The Department of Justice’s (DOJ) August 13, 2026, establishing enforcement priorities for the newly reconstituted National Fraud Enforcement Division (the Division) deserves close attention from tax departments, chief financial officers, and legal teams in every industry. The memorandum identifies “internal revenue” as one of five principal enforcement areas and signals that DOJ intends to deploy a broader, more technologically sophisticated set of tools to detect and prosecute tax fraud.

For companies in financial services, technology, manufacturing, retail, logistics, government contracting, nonprofits, and other sectors, the message is unmistakable: tax enforcement is no longer a standalone regulatory lane. DOJ is building an integrated model in which tax violations may be charged alongside procurement fraud, benefits fraud, customs evasion, sanctions violations, false statements, and other theories of corporate misconduct. The Government Accountability Office’s estimate of $233 billion to $521 billion in annual federal fraud losses¹ underscores the momentum behind this expansion.

The Tax Enforcement Signal

The memorandum’s treatment of internal revenue enforcement is notably specific. It identifies priority targets including schemes to conceal income, the filing of falsified returns, abusive promoters who market noncompliant tax strategies, and tax violations that accompany fraud against government programs or private victims.

The memorandum also states that the Fraud Division will foster intra-division and interagency coordination to “deploy the full arsenal of criminal tax tools.” Read in context, this signals a willingness to pair Fraud Division attorneys with fraud prosecutors and to coordinate with IRS Criminal Investigation, FinCEN, the Securities and Exchange Commission, and other agencies from the outset of investigations. Companies should treat routine IRS audits as a sheep in wolf’s clothing — be curious and be cautious. There could be much more behind the audit, where an audit combined with other activity (e.g., a single suspicious activity report) could more readily escalate into a multi-agency inquiry.

Data Analytics and Earlier Detection

A recurring theme throughout the memorandum is DOJ’s investment in advanced data-driven investigative techniques. The Division intends to leverage data analytics, financial forensics, and a National Fraud Detection Center to identify tax misconduct earlier and pursue tax offenders more efficiently. For companies, this has practical consequences: anomalies in payroll tax filings, deductions, information returns, transfer pricing structures, or third-party payment reporting could surface in government databases well before a formal examination begins.

The memorandum’s emphasis on “nationwide coordination” suggests that DOJ aims to connect data points across districts, enabling pattern recognition that would be invisible in a single-jurisdiction investigation. Companies operating in multiple states or across borders should anticipate that inconsistencies between federal and state filings, or between information returns and reported income, may be flagged through automated systems before any human investigator is assigned.

Overlapping Theories and Organizational Accountability

The memorandum explicitly references DOJ policies concerning the prosecution of organizations, including principles of voluntary self-disclosure, cooperation, and remediation. This language signals that DOJ could apply these frameworks to corporate tax offenses, not solely to traditional fraud matters. Where a company’s tax noncompliance is traceable to systemic failures, pressure from executives, or deliberate concealment, DOJ may view it as corporate misconduct warranting entity-level consequences.

Equally important, the memorandum’s structure makes clear that the five priority areas are not siloed. Tax violations tied to customs fraud, government contracting irregularities, payroll schemes, or sanctions evasion could be investigated under multiple theories simultaneously. A logistics company that understates customs duties and underreports the associated income, for example, could face both trade-enforcement and tax-enforcement scrutiny in a coordinated action. The memorandum encourages precisely this kind of cross-theory approach.

What This Means for Companies Across Industries

For companies and executives in any sector — from technology and financial services to retail, manufacturing, and government contracting — this memorandum counsels heightened vigilance. DOJ’s structural investments in data, coordination, and integrated theories of liability mean that tax compliance failures are more likely to be detected early, investigated aggressively, and charged in combination with other offenses. In light of these developments, companies should consider the following practical steps:

• Conduct an enterprise-wide tax fraud risk assessment. Tax compliance risk should not reside exclusively with the tax department. Legal, compliance, internal audit, finance, and operational leadership should coordinate to identify areas where a single set of facts — such as misclassified income, inflated deductions, or unreported foreign accounts — could create exposure under multiple enforcement theories
• Pressure-test tax and financial data for anomalies. If DOJ is investing in analytics, companies should do the same. This means examining payroll tax filings, information returns (Forms 1099, W-2, K-1), withholding obligations, transfer pricing documentation, and revenue-recognition practices for outliers, unexplained variances, and patterns that a government algorithm might flag. Understanding what the data shows before the government asks about it can meaningfully reduce exposure.
• Integrate tax counsel into internal investigations early — and protect privilege. When an internal investigation surfaces potential fraud, tax counsel should be engaged at the outset to assess whether the underlying conduct carries tax exposure, to preserve applicable privileges, and to advise on remediation options before positions harden or disclosures become compelled.

