As detailed in Part I of our three-part series on Minimizing Customs Enforcement and False Claims Act Risks, the combination of the new high-tariff environment, the heightened ability of Customs (and the general public) to data mine, and the Department of Justice’s (DOJ) stated focus on using the False Claims Act (FCA) substantially increases import-related risks. In light of this heightened risk, Part II and the forthcoming Part III of this series focus on preparing for specific areas where we see heightened enforcement risk, both for Customs and FCA penalties, with this article addressing the most common FCA risks arising from submitting false Form 7501 entry summary information.

By far, the most common Customs errors we see relate to misclassifications on Form 7501 entry summaries. If made knowingly, these misclassifications can lead to FCA liability, as demonstrated by a high incidence of DOJ settlements based on alleged known classification errors. Relevant FCA examples include $22.2 million and $2.3 million settlements, each premised on importers knowingly misclassifying entries into lower-tariff classifications to avoid paying duties owed on the companies’ imports.

Additionally, aggressively classifying goods to avoid being subject to the China Section 301 tariffs can create the risk of FCA liability. Such opportunistic classification led to a $22.8 million settlement by an importer that used inaccurate classifications despite receiving repeated CBP notices...

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