Three recent developments point to a marked escalation in U.S. customs and trade enforcement. The Department of Justice (DOJ) and Department of Homeland Security’s (DHS) Trade Fraud Task Force has in less than a year, demonstrating that the government is already deploying existing enforcement tools with greater intensity. Building on that momentum, the July 14, 2026, DOJ press release also announced the creation of a Global Trade & Commerce Enforcement Section within its National Fraud Enforcement Division, adding permanent prosecutorial capacity in this area. DOJ and DHS have also issued a (the Trade Enforcement Guide), which sets out the government’s trade fraud framework, identifies the principal investigative and prosecutorial tools now being used, and signals the compliance expectations likely to define the next phase of enforcement.

Taken together, these developments reflect a clear progression: first, the more aggressive use of existing enforcement mechanisms; second, the expansion of specialized enforcement capacity; and third, a more explicit statement of the government’s trade priorities and expectations. The message for importers and other supply-chain participants is direct. Customs non-compliance — at least for the most serious cases involving significant revenue loss to the Treasury — is no longer being treated mostly as an administrative matter to be managed through administrative penalty procedures. Instead, the U.S. government is increasingly treating tariff evasion, origin fraud, forced labor-related violations, and unsafe or non-compliant imports as matters to be dealt with using civil fraud and criminal exposure tools.

Importers should take that message seriously. This is a moment to test whether existing customs controls are genuinely fit for a more prosecutorial era. To help importers do that, this article examines these developments, explains why they matter, and highlights practical compliance steps businesses should take now to strengthen their trade controls given the new enforcement realities.

First Came Increased Enforcement…

The Trade Fraud Task Force’s first-year results are notable not just for their size but for what they show: tariff evasion has become a major enforcement priority. DOJ and DHS reported more than $1 billion in recoveries and enforcement-related outcomes in less than a year, signaling a shift away from treating customs violations as routine administrative issues and toward more aggressive use of fraud-based enforcement tools.

That shift matters because the government is increasingly using the False Claims Act (FCA), criminal fraud statutes, forfeiture, and other authorities to pursue trade-related misconduct. As a result, conduct once viewed as a technical customs error may now be treated as a false statement, duty evasion scheme, or unlawful importation.

The broader takeaway is that the government has already been building cases, coordinating across agencies, and applying these tools more systematically. For importers, the July 2026 announcements did not start this trend — they confirmed and accelerated it.

Now the DOJ Is Institutionalizing a Harder-Edged Approach…

The creation of the Global Trade & Commerce Enforcement Section is best understood against that backdrop, as it represents the institutionalization of a more prosecutorial model of customs and trade enforcement that was already emerging.

According to the DOJ, the section will investigate and prosecute criminal import, trade, and related fraud offences that:

• undermine American industries;
• evade external revenue collection;
• threaten consumer health and safety;
• finance foreign adversaries;
• promote forced labor through illegal trade practices; or
• violate US laws governing domestic and foreign commerce.

That formulation confirms that the government is not limiting its focus to duty underpayments in the narrow sense and instead is linking it to national security, forced labor enforcement, consumer protection, and supply-chain integrity. It also suggests the government’s attention will not stop with the importer of record. The DOJ’s framing points toward scrutiny of the wider commercial chain, including suppliers, customs brokers, distributors, resellers, and other parties that may have known of, facilitated, or deliberately ignored unlawful import practices.

A new enforcement section can develop concentrated expertise, coordinate more efficiently with DHS and other agencies, and generate a more consistent pipeline of cases. For importers and companies that rely on imports, that means trade fraud risk is less likely to depend on isolated investigations or changing enforcement priorities and more likely to become a regular and sustained feature of the enforcement landscape.

And Now the Trade Enforcement Guide Signals Where Enforcement Is Headed Next

If the Task Force’s results show that customs and tariff enforcement is already intensifying, and the new DOJ section shows that the government is expanding its capacity to pursue such cases, the new (the Guide) provides the clearest indication of where enforcement is likely to focus next.

Although presented as a general resource for enterprises of different sizes, the Trade Enforcement Guide is also usefully read as an enforcement roadmap. It explains the government’s approach to trade fraud, describes the principal investigative and prosecutorial tools available to it, and highlights the conduct areas most likely to attract scrutiny. In that sense, it not only informs companies of the rules; it also reveals the factual patterns and compliance failures the government increasingly associates with fraud, evasion, and knowing misconduct.

The Trade Enforcement Guide’s discussion of risk areas, particularly in chapters 4 and 5, points to several priority categories:

• Misclassification. Tariff classification remains a core customs risk because errors can reduce duties, avoid Section 232 or 301 tariffs, evade anti-dumping and countervailing duty (AD/CVD) orders, or affect admissibility and partner agency requirements. The Guide suggests Customs and Border Protection (CBP) may increasingly treat weak or unsupported classifications as potential evidence of evasion or false statements, not just technical disputes.
• Undervaluation, assists, and valuation omissions. Customs valuation remains a major focus, including not only straightforward undervaluation but also omissions from transaction value, such as assists, royalties, license fees, proceeds, and side payments. These issues often arise when customs lacks visibility into arrangements handled by procurement, finance, engineering, tax, or product teams, making valuation errors a sign of broader control failures or intentional duty minimization.
• False origin declarations and transshipment. The Guide emphasizes origin risk alongside transshipment, relabeling, false manufacturer information, and other efforts to hide the true source of goods. Because these tactics can evade tariffs, AD/CVD orders, forced labor restrictions, and other controls, importers are expected to go beyond supplier certifications and apply origin rules carefully.
• Section 301 and AD/CVD evasion. Evasion of Section 301 duties and antidumping/countervailing duties remains a high priority. Because these measures create strong incentives for misclassification, undervaluation, origin manipulation, and routing schemes, entries involving trade remedies are likely to face heightened scrutiny.
• Forced labor and prohibited goods. The Guide links customs enforcement to broader supply-chain integrity issues, including forced labor. False statements about sourcing, manufacturers, origin, or production conditions may support broader trade fraud theories, creating not only detention or exclusion risk but also civil and criminal exposure.
• Unsafe imports, consumer protection, and partner agency requirements. The Guide also ties trade fraud enforcement more closely to imports that threaten health and safety or violate partner government agency rules. Inaccurate customs declarations may matter not just because they reduce revenue, but because they conceal defects, bypass testing or certification, or facilitate entry of goods that should have been detained or refused.
• Downstream knowledge and supply-chain participation. Enforcement risk is not limited to the importer of record. The Guide suggests scrutiny may extend to brokers, distributors, resellers, consignees, end-users, and related entities that knew, suspected, or ignored that goods were imported unlawfully.

Taken together, these topics identify the government’s main trade fraud priorities: classification, valuation, assists, origin, tariff evasion, AD/CVD exposure, forced labor, unsafe imports, and knowing participation across the supply chain. Businesses should ensure these areas have the strongest compliance controls, documentation, and escalation processes.

Why These Developments Signal Increasing DOJ False Claims Act and Criminal Prosecution, Not Only Enhanced Customs Oversight

Before turning to the DOJ’s new role, it is worth emphasizing what has not changed. U.S. Customs and Border Protection’s administrative enforcement regime remains a core feature of U.S. customs enforcement and continues to generate substantial recoveries (in the billions of dollars) each year through audits, post-entry reviews, civil penalty actions and investigations, prior disclosures, and ordinary duty collection mechanisms. That regime is also designed to encourage importers to come forward when problems are identified. A valid prior disclosure can reduce penalty exposure and provide a compelling argument for resolution of an administrative-only matter because the DOJ’s role would be piling onto CBP’s enforcement, contrary to DOJ policy reflected in the . In that sense, CBP’s administrative system remains both a revenue collection tool and a compliance incentive. It is not being displaced, and it remains one of the government’s most important enforcement mechanisms.

What has evolved is that the DOJ is now building a more formal fraud and prosecution layer on top of administrative structure. Increasingly, errors or unpaid penalties assessed by CBP may also be assessed through an additional lens: whether it reflects a knowingly false declaration, a fraudulent scheme to evade duties or restrictions, or conduct serious enough to support civil fraud claims or criminal charges. That shift matters because it expands consequences facing importers and others in the supply chain.

The new enforcement direction indicates the government is increasingly prepared to ask tough questions about the seriousness of any underpayments: whether the company knew the declaration was unsupported; whether red flags were ignored; whether commercially significant inaccuracies were repeated over time; and whether multiple actors across the supply chain participated in or benefited from the scheme.

That is where False Claims Act and criminal exposure become more significant. In the customs context, the government may seek to characterize the underpayment of duties as a false claim or false statement to the government, particularly where inaccuracies are alleged to have been deliberate or even reckless. Criminal theories may become relevant where the facts suggest intentional concealment, falsified documents, sham routing, false manufacturer information, or coordinated conduct designed to evade duties or import restrictions. The distinction between negligence and fraud therefore becomes operationally important: weak controls, poor escalation, and untested supplier claims may no longer be viewed as compliance shortcomings if they are seen as evidence that a company disregarded obvious risks. This risk is especially heightened under the False Claims Act because it permits not only government enforcement actions but also qui tam actions filed by private individuals who can recover a share of the penalties.