• Review third-party preparers, promoters, payroll providers, and information-reporting processes. The memorandum’s focus on “abusive promoters” and falsified returns extends liability beyond the taxpayer to the ecosystem of service providers. Companies should diligence their return preparers, payroll processors, and any outside advisors marketing aggressive strategies — and document that diligence.

• Prepare for overlapping criminal, civil, and regulatory theories — and preserve records accordingly. Companies should assume that a tax issue may be framed simultaneously as criminal tax fraud, civil fraud, a False Claims Act violation, or a regulatory infraction. Document-retention policies and litigation-hold protocols should reflect that a single inquiry could generate parallel proceedings with different burdens, timelines, and disclosure obligations.

• Evaluate remediation, cooperation, and voluntary self-disclosure carefully. The memorandum reiterates DOJ’s stated commitment to reward organizations that voluntarily self-disclose, cooperate, and remediate. Whether and how to self-disclose are intensely fact-specific decisions that depend on applicable DOJ and IRS policies, the nature and scope of the conduct, the evidentiary landscape, and the company’s overall legal posture. Companies should engage experienced counsel to evaluate these options deliberately rather than reactively.

Bottom Line

DOJ’s memorandum is more than a statement of priorities. It is a structural roadmap for a more aggressive, data-enabled, and cross-cutting tax enforcement regime. Companies that treat tax compliance as a narrow, back-office function may find themselves ill-prepared for an environment in which a tax anomaly can trigger a multi-agency investigation blending fraud, false-statement, trade, and corporate-misconduct theories. Proactive risk assessment, coordinated internal diligence, and early engagement of tax-controversy counsel are the most effective responses to this evolving enforcement landscape.

On September 18, 2026, the Department of Justice (DOJ) revisions to the Justice Manual aimed at “strengthening” False Claims Act (FCA) enforcement. For FCA defense practitioners, the announcement carries a distinct sense of déjà vu, as the revisions largely reinstate policies from the first Trump administration, most notably the November 2017 “Brand Memo” and the January 2018 “” — both under the Biden administration.

The revisions to the Justice Manual focus on two principal areas: (1) limiting the use of sub-regulatory guidance; and (2) reiterated qui tam dismissal authority.

Limiting Use of Sub-Regulatory Guidance. The first revision “reinstates and builds upon” the 2017 policy that sub-regulatory guidance cannot impose legal obligations beyond those established by statute or regulation. As Associate Attorney General Stanley Woodward stated, “[t]he Department of Justice should enforce the law, not make law through enforcement.” This directly echoes the Brand Memo’s core principle: defendants cannot be held liable under the FCA for violating guidance documents that lack the force of law. As with DOJ’s 2017 policy, the reinstated policy describes multiple contexts in which sub-regulatory guidance may still be used, including as evidence of scienter or a professional standard, or when a defendant made representations of compliance with the guidance.

Reiterated Qui Tam Dismissal Authority. The second revision clarifies DOJ “should consider exercising its dismissal authority when it declines to intervene in a qui tam action” and should “revisit that assessment as appropriate during litigation.” The emphasis is on dismissing qui tam actions that “lack legal or factual merit” and that “waste taxpayer resources and impose unjustified burdens on businesses.” This, too, is a re-issue of a DOJ pronouncement — including the same seven factors that in 2018 DOJ asserted could prompt the agency to act.

Why This Matters Across Industries

These revisions carry significant implications for any industry that operates within a landscape of extensive sub-regulatory guidance. Agencies across the federal government routinely issue guidance documents, manuals, FAQs, policy statements, and informal letters that, while technically non-binding, have effectively operated as de facto compliance standards for years.

