trade flows to identify priority areas for enforcement, as it has done in the past with issues like healthcare fraud.”

According to Troutman Pepper Locke, the TFTF’s focus will be on conduct that undermines US customs laws, including: undervaluing imported goods to reduce duties owed; (ii) falsifying country-of-origin information, including deceptive labelling or transshipment to conceal origin; (iii) misusing free trade agreement preferences (for example under the US-Mexico-Canada Agreement) without meeting eligibility requirements; (iv) improperly classifying products to secure a lower duty rate or avoid tariffs entirely; and (v) structuring transactions to sidestep tariffs, such as section 301 duties on Chinese-origin goods or section 232 tariffs on steel, aluminium, automobiles and automotive parts.

“Efforts will be powered by CBP audits, whistleblower tips and data-driven targeting,” says Mr Last. “We expect enforcement to concentrate on areas with high tariff exposure, such as undervaluation, misclassification of goods, fraudulent country of origin claims, transshipment schemes and evasion of antidumping and safeguard duties. As one might put it, the TFTF playbook uses the full toolkit – FCA suits, criminal prosecutions, seizures and forfeitures, all supported by CBP audits and whistleblower tips.”

Creating a trade compliance programme

For companies that import goods into the US – or rely on suppliers that do – it is essential to recognise that the TFTF firmly embeds trade fraud within the DOJ’s enforcement priorities. Businesses must take appropriate steps to protect themselves from potential legal and financial risks.

Covington’s publication ‘Creation of the Cross-Agency Trade Fraud Task Force and the Future of Tariffs Enforcement’ outlines several key measures that companies should implement as part of an effective trade compliance programme.

First, companies should conduct thorough audits of their importing practices. The current tariff landscape is constantly evolving and presents unique challenges, particularly for firms and contractors that have not previously encountered aggressive enforcement in this area. Businesses with significant import activity would benefit from reviewing their procedures to identify and address any vulnerabilities.

Second, it is important to establish or strengthen the company’s trade compliance programme. A robust compliance framework should be well designed, properly resourced and empowered, and demonstrably effective in practice. Investing in such a programme is a prudent step toward avoiding or mitigating potential investigations.

Third, companies must actively monitor updates to applicable tariffs. Staying informed about tariff changes is critical to avoiding costly penalties. Legal counsel should be consulted to ensure goods are entered correctly and that importers are making full use of available customs programmes, thereby avoiding unnecessary overpayment.

Fourth, businesses should encourage the reporting of potential trade misconduct and ensure that any allegations are promptly investigated. Establishing strong internal procedures for handling misconduct – including disciplinary and corrective actions where appropriate – can help reduce the risk of whistleblower claims under the FCA and allow companies to resolve issues before they escalate.

Companies that fail to implement a comprehensive trade compliance programme face a range of potential consequences. These include reputational damage, operational disruptions such as supply chain delays, financial penalties and even criminal liability.

“The DOJ and the DHS are able to issue subpoenas and search warrants and conduct grand jury investigations for violations of false statements, wire fraud and conspiracy,” points out Mr Cooper. “The DOJ’s civil division has its own enforcement mechanisms for civil resolution of tariff evasion and FCA allegations, as it has already done this year. These can be complex investigations with high stakes.”

No longer a sideshow

As the TFTF continues to bed in, the prioritisation of federal trade enforcement and interagency collaboration is expected to become a powerful tariff enforcement tool. Among the most immediate impacts are a significant immediate uptick in audits, information requests and targeted seizures, as well as stronger compliance programmes, more voluntary self-disclosures and enhanced supply chain due diligence.

“The US government has a lot of data that it can use to potentially identify customs fraud or tariff evasion,” says Mr Shields. “The FCA has whistleblower provisions that encourage insiders and competitors to report customs fraud in hopes of receiving as much as 30 percent of a recovery. Moreover, the DOJ has both the means and the will to bring these cases.”

For Mr Last, the creation of the TFTF signals that tariff evasion is no longer a sideshow; rather it is a DOJ priority. “Importers are directly in the crosshairs of the US trade war, resulting in primary legal exposure if entries are wrong,” he contends. “I expect more audits, more seizures and more FCA and criminal referrals. This means companies should act now by implementing compliance programmes or expect to pay later.

“While no enforcement initiative can eliminate every scheme, the TFTF centralises investigators, prosecutors and intelligence in a way that will materially raise the risks for non-compliance,” he warns. “The TFTF will not stop every scheme overnight, but it raises the stakes for importers and suppliers who have been relying on sloppy or risky practices.”

In an era where trade policy is wielded as both shield and sword, the creation of the TFTF signals a decisive shift from passive oversight to active pursuit. For global businesses, this is not merely a regulatory ripple – it is a tidal change that demands vigilance, agility and a renewed commitment to compliance.

© Financier Worldwide

BY

Fraser Tennant