The Trade Enforcement Guide’s discussion of investigative tools, cooperation, voluntary disclosure, and qui tam relator mechanisms reinforces that point. The government appears to be encouraging earlier internal escalation and remediation by making clear that companies may face a more serious set of consequences if concerns are ignored until they get on the DOJ’s enforcement radar.

Practical Compliance Implications

Against that background, the key question is what a defensible compliance program should look like. While the appropriate design will depend on a company’s products, sourcing model, entry profile, and duty exposure, several baseline elements are increasingly important.

• Stronger governance and written procedures. Customs compliance should be treated as an active risk-management function. Senior management should ensure responsibilities are clearly allocated among trade compliance, legal, procurement, finance, logistics, sourcing, and internal audit. This is particularly important where customs decisions depend on information held outside the customs function, such as transfer pricing, engineering support, tooling arrangements, royalties, product development inputs, and origin substantiation.
• Documented classification and valuation controls. Importers should maintain defensible and documented processes for tariff classification and customs valuation. A central customs classification index should identify the applicable HTSUS code, product description, technical rationale, sourcing details, supporting rulings or legal notes, date of review, and responsible approver for each SKU or product family. Valuation controls should likewise address assists, royalties, license fees, proceeds, side payments, and other adjustments to value. Purchases from affiliated parties should be supported by a regularly updated transfer pricing study.
• A structured process for identifying assists. Assists remain a common area of under-controlled exposure because customs teams often do not have sufficient visibility into tooling, design work, engineering support, prototypes, molds, dies, or components provided free of charge or at reduced cost to overseas manufacturers. Importers should implement a formal process to identify such inputs across procurement, engineering, finance, and product teams; link them to the relevant imported goods; allocate value across affected entries; and document the methodology used.
• Risk-based post-entry reviews. With enforcement becoming more forensic after importation, companies should strengthen their own post-entry review processes. Reviews should be conducted periodically and on a risk-based basis to test whether entry data remains accurate, consistent, and adequately supported. They should cover classification, valuation, assists, origin declarations, Section 301 applicability, AD/CVD exposure, broker filing accuracy, and consistency across invoices, shipping documents, supplier certifications, and internal records.
• Enhanced supplier and origin, oversight. Origin-related enforcement risk remains particularly acute where country of origin affects duty liability or trade restrictions. Importers should not rely uncritically on supplier certifications where commercial incentives to misstate origin are obvious. Enhanced diligence may include confirming the actual manufacturer and production site, reviewing production records and bills of materials, assessing whether claimed substantial transformation is supportable, and testing consistency across invoices, labels, certificates, and entry data.
• Customs broker oversight and importer of record accountability. Importers should be careful not to treat customs brokers as a substitute for an internal compliance function. Although brokers play an important operational role in preparing and filing entries, the importer of record remains primarily responsible for the accuracy and completeness of the information declared to CBP. That means a company cannot simply hand off classification, valuation, origin, or admissibility decisions to its broker and assume that any resulting errors will be the broker’s problem. A defensible compliance program should therefore include clear written instructions to brokers, controls over the data and assumptions provided to them, periodic review of broker filings, escalation procedures for unusual transactions, and testing to confirm that broker practices align with company policy. Where multiple brokers are used, companies should also monitor consistency across filings and identify unexplained differences in classification, valuation treatment, origin declarations, or use of special trade programs.
• Protocols for investigation, disclosure, and remediation. Businesses should revisit their internal investigation and disclosure protocols in light of the DOJ’s emphasis on voluntary disclosure, cooperation, remediation, and qui tam channels. A current response plan should address issue escalation, document preservation, internal fact-finding, involvement of outside counsel where appropriate, quantification of affected entries and duty exposure, suspension of problematic practices, and decision-making around prior disclosure or other remedial engagement with the government. In a more prosecutorial environment, the speed and quality of a company’s internal response may materially affect enforcement outcomes.

Preparing for a More Prosecutorial Era

The significance of July 2026 developments lies not in any one announcement viewed in isolation, but in what they show collectively. The government first intensified use of existing enforcement tools and produced substantial early results. It has now reinforced that effort by creating permanent DOJ capacity dedicated to trade and customs-related fraud. At the same time, it has made its enforcement theory and practical priorities more explicit through the new DOJ-DHS Trade Enforcement Guide.

For importers and other supply-chain participants, the message is that customs compliance can no longer be approached as a narrow operational function concerned mainly with filing accuracy and duty calculation. It must instead be treated as part of a broader fraud, sanctions-adjacent, and supply-chain integrity risk framework in which tariff evasion, origin misstatements, forced labor-related representations, and unsafe or non-compliant imports may trigger civil fraud exposure, criminal scrutiny, and liability beyond the importer of record.

Businesses that invest now in governance, documentation, origin verification, valuation controls, post-entry testing, and credible escalation mechanisms will not eliminate enforcement risk. They will, however, be materially better positioned to identify problems early, remediate them before they escalate, and demonstrate that they take import compliance seriously in an environment where the US government plainly does as well.

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The Â鶹ֱ˛Ą International Trade & National Security Team advises companies across the full spectrum of international trade issues, including tariffs and Customs compliance, supply chain integrity, trade remedies (antidumping and countervailing duties), export controls, economic sanctions, and CFIUS national security reviews. Our Tariff & International Trade Resources blog regularly publishes practical guidance on all international trade topics and compiles it by topic area.

The Trump administration’s new tariff initiatives are reshaping the customs compliance landscape. As discussed in the prior articles in this series, higher tariff rates and new customs requirements are increasing customs bond requirements, new executive actions are signaling a more aggressive enforcement posture, and importers face a growing likelihood of audits, investigations, and other enforcement activity. Together, these developments are creating what may be described as the new customs enforcement reality.

Against this backdrop, many importers are understandably searching for opportunities to reduce tariff exposure and manage landed costs. There is nothing inherently problematic about such efforts. Indeed, customs law provides a variety of legitimate planning opportunities that may reduce duty liability when implemented correctly.

The challenge, however, is distinguishing between lawful tariff-planning strategies and positions that create significant compliance and enforcement risks. As tariff exposure increases, so too does the incentive for companies to adopt aggressive customs positions. At the same time, U.S. Customs and Border Protection (CBP) is expected to devote greater attention to classification, valuation, country-of-origin determinations, and other customs issues that directly affect duty liability.

As a result, some strategies that may appear attractive in the current environment can create substantial legal and financial exposure when pursued beyond what the law permits. In some cases, these approaches are based on misunderstandings of customs law. In others, they involve theories that have little support in existing statutes, regulations, or CBP guidance. And in still others, they may create risks that far outweigh any potential duty savings.

This final article in our series examines ten dubious tariff-saving “opportunities” that importers should approach with caution and explains why seemingly creative customs strategies can sometimes become the starting point for significant enforcement problems.

Classification and Tariff Scope Fallacies

Fallacy #1: “Come on, Customs processes millions of entries. They will never connect the dots!”

Many customs compliance strategies are built upon a surprisingly outdated assumption: that CBP reviews transactions one entry at a time and evaluates each filing in isolation.

That assumption is increasingly incorrect.

Modern customs enforcement is heavily data-driven. Through ACE and other enforcement tools, CBP has access to enormous amounts of import data and routinely employs sophisticated analytics to identify anomalies, trends, and potential compliance risks. Rather than beginning with a single problematic entry, CBP frequently begins with a pattern and then works backward to determine whether that pattern reflects a legitimate business change or a potential compliance issue.

This reality has become particularly important in the current tariff environment. CBP understands that importers have strong incentives to reduce exposure to Section 232 duties, Section 301 tariffs, antidumping and countervailing duty liability, and other trade restrictions. As a result, the agency is increasingly focused on identifying data patterns that may suggest aggressive tariff-avoidance strategies.

Classification changes are a good example. A sudden shift from one tariff provision to another shortly after a new tariff measure takes effect may attract attention, particularly where the products appear unchanged. The same is true of significant changes in declared value, abrupt country-of-origin shifts, unusual pricing trends, or sourcing changes that coincide with the implementation of new trade restrictions.

CBP also has the ability to compare importers against their peers. If one importer is declaring dramatically different values, classifications, duty rates, countries of origin, or sourcing patterns than similarly situated competitors importing comparable products, those differences may become visible through data analysis.

Importers should not assume that a questionable position will escape scrutiny simply because it appears reasonable on a single entry. Customs enforcement increasingly focuses on patterns, trends, and anomalies that become apparent only when transactions are viewed across products, suppliers, countries, and time periods.

The most effective compliance programs operate on the assumption that CBP will eventually connect the dots.

Fallacy #2: “Come on, there are at least three HTS codes that could apply. Why not use the cheapest one?”

For many importers, tariff classification is the first place they look when tariff costs increase. That is entirely understandable. A single classification decision may determine whether a product is subject only to ordinary customs duties or also faces substantial additional duties under Section 232, Section 301, antidumping and countervailing duty orders, or other trade restrictions.

In the current tariff environment, companies should be reviewing classifications. Many classifications were established years ago, when the duty consequences of a particular tariff provision were relatively modest. Today, however, the difference between two potentially applicable tariff provisions may result in dramatically different duty outcomes.