Health Care. Health care providers and life sciences companies face perhaps the most complex guidance environment. Centers for Medicare and Medicaid Service’s (CMS) Medicare Benefit Policy Manual, National and Local Coverage Determinations, Office of Inspector General (OIG) advisory opinions, and Food and Drug Administration (FDA) guidance documents long have been cited in FCA enforcement actions. The revised Justice Manual acknowledges such documents may be used as “relevant evidence” of whether procedures were medically “reasonable and necessary” but critically emphasizes “such usage does not give these documents the force of law.” For health care organizations, this distinction could be the difference between defending a meritless claim and having it dismissed or addressed outside of court.

Government Contractors. Defense contractors and other companies doing business with the federal government operate under the Federal Acquisition Regulation (FAR) and also under layers of agency-specific guidance, contracting officer interpretations, and compliance manuals. FCA cases against government contractors frequently have relied on alleged violations of guidance-level requirements. Under the revised Justice Manual, enforcement must be grounded in binding legal or contractual obligations, not agency guidance alone. Contractors facing FCA exposure should assess whether claims against them rest on actual regulatory violations or merely on guidance.

Customs and International Trade. Importers face FCA exposure when the government alleges fraud in the importation process, including misclassification of goods, undervaluation, or false country-of-origin declarations. DOJ has authority to pursue civil remedies for importation fraud under 19 U.S.C. § 1592, and FCA claims have been asserted based on alleged violations of CBP guidance regarding product classification and origin declarations. The revised Justice Manual’s principle that enforcement must rest on binding legal requirements, not agency guidance, offers importers a potential defense when FCA claims rely on non-binding CBP interpretations rather than violations of statutes or regulations.

Higher Education. Colleges and universities receiving federal funds have faced FCA exposure based on alleged noncompliance with Department of Education guidance on issues ranging from Title IX implementation to financial aid administration. The revised Justice Manual’s distinction between binding legal requirements and agency interpretation offers institutions a stronger defense against claims based solely on guidance violations.

Practical Implications for FCA Defense & What Your Organization Can Do Now

Companies facing FCA exposure — or seeking to reduce future risk — should consider the following:

• Reassess pending FCA matters. If your company is defending against an FCA claim, evaluate whether the allegations rest on violations of binding legal requirements or merely on agency guidance. The revised Justice Manual provides strong grounds for early dismissal where relators or the government rely primarily on guidance documents rather than statutes, regulations, or contracts.
• Seek dismissal of meritless whistleblower suits. The Justice Manual now instructs DOJ attorneys to “assess whether the government’s interests are served by seeking dismissal” whenever DOJ declines to intervene in a qui tam case. If your company is facing a declined qui tam, there may be an opportunity to ask DOJ to dismiss, particularly where the claims lack legal or factual merit or duplicate prior government investigations.
• Audit your compliance posture. Distinguish between compliance with binding legal requirements and voluntary adherence to agency guidance. Understanding this distinction can help your organization allocate compliance resources appropriately and strengthen your position if questions arise.
• Monitor ongoing litigation. The Justice Manual provides that even where DOJ does not initially seek dismissal, it should “revisit that assessment as appropriate during litigation.” For companies in extended FCA disputes, this creates an ongoing opportunity to seek dismissal as weaknesses in relator cases become more apparent.

For businesses operating in guidance-intensive regulatory environments, these revisions represent a return to a framework that recognizes the difference between enforcing the law as written and enforcing agency guidance that was never subject to notice-and-comment rulemaking. If your organization is facing FCA exposure — or wants to understand how these changes affect your compliance posture — Â鶹ֱ˛Ą can help you navigate this shifting landscape.

Â鶹ֱ˛Ą is here to help you address the short- and long-term impacts in the wake of change. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please reach out to the authors, your Â鶹ֱ˛Ą relationship partner, or to our Government Enforcement Defense and Investigations Group with any questions.

Barred from Future Federal Loans. On September 14, 2026, Vice President JD Vance announced in Kansas City that the Trump administration will suspend roughly 870,000 individuals suspected of defrauding COVID-era small business loan programs — including the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program — from receiving future federal loans. The Department of Justice (DOJ) echoed in its the Vice President’s remarks in touting its “Operation No Doze,” a coordinated criminal enforcement effort by DOJ and the Small Business Administration (SBA) targeting fraud in PPP and EIDL loans issued during COVID. SBA Administrator Kelly Loeffler stated the suspensions are tied to an estimated $39 billion in suspected fraud across 45 states and territories. Combined with earlier enforcement actions, total suspensions now cover borrowers connected to roughly $49 billion in alleged fraud nationwide.

