U.S. Justice Department Escalates Tariff Evasion Crackdown With Criminal Charges

The U.S. Department of Justice is intensifying its efforts to combat companies and individuals attempting to evade tariffs imposed during the Trump administration. The department is preparing to use criminal charges against those found guilty of such actions, marking a significant shift from the traditional approach of civil penalties and settlements.

On July 23, the Department of Justice announced that it is bolstering a new division focused on trade fraud with "important personnel." Concurrently, federal prosecutors across the country have begun collecting records of foreign goods transactions from the Biden administration period to gather evidence for potential lawsuits. This move is part of a broader effort to address the significant revenue losses caused by tariff evasion, which officials estimate to be in the tens of billions of dollars annually.

The enforcement actions will cover multiple industries, including steel, aluminum, textiles, and consumer goods. The goal is to maintain a fair trading environment and ensure national revenue. This initiative aligns with Trump's April promise to take "very severe" measures against global tariff evasion. Although the progress of investigations into tax evasion related to Trump's tariffs is unclear, the preparatory work by the Department of Justice has sent a strong enforcement signal, directly impacting investors and multinational corporations.

Traditionally, U.S. Customs officials have handled tariff evasion through fines or civil settlements. However, the Department of Justice is now signaling that severe violations will face criminal prosecution. The head of the Department of Justice's Criminal Division, Matthew Galeotti, stated that while some negligent behaviors or administrative errors may be better handled through civil means, criminal enforcement is appropriate for major violations. He added that when importers underreport the value of goods or falsely report their country of origin, they evade the full import costs that should be paid to the U.S.

Galeotti further emphasized that trade fraud not only results in the loss of tens of billions of dollars in tax revenue, reducing funds available for essential government services, but it can also be used to circumvent sanctions and export controls, particularly by foreign entities hostile to U.S. interests. The Trump administration had imposed a minimum 10% tariff on nearly all imported goods and a 50% tariff on all steel and aluminum imports, while threatening higher tariffs on major trading partners such as the European Union and Mexico.

A former senior customs official noted that these new tariffs, combined with existing anti-dumping duties, create a strong incentive for companies to find ways to reduce or avoid taxes. However, some of these strategies may cross legal boundaries, leading to civil or even criminal liability. The Department of Justice's Criminal Division is now involved in this effort, with its members tasked with specifically targeting companies evading tariffs.

Signs indicate that U.S. law enforcement agencies are actively preparing for future lawsuits. Prosecutors are reviewing potential violations that occurred during the Trump administration and before. Federal prosecutors' offices outside Washington have recently requested that some companies provide records of their shipments and communications with other parties in their supply chain during the Biden administration period. Typically, U.S. prosecutors rely on the Homeland Security Investigations (HSI) and Customs and Border Protection (CBP) to submit severe tariff evasion cases for potential civil or criminal charges.

CBP appears to have intensified its scrutiny of high-tariff items. A former senior customs official mentioned that some of her clients have recently received "very targeted" information requests from CBP, involving details such as product classification and the relationship between buyers and sellers. This official believes that these requests are preparatory work aimed at companies they suspect, with the best-case scenario being that these companies made mistakes, and the worst-case scenario being that they engaged in fraud.

This escalation in enforcement against trade fraud is not the first of its kind. During the Biden administration's priority enforcement of sanctions against Russia, the Department of Justice has handled similar violations multiple times. The shift from civil penalties to criminal prosecution reflects a more aggressive stance by the U.S. government in ensuring compliance with its tariff policies and protecting national revenue.