The challenge is ensuring that the analysis begins with the product rather than the desired tariff result. The proper question is not, “Which classification produces the lowest duty rate?” Rather, it is, “Which classification is supported by the terms of the Harmonized Tariff Schedule, the Explanatory Notes, CBP rulings, and applicable judicial precedent?”

CBP generally has little concern when importers undertake thoughtful classification reviews supported by sound legal and technical analysis. Problems arise, however, when classifications appear to have been selected primarily to avoid tariffs rather than to accurately describe the imported merchandise.

Importers should also recognize that classification changes are often highly visible to CBP. A sudden change in classification for the same product, or a classification change affecting products that appear substantially similar to merchandise previously entered under a different tariff provision, can be an obvious red flag. Likewise, if a significant number of importers begin shifting products into lower-duty classifications shortly after a new tariff measure takes effect, CBP is likely to notice.

A classification change that can be explained and defended is a legitimate compliance decision. A classification change that exists only because the tariff rate is lower is far more likely to attract scrutiny.

Fallacy #3: “These Section 232 tariffs are so unfair! Just pick a reasonably close alternative that is not covered and call it a day.”

Few customs issues have attracted more attention in recent years than Section 232 tariffs. As tariff rates on steel, aluminum, copper, and derivative products have increased, importers have devoted significant resources to evaluating whether particular products actually fall within the scope of the applicable measures.

There is nothing improper about undertaking that analysis. Indeed, importers should periodically revisit whether their products remain properly subject to Section 232 duties.

The challenge is that Section 232 reviews often begin with a legitimate question but can quickly become outcome driven. Once a company realizes that a particular classification or scope determination carries a significant tariff consequence, the temptation naturally arises to search for an alternative interpretation that places the product outside the scope of the applicable measures.

For numerous products, Section 232 applicability turns directly on tariff classification. A change in classification may therefore have the effect of moving a product from a tariff-bearing provision to one that falls outside the scope of the applicable Section 232 measures.

CBP is acutely aware of these incentives. Classification changes, revised product descriptions, and newly adopted scope interpretations that coincide with the imposition or expansion of Section 232 duties are likely to receive heightened scrutiny.

Importers should therefore approach Section 232 reviews with the same discipline that they would apply to any other customs analysis. The relevant question is whether the product’s physical characteristics, technical specifications, and legal classification support the conclusion being advanced.

Valuation Fallacies

Fallacy #4: “If we don’t put it on the invoice, how would Customs even know about it?”

As tariff rates have increased, customs valuation has become an increasingly important area of focus for importers seeking to manage landed costs.

Not surprisingly, many companies have begun scrutinizing whether royalties, license fees, engineering payments, software fees, tooling charges, product development costs, molds, dies, technical assistance, prototypes, and other contributions must be included in customs value.

A common misconception is that a cost somehow falls outside the customs valuation analysis simply because it does not appear on the commercial invoice. Customs valuation, however, focuses on the economic reality of a transaction rather than the accounting treatment chosen by the parties.

This issue has become particularly important as companies pursue China+1 sourcing strategies and establish relationships with new manufacturers. In many cases, importers provide substantial support to overseas producers in the form of engineering assistance, tooling, product specifications, testing protocols, software, prototypes, manufacturing know-how, and other valuable inputs. While these contributions are often necessary to establish production capability, they may also create “assist” obligations that must be reflected in customs value.

One reason royalties and assists remain recurring compliance issues is that the relevant information frequently resides outside the customs department. Engineering teams, procurement personnel, product development groups, legal departments, tax departments, and sourcing teams may each possess pieces of relevant information.

Whether a royalty must be included in customs value, or whether a particular contribution constitutes a dutiable assist, depends on a highly fact-specific analysis. As tariff exposure has increased, CBP has devoted greater attention to arrangements that appear designed to remove otherwise dutiable amounts from customs value or that fail to account for significant contributions provided to foreign manufacturers.

An assist that is overlooked does not cease to be an assist simply because no one informed the customs department that it existed.

Fallacy #5: “What’s the harm in unbundling a few costs? The supplier gets paid the same amount.”

Closely related to the assists and royalties issue is another common misconception: that a cost becomes non-dutiable simply because it appears somewhere other than the commercial invoice.

As tariff rates have increased, so has the incentive to reduce the value declared to CBP. Not surprisingly, some companies begin exploring whether costs associated with imported merchandise can be moved into separate contracts, invoices, entities, or payment streams.

Engineering services may be invoiced separately. Tooling charges may be placed in a side agreement. Royalties may be reflected in a licensing arrangement rather than a purchase order. Software fees, commissions, development costs, technical assistance charges, and other payments may be carved out from the primary purchase transaction.

The compliance risk arises when the structure is driven primarily by the desire to remove otherwise dutiable amounts from customs value.

CBP generally looks beyond invoice labels, accounting treatment, and contractual terminology to evaluate the substance of the transaction. The key question is not whether a payment appears on a separate invoice. The key question is whether the payment is sufficiently connected to the imported merchandise that it must be included in customs value under the applicable valuation rules.

Separating a payment from the commercial invoice may change the paperwork. It does not necessarily change the customs treatment.

Fallacy #6: “If our transfer pricing study is good enough for the IRS, it’s good enough for Customs!”

As tariff rates have increased, customs valuation has become an increasingly important component of overall trade compliance.

Many multinational enterprises already maintain extensive transfer pricing documentation for income tax purposes. Faced with the cost and complexity of customs valuation compliance, some companies naturally wonder whether those existing transfer pricing studies can simply be repurposed to support customs value.

Unfortunately, the answer is not always that simple.

Although tax and customs authorities both examine related-party transactions, they often do so from different perspectives and for different purposes. Transfer pricing analyses prepared for the IRS typically focus on whether profits are allocated appropriately among related parties and whether the pricing is consistent with the arm’s-length standard. CBP, by contrast, focuses on whether the declared customs value satisfies the requirements of the customs valuation statute and whether the relationship between the parties influenced the price paid for the imported merchandise.

The overlap between tax and customs is significant. The rules, however, are not identical.

Fallacy #7: “If there are three invoices, why aren’t we using the cheapest one?”

As tariff rates have increased, many importers have begun exploring First Sale programs as a means of reducing customs value and lowering duty liability.

Unlike many of the strategies discussed in this alert, First Sale is not a loophole or an aggressive compliance position. When properly implemented, it is a well-established customs valuation methodology recognized by CBP and the courts.

One of the most common misconceptions, however, is that First Sale simply permits the importer to use the lowest invoice in a multi-tier supply chain as the basis for customs value.

To qualify for First Sale treatment, importers generally must establish that there was a bona fide sale for export to the United States, that the relevant parties dealt with one another at arm’s length, and that the transaction satisfies the requirements established through CBP rulings and judicial precedent. Equally important, the importer must possess sufficient documentation to demonstrate that those requirements have been satisfied.

Simply selecting the lowest invoice in the transaction chain is not a First Sale program. It is merely a lower number.

Origin Fallacies

Fallacy #8: “If we assemble the product in Vietnam, doesn’t it become a product of Vietnam?”

Few customs concepts have become more important in recent years than country of origin.

Not surprisingly, many importers have pursued China+1 sourcing strategies, relocating production or portions of their supply chains to countries such as Vietnam, Thailand, Malaysia, India, and Mexico.

The challenge is that not every supply-chain change results in a new origin.

One of the most persistent misconceptions in international trade is the belief that country of origin changes simply because merchandise is subject to some processing in another country. It does not. Minor assembly operations, repackaging, relabeling, testing, inspection, sorting, or other limited processing activities generally do not change origin if they do not result in a substantial transformation of the product.

Because China+1 strategies have become so widespread, country-of-origin claims associated with third-country manufacturing have become a major enforcement focus. CBP is well aware that importers have strong incentives to reduce exposure to Section 301 duties and other trade restrictions.

Country-of-origin determinations should be driven by the facts of the production process and the substantial transformation analysis, not by the tariff result the importer hopes to achieve.

Compliance Fallacies

Fallacy #9: “Just let the customs broker handle everything; it’s what we pay them for.”

As customs compliance becomes increasingly complex, many importers rely heavily on their customs brokers to help navigate classification, entry filing, admissibility requirements, tariff programs, and a growing array of trade restrictions.

The challenge is that importers sometimes assume that the broker’s involvement means that someone else is responsible for evaluating all customs compliance issues.

More importantly, many of the customs issues discussed in this alert involve facts that the broker may never see.

A broker can review the commercial invoice and entry documentation that it receives. What the broker often cannot see are royalty agreements negotiated by the legal department, transfer pricing policies developed by the tax department, engineering services provided by product development teams, tooling supplied by procurement personnel, or sourcing decisions made months earlier as part of a China+1 initiative.

Many customs disputes arise not because anyone intentionally ignored a compliance issue but because the importer assumed that someone else was evaluating it. The logistics department assumed the broker was handling it. The broker assumed the importer had already analyzed it. Meanwhile, the underlying issue was never reviewed by anyone.

A customs broker is an important part of a compliance program. It is not a substitute for one.

Fallacy #10: “if everyone else in the industry is doing it, why should we be the only saps who are paying the highest tariff rate?”