500 Prosecutors Focused on COVID Fraud Investigations. Attorney General Todd Blanche confirmed that 500 prosecutors are now focused on pandemic fraud nationwide. The SBA’s inspector general has previously estimated that more than $200 billion distributed through the PPP and EIDL may show signs of fraud. Congress created the PPP in March 2020 to keep businesses afloat during the pandemic, ultimately backing roughly 11.8 million loans totaling about $800 billion. Congress extended the statute of limitations for PPP fraud investigations to 10 years, giving prosecutors until 2030–2031 to charge criminal PPP cases. Many of the DOJ’s investigations regarding PPP fraud are referred to DOJ by data miners or insiders. In addition to criminal enforcement, DOJ’s False Claims Act (FCA) prosecutors are actively investigating FCA cases involving PPP borrowers. 

How to reduce PPP criminal and FCA risk today. For many organizations, the issue now is post-program defensibility in a potential FCA or criminal investigation. This can include:

• Reconstruct the PPP file. Gather the original application, supporting payroll documents and spreadsheets, correspondence, key emails, and forgiveness submissions.
• Interview key personnel. Try to talk to the team that actually applied for the loan to understand the decisions made at the time. Try to memorialize the company’s evidence of intent to follow the rules. Talk to the lender as well, if possible.
• Stress-test eligibility. Revisit affiliation/size and eligibility rules as they applied at the time. See if the company was nonetheless eligible under a different theory such as the alternative size test.
• Verify expenditures. Trace the monies received from the SBA to ensure that the monies were spent appropriately and document such tracing analysis.
• Prepare. Companies often learn of a PPP FCA investigation when they receive a civil investigative demand (CID) from DOJ. Others learn when a relator serves them with a complaint after DOJ declined to intervene in the case. Take the issue seriously now and retain experienced FCA counsel; FCA penalties can be high. 
• Investigate the public record. If DOJ has declined to intervene in the case, a company can potentially convince a court to dismiss the case because the FCA’s public disclosure bar precludes a case that is based on certain public information. Public PPP data available from the SBA and business entity information easily sourced online may bar the case pursuant to 31 U.S.C. § 3730(e)(4)(A). “[T]he public disclosure bar prevents a relator from merely repackaging information enumerated in the public disclosure bar for personal profit by asserting an FCA claim.”
• Repay the SBA. If, after all analysis is completed, the company determines that the money was improperly obtained and improperly spent, consider returning the money to the SBA before DOJ sends the company a subpoena or a relator files a qui tam case underseal against the company. 

Â鶹ֱ˛Ąâ€™s team can assist in these efforts. 

This month’s by the United States Department of Justice (DOJ) of another False Claims Act (FCA) settlement with a federal contractor offers further proof that the government continues to prioritize cybersecurity enforcement. According to DOJ’s press release, government contractor Honeywell Aerospace Inc. (Honeywell Aerospace) agreed to pay over $2 million to settle an FCA matter, which arose from allegations related to the company’s cybersecurity practices with respect to its Department of Defense contracts.

The Honeywell Settlement

Honeywell Aerospace is an Arizona-based company that provides aerospace products and solutions to government and commercial customers. A former IT employee filed a qui tam complaint after she was allegedly constructively discharged by the company for raising cybersecurity concerns related to the company’s contracts with the Department of Defense.

According to the complaint, pursuant to the contracts, Honeywell Aerospace provided the government with quantum computing services. Federal defense contractors like Honeywell Aerospace are required to implement certain cybersecurity controls outlined in the National Institute of Standards and Technology Special Publication 800-171 (). But, according to this lawsuit, Honeywell Aerospace failed to meet these requirements in connection with its work on the Quantum Contracts.

The complaint alleged myriad cybersecurity failings by Honeywell Aerospace with respect to the Quantum Contracts from April 2020 through December 2023, particularly as to the company’s treatment of controlled unclassified information (CUI) hosted on its “Gray Network,” an electronic network used for its work on the Quantum Contracts. The relator alleged that Honeywell Aerospace relied on a firewall to protect the Gray Network that was simply “a smokescreen to hide its inadequate security practices,” and that the company employed inadequate malicious code protection, access control, incident testing and response, and oversight of suspicious activity. Further, the complaint alleged that the company failed to report suspected cyber incidents or breaches as required by the Quantum Contracts and federal cybersecurity requirements.

