Customs Fraud: Why Whistleblowers Are Crucial as Tariffs Rise
When international trade policy shifts, companies face pressure. And when that pressure takes the form of rising tariffs, some businesses look for ways around the rules. That’s where customs fraud often begins—and where whistleblowers have the power to stop it.
In this episode of our whistleblower video series, customs fraud attorney Stephen Teller discusses how customs fraud happens, what kinds of schemes are common, and why whistleblowers are uniquely positioned to uncover this type of wrongdoing. Below, we explore several takeaways from his insights.
Why Does Customs Fraud Increase When Tariffs Go Up?
Tariffs don’t just affect trade—they change incentives. When new or increased tariffs are suddenly applied, companies that rely on imports often scramble to protect their profit margins. For some, this means raising prices. For others, it means crossing the line into fraud.
Whether a company is falsely labeling where goods come from, misclassifying a product to reduce the tariff owed, or undervaluing shipments, the motive is the same: avoid paying what’s legally required. And the cost to taxpayers—and domestic industries—can be substantial.
How Do Companies Commit Customs Fraud?
There’s no one-size-fits-all method of cheating the system, but Teller identifies some common tactics seen across industries:
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Falsifying country of origin to claim a lower-duty country
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Misclassifying goods to sneak them into lower tariff categories
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Undervaluing shipments to reduce the percentage owed
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Smuggling or misdeclaring goods to bypass customs enforcement entirely
While some tactics involve gray areas in classification or sourcing, many schemes are outright fraudulent. And when patterns emerge across repeated shipments or communications, the case for government action becomes stronger.
Do Small-Scale Customs Violations Really Matter?
One of the most common misconceptions is that customs fraud only happens on a massive scale. That’s not true. In fact, Teller highlights several cases where even small discrepancies—when documented carefully—led to significant whistleblower actions.
The key isn’t always the dollar amount. It’s the consistency of the fraud, the clarity of the evidence, and the willingness of someone on the inside to speak up.
What Role Do Anti-Dumping Duties Play?
Anti-dumping and countervailing duties exist to protect U.S. industries from unfair trade practices—such as when foreign governments subsidize exports to undercut competitors. One area where this regularly plays out is aluminum products, such as extruded parts used in manufacturing.
Whistleblowers who recognize that their company is importing such materials while evading these duties are often among the only people with the access and context to flag the problem. Their reports can reveal not only fraud, but also how certain companies gain unfair advantages in competitive industries.
Can Mislabeling a Product’s Origin Be Considered Fraud?
In some cases, country-of-origin labeling fraud is elaborate—shifting components through multiple countries or claiming assembly in a jurisdiction with lower duties. But in others, it’s shockingly blatant. One whistleblower flagged a shipment of Chinese goods with no label at all—only to learn the product wasn’t manufactured anywhere else.
These are the kinds of details customs authorities rely on, and without whistleblowers, many would never come to light.
Why Do Whistleblowers Risk Coming Forward?
Beyond stopping wrongdoing, whistleblowers in customs fraud cases can be eligible for a portion of the recovery under the False Claims Act. That reward typically ranges from 15% to 25% of what the government recovers. In one of Teller’s cases, the whistleblower was awarded $6.5 million for reporting fraud in the telecommunications sector.
But rewards are only available to those who are first to file and who follow proper procedures.
What Should You Do If You Suspect Customs Fraud?
If something doesn’t seem right—invoice discrepancies, unexplained country-of-origin claims, suspicious tariff categories—it’s important to investigate further. Teller emphasizes the value of quiet documentation and strategic timing. For example:
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Keep handwritten or electronic notes with dates and details
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Save communications that demonstrate intent or misrepresentation
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Refrain from quitting before speaking to an attorney
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Consider whether internal reporting is appropriate—or risky
Why Is Legal Advice So Important for Whistleblowers?
Fraud against the government is a serious allegation. It’s also one where timing and legal advice matter immensely. Teller encourages potential whistleblowers to speak to an attorney experienced in both employment law and False Claims Act matters before taking action. This ensures the individual is protected against retaliation, preserves the ability to seek financial recovery, and helps build a case that can stand up under scrutiny.
Is Customs Fraud Really Getting Worse?
As global supply chains become more complex and trade policies continue to evolve, customs fraud isn’t going away. But accountability is still possible—especially when insiders are empowered to step forward, report what they see, and take action through the proper channels.
Thinking of Reporting Customs Fraud?
Call Teller Law at (206) 324-8969 to speak with a whistleblower attorney. All calls are confidential, and you may be eligible for a reward if the government recovers funds based on your report.