As tariff rates have increased and customs compliance has become more consequential, importers have devoted significant attention to understanding how competitors classify products, determine country of origin, value merchandise, and address other customs issues.

The challenge arises when industry practice becomes a substitute for legal analysis.

One of the more common justifications for an aggressive customs position is the belief that the position must be acceptable because it is widely used throughout the industry. Whether that belief is accurate or not, it generally misses the point. CBP does not determine compliance based on the number of companies taking a particular position. Rather, the agency evaluates whether a specific importer’s customs treatment is consistent with the applicable legal requirements.

Moreover, widespread adoption of a particular practice does not necessarily reduce enforcement risk. In some circumstances, it may increase it. When CBP identifies a potential issue affecting a particular product category or industry sector, it is not uncommon for multiple importers of similar merchandise to receive CF-28 Requests for Information or become part of a broader enforcement initiative.

In those situations, the fact that everyone is doing it may simply mean that everyone receives the same questionnaire.

If a company genuinely believes that a competitor is obtaining an unfair advantage through customs violations, CBP maintains mechanisms, including its e-Allegations program, through which suspected customs violations may be reported. The appropriate response to suspected noncompliance is to evaluate available legal remedies, not to assume that another company’s conduct creates a safe harbor for everyone else.

Ultimately, customs compliance is determined by the correctness of an importer’s own entries, not by whether its competitors are making the same decisions.

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The common theme running through all ten of these fallacies is that they begin with the desired tariff result and work backward. Customs compliance works best when the process runs in the opposite direction.

There is nothing improper about reducing tariff exposure. In fact, importers should continuously evaluate legitimate opportunities to improve classifications, optimize supply chains, implement First Sale programs, review valuation methodologies, and qualify for preferential tariff treatment where appropriate. Many of the most effective tariff-saving strategies are entirely lawful and have been recognized by CBP and the courts for decades.

The challenge is ensuring that the facts and the law support the result.

As tariff rates increase, so too do the incentives for aggressive customs positions. CBP understands those incentives and has increasingly focused its enforcement efforts on classification changes, valuation adjustments, country-of-origin claims, and other positions that materially affect duty liability. In today’s data-driven enforcement environment, assumptions, industry practices, and undocumented conclusions are becoming increasingly difficult to defend.

Ultimately, the best tariff-planning strategy is not the most creative one. It is the one that remains supportable when CBP asks a simple question:

“Please provide the documentation supporting your position.”

The landscape of tariff enforcement is intensifying, creating significant compliance, financial, and operational challenges for importers. The first installation in this series examined how rising bonds and liquidity could impact importer’s risk management profiles, while the second analyzed the impact of the new executive order on Strengthening Customs Enforcement. We now proceed to analyze the impact of the new focus of the Department of Justice on tariff underpayments, which further increases the risk of importing.

In a development that may mark a meaningful escalation in the Trump administration’s trade enforcement agenda, the Department of Justice (DOJ) recently announced a major False Claims Act (FCA) settlement involving importers accused of evading antidumping and countervailing duties (AD/CVD). The settlement is an important reminder that customs enforcement risk no longer resides only with U.S. Customs and Border Protection (CBP). The DOJ is increasingly positioning itself as an active player in trade enforcement, with a focus on import fraud, duty evasion, and false statements made in connection with import entries.

For importers, the message is straightforward. Companies should reassess their own customs compliance programs now, particularly in higher-risk areas such as tariff classification, valuation, country of origin, AD/CVD exposure, and supply chain representations. They should also be aware that the DOJ’s renewed focus may create opportunities for companies; those harmed by unfair competition will see opportunity to raise concerns about trade evasion by their competitors.

DOJ Has Been Building Toward This Moment

The recent settlement did not emerge in isolation. Over the past year, the DOJ has been assembling the internal structure necessary to pursue trade fraud more aggressively.

In August 2025, the DOJ created its Market, Government, and Consumer Fraud Unit within the Criminal Division. That move was widely viewed as an effort to build enforcement capacity around customs and trade-related fraud, including misclassification, undervaluation, transshipment, and relabeling schemes used to evade duties. At the time, the initiative appeared closely aligned with the Administration’s broader reliance on tariffs and other trade restrictions, including duties imposed under the International Emergency Economic Powers Act (IEEPA).

The DOJ later reinforced that direction by launching a cross-agency Trade Task Force focused specifically on customs violations and trade evasion. The task force was described as using a range of enforcement tools, including civil False Claims Act cases, collections actions, and criminal prosecutions, and drew personnel from the DOJ’s civil and criminal components as well as the Department of Homeland Security. By early 2026, the DOJ had identified leadership for the task force and was coordinating with U.S. Attorneys’ Offices to support enforcement efforts.

Then, in April 2026, the DOJ announced the creation of a new National Fraud Enforcement Division, following broader concerns about fraud against the government. Although that move raised questions about whether trade enforcement would be absorbed into a more general anti-fraud framework, the better reading now appears to be that the DOJ intends to pursue trade fraud through multiple channels rather than narrow its focus.

The Aluminum Settlement Suggests DOJ Is Following Through

That enforcement architecture now appears to be producing visible results. On May 12, DOJ announced a $549.5 million settlement with aluminum importers to resolve civil False Claims Act allegations tied to the evasion of antidumping and countervailing duties on aluminum extrusions from China.

According to the DOJ, the importers falsely described the imported merchandise on Customs entry documentation in order to avoid AD/CVD liability. The government alleged that the products were declared as finished aluminum pallets, when in reality they were aluminum extrusions that had been superficially modified to appear to fall outside the applicable trade remedy orders and were intended to be broken apart and resold for other downstream uses.

The size of the settlement is notable on its own, but the case is significant for broader reasons as well. It shows that the DOJ is prepared to use the False Claims Act in the customs context where alleged duty evasion is supported by false statements made to the government, including on Customs Form 7501 entry summaries and related import documentation. It also confirms that the government is willing to pursue large-scale recovery in trade cases that historically might have been viewed primarily as administrative customs matters.

Why This Matters for Importers

The settlement underscores a larger shift: import-related compliance failures may increasingly be framed not just as customs violations but as fraud against the United States. That framing brings with it much more serious consequences, including treble damages, statutory penalties, broader investigatory tools, and greater reputational exposure.

The DOJ appears particularly focused on conduct involving:

• misclassification of imported merchandise;
• undervaluation;
• false country-of-origin claims;
• transshipment and relabeling schemes;
• evasion of AD/CVD orders;
• false certifications or declarations submitted to CBP; and
• supply chain representations that cannot be substantiated.

For importers, this means that customs compliance and government-facing trade representations should be viewed through a litigation and enforcement lens, not merely an operational one.

Expect More Overlap Between Trade Enforcement and Supply Chain Enforcement

Looking ahead, the DOJ is likely to use a broader set of legal tools to address trade misconduct, especially where the underlying conduct touches China, Southeast Asia, or other supply chains already associated with heightened enforcement risk. In addition to more traditional duty evasion cases, companies should expect increasing attention to statutes such as the Uyghur Forced Labor Prevention Act (UFLPA) and potentially other laws aimed at forced labor, trafficking, and prohibited imports.

This matters because modern trade enforcement often turns on statements made to the government. For example, importers responding to UFLPA scrutiny may be required to provide detailed certifications and supply chain tracing information to CBP. Where those submissions are inaccurate, inconsistent, or unsupported, they may create the kind of evidentiary record that can support broader fraud allegations. In that sense, forced labor enforcement and trade fraud enforcement are becoming more closely linked.

Competitor Complaints and Whistleblower Risk Are Also Rising

Another important consequence of the DOJ’s posture is that companies harmed by trade evasion may have more incentive to act. If a competitor appears to be gaining an unfair advantage by avoiding duties or making false import declarations, there may now be a more receptive audience within the government for well-supported allegations.

In addition, the False Claims Act creates the possibility of private whistleblower suits, which can allow a private party to bring allegations on behalf of the government and share in any recovery. That creates an additional risk layer for importers, particularly where customs compliance issues are known internally by employees, former employees, suppliers, or competitors with access to relevant facts.

Practical Takeaways

Importers should consider taking several concrete steps now in light of the DOJ’s growing trade fraud focus and the increasing overlap between customs enforcement, supply chain enforcement, and False Claims Act risk.

Review classification, valuation, origin, and AD/CVD compliance controls. Companies should revisit the core customs determinations that drive duty liability, including tariff classification, customs valuation, country of origin, and exposure to antidumping and countervailing duties. This review should focus not only on whether the company has a formal process but also on whether the process is sufficiently documented, consistently applied, and updated when sourcing patterns, product design, or tariff treatment changes. Areas that involve engineering distinctions, mixed-origin inputs, first sale valuation, assists, transfer pricing, or possible AD/CVD scope questions should receive particular attention.