Honeywell Aerospace did not admit these allegations but agreed to pay over $2 million to settle the claims, of which the qui tam relator will receive $375,823.

Implications of the Honeywell Aerospace Settlement

This settlement serves as a reminder that the government’s enforcement work on cybersecurity issues under the FCA is alive and well. As noted by Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division in connection with the Honeywell Aerospace settlement: “The Justice Department will continue to investigate potential violations of these cybersecurity requirements to protect this critical information.”

This case fits a pattern of other recent cybersecurity FCA settlements that involve federal defense contractors whose contracts have contractual clauses requiring compliance with the NIST SP 800-171 requirements for handling CUI. Defining what constitutes CUI and mapping the boundaries of information systems that hold CUI is notoriously challenging. The threat of FCA enforcement raises the stakes for confronting that challenge even more. 

In addition, this also highlights the risk of FCA suits arising from insiders, as the FCA is a rare statute that allows private individuals to file suit on behalf of the United States. Just like multiple other recent cyber FCA settlements, the relator in this case was an IT employee of the company who allegedly had raised concerns about the company’s cybersecurity compliance.  

Recommendations

Government contractors and other recipients of federal funds should consider the following steps to enhance cybersecurity compliance and reduce FCA risk:

1. Catalogue and monitor compliance with all government-imposed cybersecurity standards. Ensure your organization has a comprehensive list of all cybersecurity requirements and covered systems in your organization. These requirements may come not only from prime government contracts but also subcontracts, grants, or other federal programs. This includes not only ongoing knowledge of the organization’s contracts but also diligently classifying the types of information the organization handles (such as CUI) and which systems process that information. This also includes continuously monitoring and assessing the organization’s cybersecurity program to identify and patch vulnerabilities and to assess compliance with those contractual cybersecurity standards. This assessment should also consider third-party relationships, including vendors and service providers.

• Develop and maintain a robust and effective compliance program that addresses cybersecurity issues. In many companies, the compliance program and information security functions are not well integrated. An effective compliance program will address cybersecurity concerns and encourage employees to report such concerns. When concerns are identified, it is critical to escalate and investigate them promptly — the allegations in the Honeywell Aerospace complaint serve as a cautionary tale highlighting the potential consequences of not effectively responding to employees’ concerns. And companies should take care to ensure that there is no retaliation against employees who report concerns in good faith. It may often be beneficial to involve counsel in the investigation of concerns as early intervention is key to assessing and minimizing risk.

• Where non-compliance with cybersecurity standards is identified, organizations should evaluate potential next steps. This includes whether to disclose the matter to the government and cooperate with government investigators. Organizations should work with experienced counsel in this regard. Proactively mapping out a strategy for investigating and responding to potential non-compliance can instill discipline to the process and streamline the organization’s approach. And a proactive approach may mitigate the impact of consequences down the line.

If you have questions about cybersecurity or the False Claims Act, reach out to the authors or your Â鶹ֱ˛Ą & Lardner attorney.

The recent Department of Justice (DOJ) outlining the National Fraud Enforcement Division’s priorities signals a strategic shift in how DOJ intends to investigate and prosecute fraud. As discussed in our prior article on the memo’s health care implications, the memo shows that DOJ will concentrate its resources on fraud that threatens the “health, safety, security, and prosperity of Americans,” with emphasis on five priority areas: public trust and financial integrity, health care, internal revenue, global trade and commerce, and corporate misconduct.

This article focuses on what the memo means for companies engaged in global trade and commerce — particularly U.S.-based importers. The takeaway for these companies is that customs and trade fraud enforcement has entered a new and far more aggressive phase, and importers who are not accustomed to this level of government scrutiny need to get up to speed.

Trade and Customs Fraud Is a DOJ Priority

The Fraud Division memo explicitly identifies “Global Trade and Commerce” as one of its five principal enforcement priorities. According to the memo, the Division will “lead the Department’s coordinated criminal enforcement strategy, targeting trade and customs violations and supply chains polluted by forced labor.” The memo further states that prosecutors will focus on “systemic, high-impact noncompliance that threatens our economic and national security,” including “illicit transshipment schemes, country-of-origin fraud, the undervaluation of imported goods designed to evade duties, sanctions evasion, and foreign forced labor schemes.”

DOJ Has Established Tools for Enforcement

• The Fraud Division memo is not the first indicator of the administration’s crackdown on trade violations. Over the past year, DOJ has been developing several other related initiatives:
• The Trade Fraud Task Force. In August 2025, DOJ and the Department of Homeland Security launched a cross-agency Trade Fraud Task Force, combining prosecutors and investigators from multiple agencies — including Customs and Border Protection (CBP), Homeland Security Investigations, Internal Revenue Service (IRS) Criminal Investigation, and more than 30 U.S. Attorney’s Offices. By July 2026, the Task Force had surpassed $1 billion in civil and criminal recoveries, penalties, forfeitures, and publicly charged losses in less than one year.
• The Global Trade & Commerce Enforcement Section. In conjunction with the Task Force’s $1 billion milestone, DOJ announced the creation of a permanent Global Trade & Commerce Enforcement Section within the National Fraud Enforcement Division itself — signaling that heightened trade enforcement is a long-term institutional priority.
• A Resource Guide to Trade Fraud Enforcement. In July 2026, DOJ published detailing the statutes, enforcement mechanisms, and interagency partnerships it intends to leverage — essentially a roadmap for the trade community.
• Technology-Enabled Detection. The memo describes a Division backed by data scientists, automated litigation support, and a new National Fraud Detection Center, which DOJ launched on August 24, 2026, as a multiagency hub for generating criminal leads across all fraud types. On the customs side, CBP is developing an artificial intelligence-enabled (AI) “Detective Border” that integrates shipment data, routing histories, ownership relationships, production-capacity indicators, and other information to identify suspicious transshipment and country-of-origin claims. These are capabilities that did not exist at this scale even a few years ago. DOJ officials have said openly that they plan to borrow from the Health Care Fraud Unit’s data-driven playbook, which used algorithmic detection and AI tools to charge multiple defendants in a 2026 health care fraud takedown.¹ Importers should expect similar techniques applied to tariff classification, valuation, and country-of-origin data.

The False Claims Act Is Driving the DOJ Enforcement Wave

The primary DOJ enforcement vehicle in this new push has been — and will likely continue to be — the False Claims Act (FCA). For decades, the FCA was the government’s tool of choice in health care fraud and defense procurement cases. While health care companies know it well, many importers may not.

The FCA’s “reverse false claims” theory imposes liability for knowingly avoiding an obligation to pay money to the government — which maps directly onto customs duty evasion. The FCA also carries treble damages and allows private individuals known as “relators” to initiate qui tam suits, which means the financial exposure for importers can be enormous. Relators can be anyone — a former employee, a competitor, a customs broker — and they stand to collect a share of whatever the government recovers, often millions of dollars.

Recent cases illustrate the scale:

• Perfectus Aluminum ($549.5 million). In May 2026, DOJ announced one of the largest customs-related FCA settlements in history. Perfectus Aluminum and affiliated companies agreed to pay $549.5 million to resolve allegations that they evaded antidumping and countervailing duties on aluminum extrusions imported from China by disguising them as finished “pallets” not subject to applicable duties. over 2.2 million aluminum products and more than $880 million in imports. The relators received approximately $96 million — roughly 17.5% of the settlement — underscoring just how lucrative these cases can be for insiders willing to come forward.
• Ceratizit USA ($54.4 million). In December 2025, Ceratizit USA settled FCA allegations that it routed Chinese-origin tungsten carbide products through Taiwan and falsely declared Taiwan as the country of origin to avoid Section 301 tariffs. At the time, this was itself a record — Perfectus eclipsed it five months later.
• MGI International (criminal + civil resolution). Also in December 2025, DOJ announced a criminal resolution involving MGI International, whose chief operating officer pleaded guilty to conspiracy to smuggle goods into the United States for directing subordinates to misrepresent the country of origin of plastic resin on customs entry summaries.

These cases show that DOJ now views customs evasion the same way it views health care fraud or procurement fraud — as a form of stealing from the federal government that warrants aggressive, multi-tool enforcement.

What This Means for Importers and Trade-Facing Companies

DOJ is building a more centralized, technologically enabled trade fraud enforcement model. For importers and companies with global supply chains, that makes customs compliance an enterprise-level legal risk. And unlike the health care industry, which has had decades to develop compliance programs in response to FCA enforcement, the import community is largely encountering this level of enforcement intensity for the first time.