• Assess whether import declarations and supporting records accurately reflect the merchandise and supply chain. The DOJ’s recent actions underscore that entry summaries, commercial invoices, packing lists, certifications, and other government-facing trade documents can become the basis for fraud allegations if they are materially inaccurate. Importers should confirm that their entry data matches the actual product, use, composition, origin, and transaction structure, and that internal records support the representations being made to CBP. Companies should also review whether product descriptions used in import documentation are overly generalized, outdated, or inconsistent with technical specifications and commercial reality.
• Evaluate UFLPA and other forced labor-related representations for consistency and evidentiary support. Companies importing from higher-risk jurisdictions or sectors should assess whether their supply chain tracing, supplier certifications, affidavits, origin records, and due diligence files would withstand government scrutiny. This is particularly important where importers have made, or may need to make, affirmative statements to CBP regarding forced labor, source materials, factory relationships, or production tracing. Any gap between what the company knows internally and what is being represented externally creates potential enforcement risk.
• Investigate internal complaints or red flags involving customs reporting before they become external issues. Internal audit findings, broker questions, employee complaints, sourcing irregularities, and inconsistencies in invoices or origin documentation should not be treated as routine operational noise. In the current environment, those issues can become the basis for a whistleblower complaint, a government inquiry, or a False Claims Act theory if left unresolved. Companies should ensure that customs and trade concerns are escalated appropriately, investigated promptly, and remediated where necessary, with attention to whether prior disclosures or corrective filings should be considered.
• Consider whether competitors may be engaging in actionable trade evasion. Companies that compete against importers benefiting from suspiciously low pricing, implausible origin claims, unusual transshipment routes, or apparent duty avoidance should evaluate whether those practices warrant further investigation. In an environment where the DOJ and other agencies are actively looking for trade enforcement leads, well-supported allegations of evasion may receive attention. Businesses harmed by unfairly traded imports should consider the range of available options, including administrative and litigation-related avenues, depending on the facts.
• Prepare for a more coordinated enforcement environment involving CBP, DOJ, DHS, and potentially private whistleblowers. Customs issues that once might have been handled as routine administrative matters may now be viewed through a broader fraud-enforcement lens. Importers should assume that entry practices, certifications, supply chain representations, and duty determinations may be examined not only by CBP but also by the DOJ, Homeland Security Investigations, and private relators under the False Claims Act. Trade compliance programs should therefore be evaluated with cross-agency enforcement risk in mind, including document retention, internal reporting channels, management oversight, and legal review of sensitive customs positions.

The DOJ’s recent aluminum settlement is a significant signal that trade fraud enforcement is becoming more active, more coordinated, and more consequential. The government appears prepared to use the False Claims Act and other tools to pursue importers that evade duties through false statements, misleading declarations, or unlawful supply chain practices. For companies engaged in cross-border trade, this is a good time to reassess customs compliance, supply chain representations, and exposure to competitor-driven or whistleblower-driven enforcement.

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Would you like more practical compliance tips like these? The Â鶹ֱ˛Ą International Trade & National Security Team is monitoring all international trade, enforcement, and compliance developments, which we post as they occur on our Tariff & International Trade Resources blog. for our email list to receive future emails and practical international regulatory compliance tips, including our biweekly What Every Multinational Should Know articles.

Our white paper on Managing Import and Tariff Risks During a Trade War outlines a 12-step plan to provide practical steps to help importers navigate the tariff and international trade risks in the current tariff and trade environment, while the companion white paper on Managing Supply Chain Integrity Risks provides practical advice to deal with heightened supply chain risks pertaining to goods imported into the United States, including the increasing use of detentions by Customs.

Â鶹ֱ˛Ą recently secured dismissal of a False Claims Act (FCA) case targeting Medicare Advantage marketing practices — a victory that shut down an attempt to transform routine patient-acquisition and outreach activities into federal and state fraud claims. While the case ended favorably, the allegations offer a valuable window into a fast-developing enforcement risk area for providers, management organizations, plans, brokers, agents, and marketing vendors operating in the Medicare Advantage space.

At its core, the complaint advanced a familiar but increasingly aggressive theory: that common business-development arrangements tied to beneficiary outreach — even those seeking to better inform and care for beneficiaries — can nevertheless become actionable if characterized as remuneration intended to influence where federally insured patients receive care. The relator alleged that the defendants used cash or commission-based arrangements with third-party marketing or sales agents, co-marketing support, shared event costs, co-branded outreach, and free transportation to induce Medicare and Medicaid beneficiaries to enroll for services, then submitted claims to federal health care programs allegedly tainted by those arrangements.

Those allegations matter because they reflect how relators and enforcement authorities are now viewing growth strategy in the Medicare Advantage ecosystem. Business practices that may once have been treated primarily as sales, outreach, or access initiatives may instead be framed by relators and prosecutors as implicating the Anti-Kickback Statute, beneficiary inducement rules, and, by extension, the False Claims Act when they involve referrals, recommendations, or anything of value offered in connection with federally reimbursable business.

This theory has already produced significant enforcement action. In September 2024, the Department of Justice (DOJ) announced that Oak Street Health agreed to pay $60 million to resolve allegations that it paid kickbacks to third-party insurance agents in exchange for recruiting seniors to its primary care clinics. Agents allegedly provided marketing support, warm transfers, and beneficiary referrals connected to Medicare Advantage enrollees. The DOJ expressly tied that resolution to ongoing efforts to police conduct by Medicare Advantage providers, insurance agents, and brokers that can distort beneficiary choice and drive federal program spending through allegedly improper steering arrangements.

Viewed against that backdrop, Â鶹ֱ˛Ąâ€™s dismissal result is significant not just because the case ended favorably for our clients, but because it arose in an area where the government and relators are actively testing novel and expansive enforcement theories. The case also serves as a reminder that Medicare Advantage compliance risk increasingly sits at the intersection of sales, operations, and fraud-and-abuse law. CMS’s Medicare Marketing Guidelines continue to frame expectations for beneficiary-facing conduct, while the DOJ and the Department of Health and Human Services Office of Inspector General (HHS-OIG) remain attentive to arrangements that may be portrayed as steering mechanisms rather than neutral outreach or patient-support services.

For federal health care program participants, especially in the Medicare Advantage space, several practical action items stand out to mitigate risk and promote compliance:

• Evaluate broker, agent, and marketing intermediary arrangements for any compensation structure that could be portrayed as rewarding referrals or recommendations tied to federally reimbursable services.
• Reassess co-marketing, shared-event sponsorships, co-branded materials, lead-sharing practices, and community outreach strategies to determine whether they create undue steering risk.
• Review transportation and similar beneficiary support offerings to ensure they are structured as legitimate access measures and not marketed in a manner that could be characterized as an inducement to choose a particular provider.
• Bring legal, compliance, and business teams into the same review process early, particularly where growth initiatives touch enrollment pathways, agent involvement, or beneficiary decision-making.
• Maintain contemporaneous documentation showing the compliance rationale, review path, and guardrails around outreach programs before they are launched.

As enforcement attention continues to expand in this area, dismissal of these cases can be as important strategically as any merits ruling. For organizations participating in the federal health care marketplace, the broader message is clear: marketing and patient-growth strategies now demand the same level of fraud-and-abuse scrutiny as more traditional referral and compensation arrangements.

The U.S. Department of Justice’s (DOJ) recent settlement with Alabama defense contractor LOGZONE Inc. (LOGZONE) is a notable reminder that, in the federal contracting context, cybersecurity deficiencies are not merely technical concerns — they can create False Claims Act (FCA) exposure, particularly where a contractor misstates its compliance status to the government. Under the settlement, LOGZONE agreed to pay $507,144 to resolve allegations that it submitted claims for payment under two Department of the Navy contracts while knowing that it failed to comply with those contracts’ cybersecurity requirements.

This resolution shows the DOJ’s continued willingness to treat alleged noncompliance with contractual cybersecurity requirements as a fraud issue even in the absence of any data breach or other security incident. The press release reflects a theory that turns not only on the existence of unimplemented security controls, but also on the alleged submission of compliance-related information that did not accurately reflect the company’s actual cybersecurity posture. That combination — known deficiencies coupled with inaccurate compliance representations — presents an especially acute area of FCA risk for government contractors handling sensitive defense information.

The Settlement

The two Navy contracts at issue incorporated Defense Federal Acquisition Regulation Supplement (DFARS) 252.204-7012, which requires contractors handling covered defense information to provide adequate security for covered contractor information systems, including by implementing the National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171 security requirements. The applicable framework also required LOGZONE to report a summary-level score from a current NIST SP 800-171 self-assessment in the Supplier Performance Risk System (SPRS).

The DOJ alleged that, from May 2021 to March 2025, LOGZONE failed to implement certain NIST SP 800-171 controls that, if left unaddressed, could permit system exploitation or exfiltration of sensitive defense information. The government further alleged that LOGZONE submitted a score of 110 in SPRS — the highest possible score — and certified compliance, even though the company knew it had not fully implemented all required controls.

The alleged deficiencies came to light through a Defense Contract Management Agency assessment of LOGZONE’s implementation of NIST SP 800-171 controls. According to the press release, that assessment resulted in LOGZONE receiving a score of -170, near the bottom of the possible scoring range of -203 to 110. Notably, this case did not involve a whistleblower or insider — rather, this was the direct result of a government audit leading to the referral to the Justice Department. 

Why This Resolution Matters

This settlement fits within the DOJ’s broader effort to use the False Claims Act to enforce cybersecurity requirements in government contracting. But it also highlights several practical realities that contractors should not ignore.

First, cybersecurity compliance is being tested against actual implementation, not paper commitments. A contractor may have policies, plans, or remediation efforts underway, but that will not eliminate exposure if required controls are not in place and the company continues to bill the government under contracts that require them.

Second, government assessments can become the foundation for a FCA resolution. Here, the DOJ tied its allegations to an assessment of control implementation. Contractors should assume that poor assessment results, particularly where they suggest significant gaps in required controls, may carry legal as well as operational consequences. Notably, the settlement does not indicate that there was a qui tam complaint or other tip by an insider.

Third, the DOJ does not need to allege a breach to pursue a cyber-related FCA matter. The press release focuses on the failure to implement required controls and the submission of claims for payment under contracts requiring those controls. That is a point worth emphasizing for companies that still view cyber enforcement primarily through the lens of incident response.

Practical Considerations for Contractors

For contractors performing work subject to cybersecurity clauses and related assessment obligations, several practical lessons emerge from the LOGZONE settlement.

• Ensure that assessments, scores, and certifications are accurate. Companies should treat scores, certifications, and other statements regarding NIST SP 800-171 implementation as legally significant representations, not administrative formalities. Those submissions should be supported by documentation and reviewed by personnel who understand the technical requirements as well as the contractual and legal implications.

• Do not blur the line between current implementation and future remediation.
  A company may identify cybersecurity deficiencies and work toward full compliance through an appropriate remediation process. But that is different from representing that all required controls have already been implemented. Contractors should be precise in how they describe their current cybersecurity posture.

• Treat adverse assessment results as potential legal exposure, not just technical feedback. Government or third-party assessment findings showing substantial gaps should be escalated promptly to legal, compliance, and senior leadership. Assessment findings that sit unresolved can create much larger problems over time.

• Evaluate billing risk where known deficiencies exist. Where contracts require implementation of specific cybersecurity controls, continued claims for payment may carry significant risk if the contractor knows those controls have not been implemented and prior compliance-related submissions are inaccurate.

• Document the basis for compliance determinations. Contractors should be able to demonstrate how assessment conclusions were reached, what information was available when certifications or scores were submitted, and what remediation was underway at the time. In any later inquiry, contemporaneous documentation will be critical.

The Department of Justice’s (DOJ) 2026 National Health Care Fraud Takedown is easy to summarize as a large numbers case: 455 defendants, including 90 doctors and other licensed medical professionals, charged across 56 federal districts and 45 states and territories in alleged schemes involving more than $6.5 billion in false claims (). But for health care companies, investors, management services organizations, provider platforms, and boards, the more important message is more specific: the government is now treating fast-growing reimbursement categories as data-driven, enterprise-risk environments.

This article highlights two areas that featured prominently in the takedown: (i) wound-care and (ii) hospice care. This article summarizes the cases in those two areas, describes the significance of the takedown for those areas, and provides actionable recommendations for health care clients.

Wound-Care Cases

That point is clearest in the wound-care and hospice allegations. The DOJ highlighted alleged fraudulent wound care schemes involving amniotic wound allografts, a product category that became a focal point because the government says data analytics detected a spike in payments for allografts that led to prosecutions. The DOJ alleged that, in one nationwide scheme, providers billed Medicare more than $4 billion for a company’s allografts from approximately December 2021 through June 2024 and received more than $2 billion in payments. The government further alleged that the product economics themselves were a fraud signal: the company did not manufacture the allografts but instead acquired them from tissue banks, relabeled them for sale, charged up to $1,450 per square centimeter, and used an alleged 2,000% markup to fund kickbacks of approximately 40% of the amount charged. The release describes alleged applications to superficial wounds that did not need the treatment, infected wounds without proper treatment for infection, wounds that would not heal because a patient was terminally ill, and areas far larger than the actual wound.

Hospice Cases

The DOJ also highlighted that the Health Care Fraud Unit combined traditional data analytics with financial analysis to identify hospice fraud. The government had the ability to use data analytics to monitor the percentage of patients discharged from hospice alive (an indicator of fraud) in an alleged $27.7 million health care fraud scheme. These cases matter because the government is not simply challenging whether a code was payable; it is telling a story about vulnerable-patient targeting, clinical futility, and exploitation of end-of-life care.

Why This Takedown Matters

First, the DOJ is signaling that the “spike” matters. In mature enforcement areas, companies often think about compliance in terms of written policies, fair-market-value analyses, chart documentation, and billing audits. Those tools still matter, but this year’s takedown suggests that enforcement agencies are increasingly starting from macro-patterns: sudden volume increases, outlier reimbursement per patient, geographic dispersion, suspicious referral networks, and product-category anomalies.

The DOJ stated that the takedown involved “cutting-edge use of data analytics to target the worst actors,” and reported that the Centers for Medicare & Medicaid Services (CMS) suspended 1,079 providers and revoked 1,403 billing privileges, that the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) excluded more than 1,400 providers, and that HHS-OIG pursued more than $10 billion in payments to the Medicare Trust Fund from payments CMS caught and suspended before funds were paid to allegedly fraudulent providers. The DOJ also announced agreements designed to improve data access and break down data silos, including arrangements involving CMS and the Department of Homeland Security. For companies, this means that the first warning sign may not be a subpoena or whistleblower complaint — it may be the company’s own data profile beginning to look like an enforcement outlier.

Second, wound grafts show how enforcement risk can arise at the intersection of sales design, product pricing, clinical documentation, and end-of-life care. The DOJ’s District of Arizona case summary alleges that a vice president of sales caused hundreds of millions of dollars in illegal kickbacks, bribes, and rebates to be paid to sales representatives and medical providers, and that sham sales invoices and pass-through bank accounts were used to conceal the payments. In the Middle District of Florida, the DOJ alleged that defendants targeted Medicare patients so that a nurse practitioner could bill for unnecessary wound allografts and referring nurses could receive kickbacks, with some allografts allegedly not applied, applied to infected wounds, or applied to wounds that would not heal because the patient was terminally ill. In the Southern District of California, the DOJ alleged that mobile medical services involving expensive amniotic allograft skin substitutes were billed while a nurse practitioner was incarcerated and that services were provided by an unlicensed person.

Third, the hospice cases are especially notable in California, as the government has focused on alleged hospice fraud in this particular state. In one specific case, charges were brought against a hospice owner and two marketers for a $27.7 million Medicare fraud scheme in which the hospice owner allegedly tried to avoid detection through a scheme to purchase information of the recently deceased from a funeral home employee. The defendant was allegedly carrying out a hospice fraud scheme in which he fraudulently enrolled patients who were not terminally ill. Concerned that Medicare and law enforcement used data analytics to monitor the percentage of patients discharged from hospice alive, the hospice owner allegedly paid illegal kickbacks of $1,000 to $3,000 per person to a funeral home employee in exchange for deceased Medicare beneficiaries’ information. The defendant then allegedly billed Medicare for a few days of hospice services for these recently deceased individuals who had not received hospice care and created fake, back-dated medical records claiming that the beneficiaries had been seen by a physician, thereby allegedly seeking to deceive Medicare by reducing his outlier data metrics.

Fourth, the DOJ is pairing criminal cases with asset seizure, civil remedies, administrative actions, and payment-policy changes. The takedown included the seizure of more than $182 million in cash, luxury vehicles, jewelry, and other assets, and the DOJ separately described forfeiture actions involving more than $27 million from twelve South Florida clinics alleged to be “bust outs” that billed Medicare for amniotic wound allografts and services never provided (). CMS also reduced Medicare’s payment for allografts to $127 per square centimeter beginning January 1, 2026, and the DOJ stated that, without CMS action, the Part B premium increase caused by allograft payments alone would have cost every Medicare beneficiary an extra $11 per month. That combination of criminal, civil, administrative, and reimbursement levers is now the operating environment.

Specific Recommendations for Health Care Clients

Build a high-cost-product “data packet” before the government asks for it: For every high-cost graft or biologic application, companies should be able to link supplier invoice, lot or product information, acquisition cost, patient assessment, wound measurements, infection status, healing prognosis, treating-physician coordination, application record, photographs where appropriate, claim, and payment. The goal is to make medical necessity and quantity used auditable at the product, patient, and claim levels.

Audit economics, not just documentation: Providers and their compliance teams should review whether margins, rebates, sales commissions, distributor spreads, invoice practices, credit memos, and referral-source payments create the same type of story the DOJ alleged in the allograft cases. A fair-market-value memo is not enough if the data show that compensation rises with product volume or that invoice structures obscure the real flow of money.

Treat hospice, homebound, mobile-care, and terminally ill populations as heightened-risk patient groups: The takedown repeatedly frames vulnerable patients as central to the alleged misconduct, including elderly and hospice patients in wound-graft matters. Organizations should require enhanced review when expensive products are used for patients with limited healing potential, poor infection control, terminal diagnoses, or no documented coordination with the treating physician. Hospice providers should also closely monitor discharge metrics and patient enrollment patterns, which the government is using as analytical indicators of fraud.

Run the government’s analytics on yourself: Companies should monitor reimbursement per patient, product square centimeters per wound size, utilization by clinician, sales representative, location, payer, and referral source, and month-over-month growth in any high-cost category. The key is not simply finding errors — it is identifying the outlier narrative and taking remedial action before an enforcement agency does.