In light of these developments, companies should consider several practical steps:

1. Elevate customs compliance to an enterprise risk. Customs and trade compliance should not be siloed in the logistics or operations department. It should be integrated into enterprise risk management, internal audit, and legal oversight — the same way health care companies treat billing compliance and anti-kickback programs. Boards and senior leadership should have visibility into import compliance risks.

2. Audit your customs data before the government does. With DOJ leaning into data analytics, importers should do the same. Review import entry data, tariff classifications, country-of-origin declarations, valuation methodologies, and free trade agreement claims for outliers and unexplained anomalies.

3. Scrutinize your supply chain. Companies should understand the actual production flow and country of origin for their imports, retain supporting documentation, and ensure that third-party partners are not creating compliance exposure. Pay attention to customs brokers, freight forwarders, warehouse operators, and foreign suppliers.

4. Take forced labor risk seriously. The memo specifically calls out “supply chains polluted by forced labor.” The Uyghur Forced Labor Prevention Act creates a rebuttable presumption that goods from the Xinjiang region of China are made with forced labor and are barred from entry. In addition, CBP has long enforced trade restrictions on the importation of goods that use forced labor or human trafficking in the supply chain; the DOJ could get involved in these issues as well. The DOJ has signaled that forced labor violations in trade may also carry criminal consequences under 18 U.S.C. § 1589 and related provisions.

5. Integrate tax into trade investigations. The Fraud Division memo makes clear that tax enforcement is a cross-cutting priority. Potential trade fraud matters should be evaluated for tax implications early. If a company uncovers questionable import activity, counsel should evaluate whether there are corresponding tax reporting obligations or exposure.

6. Prepare for overlapping enforcement theories. Importers should assume that a single compliance issue may be framed simultaneously as civil FCA fraud, criminal customs smuggling (18 U.S.C. § 545), false statements (18 U.S.C. § 542), Tariff Act violations, and potentially sanctions or forced labor violations. The Perfectus case is a prime example — it involved parallel criminal convictions, a $1.8 billion restitution order, and a $549.5 million civil FCA settlement arising from the same underlying conduct.

7. Understand the insider dynamic. The FCA’s qui tam provisions allow private individuals — including employees, competitors, customs brokers, and other supply chain participants — to file suit on the government’s behalf and share in any recovery (up to 30%). DOJ has expanded its Corporate Whistleblower Awards Pilot Program to cover trade, tariff, and customs fraud, and CBP reported more than 1,200 investigations into revenue-focused allegations made through its e-Allegations portal. Companies should consider implementing internal reporting mechanisms and response protocols.

8. Consider voluntary self-disclosure. The memo reiterates DOJ’s commitment to hold “accountable organizations that flout the law and reward those that voluntarily self-disclose, cooperate, and remediate.” DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy and the Civil Division’s longstanding FCA settlement credit policies provide meaningful incentives for companies that come forward proactively. While numerous factors must be weighed when determining whether self-disclosure is appropriate, the memorandum underscores DOJ’s intent to meaningfully reward companies that take a proactive approach.

Conclusion

DOJ’s memo is a blueprint for a more integrated fraud enforcement regime — larger, more technologically sophisticated, and willing to combine multiple theories in a single case. The enforcement playbook that has shaped health care and defense procurement compliance for decades is now being applied to customs and trade. Companies that import goods into the United States — particularly those dealing with goods from China or other high-tariff jurisdictions — face a fundamentally different risk environment than they did even two years ago.

In this environment, proactive compliance, coordinated risk assessment, and early investigative discipline are more important than ever.

If you have questions about how your company can best follow the compliance requirements discussed in this article, please contact the authors or your Â鶹ֱ˛Ą attorney.

A version of this article was published in on September 28, 2026.

On August 13, 2026, Assistant Attorney General Colin M. McDonald issued a to all personnel of the Department of Justice’s (DOJ) newly created National Fraud Enforcement Division (the Fraud Division). The memorandum identifies five Fraud Division enforcement priority areas: (A) public trust and financial integrity; (B) health care; (C) internal revenue; (D) global trade and commerce; and (E) corporate misconduct. The implications of the memorandum on combating health care fraud were addressed in a recent Â鶹ֱ˛Ą & Lardner article. This article focuses on the DOJ’s renewed emphasis on combating government program fraud with significant increases in manpower and data-driven resources in specific target areas, particularly those involving foreign nationals. It also addresses the precautions and compliance measures companies should initiate to prevent corporate misconduct when receiving government funds.