Conclusion

The 2026 takedown should be read less as a one-day splashy headline announcement and more as a map of where health care fraud enforcement is going. The DOJ is combining claims analytics, payment suspensions, asset seizures, kickback theories, patient-harm narratives, and interagency data-sharing in ways that compress the time between anomalous data and enforcement action. For companies in wound care, hospice, and other high-reimbursement categories, the practical question is no longer whether the chart can support the claim in isolation. It is whether the entire business model can withstand a data-driven examination from product acquisition to patient application to payment.

On May 18, 2026, a jury in the Central District of California convicted Dr. Violetta Mailyan of orchestrating to defraud Medicare through fraudulent Botox injection claims. While the fraud itself was bold enough, what makes this case a bellwether is how the government caught her.

The Department of Justice’s (DOJ) Health Care Fraud Section’s Data Analytics Team flagged Mailyan after its analysis showed she collected more Medicare payments for Botox injections than any other doctor in the country. At trial, prosecutors drove the point home with a peer comparison exhibit — a graph showing Mailyan as an extreme statistical outlier who raked in more than $24 million over four years, which was six times more than the next highest group of providers. The visual is striking, intuitive, and devastating. It reduced a complex fraud scheme to a single, irrefutable data point: this doctor is not like others:

The Mailyan case is not an isolated success story. It is the most recent illustration of a fundamental shift in how the federal government detects and prosecutes health care fraud — a shift from reactive investigation to proactive, data-driven identification of fraudulent actors.

The Rise of the Data Analytics Team

The DOJ’s Health Care Fraud Unit’s Data Analytics Team was established to enhance the Unit’s ability to detect, investigate, and prosecute complex health care fraud schemes. Since its founding, the team has grown in both capacity and ambition. According to the DOJ’s 2025 Year in Review, the Data Analytics Team completed 2,085 data requests and 164 proactive data referrals in 2025 alone — referrals that aided charging decisions, resolution of significant matters, and asset seizures.[1]

The term “proactive referral” is the key phrase. Traditional health care fraud enforcement has long followed a “pay and chase” model — the government pays claims, receives a tip or complaint, investigates after the fact, and then attempts to recover funds that have often already been dissipated. Proactive data referrals work to invert this paradigm. The Data Analytics Team identifies statistical anomalies, billing outliers, and suspicious patterns in claims data before a complaint is filed and, in some cases, before the money even goes out the door.

The Mailyan case is a textbook example. Nobody filed a whistleblower complaint. No disgruntled employee called a tip line. The data itself raised the alarm.

What This Means for Health Care Providers

The practical implications for health care providers are significant. The DOJ is no longer primarily dependent on whistleblowers, patient complaints, or traditional investigative leads to initiate cases. The government is actively mining Medicare and Medicaid claims data to identify outliers — and it is doing so continuously.

The Mailyan trial exhibit, a peer comparison graph showing the defendant multiple standard deviations from her peers, is a preview of what juries will see in future cases. It is simple, visual, and powerful. A provider who is a dramatic statistical outlier will face the immediate inference that something is wrong, and the burden of explaining away that data will fall squarely on the defense.

For compliance purposes, providers should assume that their billing data is being analyzed and compared against their peers at all times. Internal compliance programs should incorporate the same types of analytics the government is using — peer comparisons, outlier detection, and trend analysis — to identify and remediate potential issues before the government comes calling. As the DOJ’s enforcement record makes clear, it is far better to be the one who finds the anomaly first.

Conclusion

The conviction of Dr. Mailyan is a milestone not because of the fraud itself but because of what it represents about the future of health care fraud enforcement. The government found this case not through a tip, not through a whistleblower, but through data. And it proved the case at trial not primarily through cooperators or paper trails, but through a graph showing that the defendant’s billing was so far from the norm as to be inexplicable by any legitimate practice.

As the DOJ continues to invest in its Data Analytics Team and AI-powered detection capabilities, providers should expect that the era of “pay and chase” is giving way to an era of “detect and prevent”. The peer comparison chart in the Mailyan trial may prove to be one of the most consequential trial exhibits in recent health care fraud enforcement — not for what it showed about one doctor but for what it signals about how the government intends to find and prosecute the next one.

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[1]

On May 27, 2026, the Assistant Attorney General in charge of the Department of Justice’s (DOJ) Civil Division, Brett Shumate, that civil lawyers within the DOJ and U.S. Attorney’s Offices will need to fast-track and prioritize sealed False Claims Act (FCA) qui tam cases involving fraud against federally funded state administered benefits programs. According to the DOJ’s announcement, the Civil Division intends to evaluate these sealed matters within 60 days where possible, and no later than 120 days, pursuant to a March 2026 executive-order-driven enforcement initiative. This directive will require the DOJ’s civil lawyers to issue subpoenas, review records, and conduct interviews in an unusually compressed timetable.

This development has immediate consequences for recipients of Civil Investigative Demands (CIDs). For these state-based benefit matters, this directive will require companies and other entities that receive CIDs for documents, interrogatory responses, or testimony to mobilize quickly, preserve relevant information immediately, and make early strategic decisions about response scope and privilege. Extended deadline continuances may become harder to obtain if the DOJ is operating under internal review clocks tied to sealed-case decision points.

This accelerated decision schedule will necessarily shift the burden of litigation to relators and their lawyers requiring them to handle the resulting litigation with a minimal burden on the government. That reality makes the pre-intervention phase more consequential: presentations to the DOJ during the CID and seal period may now have an even greater impact on whether the government intervenes, narrows its theories, or declines the case altogether.

The DOJ’s leadership emphasized in the memorandum that a “whole-of-government” approach would apply: the DOJ will coordinate quickly with criminal prosecutors, fraud enforcement units, and affected agencies to evaluate criminal, civil, and administrative remedies, including payment suspensions and program-specific analysis. Overall, the goal is to accelerate meritorious benefits fraud cases and focus government resources on the most serious and complex schemes.

It will be essential for companies and individuals who receive these CIDs to retain counsel and start collecting the responsive records immediately upon receipt.

Practical Implications for Providers, Contractors, and Managed-Care Participants

Organizations participating in Medicaid, Medi-Cal and other state-administered benefit programs should expect faster information demands and less tolerance for slow internal collection efforts once a CID or related inquiry arrives. Entities that rely on decentralized claims, eligibility, utilization-management, pharmacy, or subcontractor data may face greater challenges because the government’s timeline will not pause while records are gathered across business units.

Three practical implications stand out:

• Preservation and collection must begin immediately. Legal, compliance, and business teams should identify custodians, systems, and third-party data sources at the outset rather than waiting for rolling negotiations over scope.
• Early case assessment becomes more important. Counsel should quickly test the factual theory, reimbursement pathway, damages assumptions, and any materiality arguments before the DOJ reaches an intervention decision.
• Parallel-enforcement planning should occur on day one. Because the DOJ has signaled closer coordination across enforcement channels, responses should account for potential criminal, administrative, suspension, and overpayment ramifications at the same time.

Given the importance of FCA matters to the healthcare industry, in-house counsel at such organizations should be extra attentive when CIDs arrive regarding Medicaid and Medi-Cal in light of these new, compressed deadlines. 

On April 28, 2026, the U.S. Department of Justice (DOJ) the seizure of more than $2 million from Expert Wound Care PC, a Pasadena-based wound care clinic accused of defrauding Medicare by billing for skin graft procedures never performed. The clinic allegedly submitted over $46.6 million in false claims within approximately seven months. The case underscores the DOJ’s growing reliance on statistical benchmarking and data analytics to identify aberrant billing patterns — a strategy increasingly targeting wound care providers in particular.

DOJ’s Data-Driven Enforcement Methods

According to the affidavit supporting the seizure warrant, the government flagged Expert Wound Care based on several statistical red flags:

• Per-claim averages. From July 2025 to March 2026, the clinic averaged approximately $37,449 per claim for skin substitute grafts — more than double the national average of $16,837.
• Billing trajectory. Medicare billing escalated from $4,975 in July 2025 to approximately $33 million in December 2025, an extraordinary spike easily detectable through automated monitoring.
• Utilization rates. The clinic’s rate of beneficiaries receiving skin substitute grafts was 38.5% — over six times the national average of 6%. Its share of total claims for these procedures was 63%, roughly nine times the national average.
• Payment concentration. One beneficiary alone accounted for approximately $6.2 million in payments, with an average paid amount per beneficiary of approximately $299,639.

These metrics reflect the DOJ’s institutionalized outlier-detection methodology. The Health Care Fraud Unit’s dedicated Data Analytics Team monitors billing trends, identifies aberrant providers, and helps prosecutors detect emerging schemes. DOJ leadership has stated publicly that “cutting-edge data analytics jumpstarted” investigations in the wound care space, including a separate $900 million amniotic wound care fraud scheme.

This data-driven approach accelerated in 2025 and 2026. In June 2025, the DOJ announced its largest-ever National Health Care Fraud Takedown, charging 324 defendants in connection with over $14.6 billion in alleged fraud — including seven defendants charged with approximately $1 billion in fraudulent claims for performing medically unnecessary skin grafts on dying patients. In December 2025, owners of Arizona wound graft companies were sentenced to over 14 years in prison for a $1.2 billion wound graft fraud scheme, with $126 million in assets seized. In November 2025, one of the nation’s largest wound care providers agreed to pay $45 million to resolve False Claims Act allegations that it programmed billing software to ensure Medicare was always billed for higher-reimbursed procedures.

The DOJ has further committed to data-driven enforcement by announcing a Health Care Fraud Data Fusion Center, bringing together data specialists from the DOJ, Department of Health and Human Services Office of Inspector General, and the FBI to leverage cloud computing, artificial intelligence, and advanced analytics. The newly launched West Coast Health Care Fraud Strike Force — covering Arizona, Nevada, and Northern California — was formed explicitly because “data analytics show” a migration of fraud schemes to these regions. See Â鶹ֱ˛Ąâ€™s recent blog on the West Coast Health Care Fraud Strike Force.

Key Takeaways and Risk Considerations

This enforcement action, viewed alongside broader DOJ prosecutions in the wound care sector, carries several important implications:

Wound care remains a top enforcement priority. The concentration of major prosecutions — from the $1.2 billion Arizona case to the $45 million False Claims Act settlement to the Expert Wound Care seizure — reflects the DOJ’s sustained focus on what it views as a high-risk category prone to upcoding, services-not-rendered fraud, and medically unnecessary utilization.

Whistleblowers are no longer the primary trigger. Proactive data analytics allow the DOJ and the Centers for Medicare & Medicaid Services to identify aberrant providers before any complaint or subpoena is issued. Providers whose billing patterns deviate significantly from benchmarks should expect scrutiny — regardless of whether a qui tam relator has come forward.

Statistical outlier status supports civil and criminal enforcement. The government uses data not just to flag potential fraud, but as substantive evidence, particularly to show that a provider “knew or should have known” about improper billing. Rapid billing growth, per-claim averages far exceeding norms, and concentrated beneficiary payments can all support inferences of knowledge and intent.

Asset seizure is an aggressive early-stage tool. The government moved to seize funds before any indictment, using the civil forfeiture process to deprive the clinic of its proceeds while the investigation continues. Providers should understand that the DOJ may act swiftly to freeze assets, creating immediate financial disruption.

We will continue to monitor developments in this area. This alert is the first in a series that will explore the full spectrum of legal and compliance challenges facing wound care providers today — including the clinical and reimbursement context driving enforcement activity since 2019, the contractor audit and overpayment landscape, administrative law judge appeal strategies, common government liability theories, defense approaches to extrapolated recoupments and parallel proceedings, and proactive compliance frameworks. Future installments will offer in-depth guidance on each of these topics.

Please do not hesitate to reach out to your Â鶹ֱ˛Ą relationship partner or to our Government Enforcement Defense & Investigations and Health Care teams with any questions about how these enforcement trends may affect your organization.

The U.S. Department of Justice (DOJ) reported a record year for False Claims Act (FCA) enforcement in fiscal year 2025, with more than $6.8 billion in settlements and judgments — the largest annual total in the history of the statute. The DOJ also reported a record 1,297 qui tam actions filed by whistleblowers and 401 investigations opened by the government during the year.

The 2025 results confirm that the FCA remains one of the government’s most significant civil enforcement tools, particularly in matters involving federal health care programs, government contracts and grants, cybersecurity obligations, and, increasingly, customs and trade issues. Those results also offer an important preview of likely enforcement priorities in 2026, alongside newer uses of the False Claims Act.

Key Enforcement Themes in FY 2025

Health Care Continues to Drive FCA Recoveries

As in prior years, health care matters accounted for the majority of FCA recoveries, representing more than $5.7 billion of the total amount recovered in FY 2025. The DOJ highlighted several recurring areas of focus, including:

• Managed care, particularly allegations involving unsupported diagnosis codes and retrospective chart reviews used to add improper diagnoses;
• Prescription drugs, including drug pricing, illegal kickbacks, copay assistance arrangements, speaker programs, and dispensing practices; and
• Medically unnecessary services and substandard care, including inappropriate inpatient admissions, unnecessary wound care, infection control deficiencies, inadequate staffing, and poor quality of care in residential settings.

These categories reflect DOJ’s continued scrutiny of coding, reimbursement, and quality-of-care issues across the health care sector.

Procurement, Loan, and Grant Fraud Remain Active Priorities

The DOJ also continued to pursue FCA cases involving government procurement and pandemic-related relief programs. Notable cases throughout FY 2025 cover a range of allegations, including:

• billing Medicare for COVID-19 tests that were not provided,
• billing higher-reimbursement codes for services performed at COVID-19 testing sites,
• false statements in PPP and EIDL loan applications,
• use of confidential procurement information to influence contract awards, and
• failure to disclose accurate cost and pricing data in government contract proposals.

These cases demonstrate that the DOJ remains focused on not only traditional procurement fraud but also alleged misuse of pandemic-era funding and reimbursement programs. In 2025, the DOJ obtained more than 200 settlements and judgments resolving allegations of pandemic-related fraud, recovering more than $230 million.

Cybersecurity Enforcement Continues to Expand

The DOJ’s Civil Cyber-Fraud Initiative continues to generate meaningful enforcement activity. The DOJ recovered more than $52 million in cybersecurity-related FCA settlements in 2025.

The government’s recent settlements have focused on allegations that contractors and grant recipients:

• failed to implement required cybersecurity safeguards,
• falsely certified compliance with contractual cybersecurity standards,
• submitted inaccurate cybersecurity assessment information, or
• failed to timely identify and remediate known vulnerabilities.

For companies that contract with the federal government or participate in federally funded programs (such as through a federally funded state contract), cybersecurity compliance remains an important and growing FCA risk area, particularly where the company makes representations to the government regarding controls, testing, or incident response.

Customs and Trade Enforcement Is a Developing FCA Risk

One of the clearest emerging themes from 2025 is the DOJ’s increased focus on customs and trade fraud. This is reflected in the DOJ’s creation of a Market, Government, and Consumer Fraud Unit within the Criminal Division’s Fraud Section as well as a Trade Fraud Task Force that facilitates increased coordination among the DOJ, U.S. Customs and Border Protection, and the Department of Homeland Security.

The DOJ appears particularly focused on:

• country-of-origin errors,
• tariff misclassification,
• under- or mis-valuation of imported goods,
• forced labor and UFLPA-related issues, and
• creative workarounds designed to reduce duties, such as unbundling costs or services and seeking alternative HTS codes.

Given heightened tariff exposure, increased availability of import data, and express government interest in whistleblower referrals in this area, importers should expect customs-related FCA risk to remain elevated in 2026.

DOJ Continues to Evaluate FCA Theories in the Diversity, Equity, and Inclusion (DEI) Context

2025 enforcement activity also demonstrated the DOJ’s growing use of the FCA to investigate federal fund recipients’ DEI practices as alleged violations of federal civil rights laws. Recent remarks by DOJ officials suggest that the focus is not on the existence of DEI programs themselves but rather on whether contractors engage in conduct that could be characterized as unlawful race- or sex-based discrimination in hiring, promotion, compensation, or training opportunities.

Although this remains an evolving area, companies with federal contracts should be mindful of conduct that could draw DOJ attention, including measuring leader performance by progress towards DEI goals or tracking diversity goals in a manner that expresses preference for people of a particular race or sex. Companies should continue to monitor developments closely, particularly where compliance certifications intersect with employment or contracting practices.

Looking Ahead

FY 2025 enforcement activity suggests several practical takeaways for companies facing FCA exposure in 2026.

• First, whistleblower activity remains a major driver of enforcement. The record number of qui tam filings confirms that private parties will continue to play a central role in surfacing potential FCA claims, even as DOJ expands direct enforcement activity.

• Second, the DOJ continues to place value on self-disclosure, cooperation, and remediation. A number of 2025 resolutions reflected credit for proactive disclosure, cooperation in identifying relevant facts and damages, and compliance enhancements. Companies confronting potential issues should assess early whether internal investigation, remediation, and disclosure may mitigate risk.

• Third, the government is continuing to apply the FCA in both established and emerging contexts. Health care remains the dominant enforcement area, but cybersecurity, customs and trade, DEI, and other nontraditional theories are receiving increasing attention.

Practical Considerations

In light of these trends, companies should consider whether their compliance programs are adequately calibrated to current FCA risks. That may include:

• reviewing controls around billing, coding, and reimbursement practices;
• reassessing procurement and pricing certifications made in connection with government contracts;
• evaluating cybersecurity compliance against contractual requirements and recognized standards;
• reevaluating employment practices that could be perceived as expressing a preference for — or discriminating against — any race or gender;
• reviewing import compliance processes, including classification, valuation, and origin determinations;
• strengthening internal reporting and escalation channels; and
• ensuring prompt investigation and remediation of identified issues.

2025’s record-setting enforcement activity makes clear that the DOJ and the relators’ bar intend to continue using the FCA aggressively in 2026. Organizations that receive federal funds, participate in federal health care programs, or do business with the government should be prepared for continued scrutiny across a widening range of enforcement areas.