DOJ’s Priority on Prosecuting Fraud in Public Trusts and Grants

The DOJ has committed significant resources to combating government program fraud. These resources include an increased headcount to approximately 500 attorneys over the next two years, data-driven white collar law enforcement, and reduced bureaucratic oversight resulting in faster prosecutions. The DOJ memorandum singles out several categories of conduct under “public trust and financial integrity” for its government fraud enforcement. These categories include:

• Procurement and contracting fraud. The memorandum calls procurement fraud “a critical priority,” expressly listing “defective pricing, bid rigging, self-dealing, bribery, product substitution, and billing frauds,” and tying these schemes to national security and military readiness.

• Benefit and grant programs. The memorandum highlights programs ranging from “student loans to childcare, veterans’ benefits to nutritional supplements, and disaster relief to small business programs,” warning that “lax oversight allowed bad actors — often foreign nationals — to exploit these programs.”

• Foreign nationals and organized schemes. The memorandum emphasizes its intent to focus on foreign nationals and that fraudsters are “not just isolated actors” but form “criminal conspiracies, often spanning international borders” that exploit benefit programs.

The DOJ recently publicized its government program fraud work in coordinated fashion. For example, on July 30, 2026, the United States Attorneys for the Eastern, Middle, and Western Districts of Louisiana highlighting nine recent fraud prosecutions across the state, framing the effort as an extension of the Fraud Division’s mission. The nine cases track the DOJ memorandum’s government program fraud priorities closely, including pandemic relief fraud under the Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL), and Employee Retention Credit government programs, among other crimes.

Yet, the DOJ’s emphasis in pursuing government program fraud is not new. In April 2025, the United States Attorneys’ Office for the Central District of California in Los Angeles the formation of a Homelessness Fraud and Corruption Task Force to investigate “fraud, waste, abuse, and corruption involving funds allocated toward the eradication of homelessness.” The announcement noted the Task Force would “prioritize a review of federal, state, and local programs receiving federal grants and funding,” including private donations intended for the homeless population. As a result, government grant recipients and their subrecipients (nonprofits, service providers, and developers alike) can assume that receipt of federal program dollars carries federal audit and enforcement consequences downstream.

What This Means for Organizations That Receive Government Funds

Analyze and audit your own data before the government does. If the DOJ is investing in data science, recipients of federal funds should too. Test the claims, invoices, cost reports, performance metrics, and drawdown requests the company submits to the government for outliers, statistical anomalies, and patterns that could look suspicious to a government analyst. If those audits identify potential issues, evaluate whether and when to make a self-disclosure to the government.

Assess the company’s workforce and customer base. Immigration compliance should be part of fraud risk management, as both a policy and a practical matter. The DOJ memorandum’s emphasis on schemes that “prey on the vulnerable” and on wrongdoing by foreign nationals directly signals heightened scrutiny of organizations serving children, the elderly, and the sick or disabled, and of workforce composition, particularly at companies that employ foreign nationals. Companies would be best served by confirming that their employment practices, such as contractor and staffing-agency arrangements, and work-eligibility verification procedures, such as I-9 collection and retention, are current and auditable.

Build tax into internal investigations. The memorandum states that “many fraudsters who steal money from government programs . . . simultaneously violate our internal revenue laws,” and promises “intra-division and interagency coordination” to enable an “all-tools response.” Companies should conduct an internal investigation to identify any questionable revenue, unreported income, or improper deductions. This revenue and tax analysis should begin as soon as practicable and not after a government investigation has ensued.

Reassess compliance against the government’s stated priorities. Compliance programs should be mapped against the specific conduct the DOJ memorandum identifies. Under the DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), “timely and appropriate remediation” requires, among other things, a documented root cause analysis, an effective compliance and ethics program, appropriate discipline of responsible employees and their supervisors, and controls on other practices that may undermine record retention. A company’s proactive remediation before a government investigation ensues is cheaper, more controllable, and likely to be perceived by the government as more credible than any post-investigation response.

Bottom Line

The Fraud Division memorandum indicates that more resources are being dedicated to combating fraud. More prosecutors, data-driven investigations, and specialized prosecutorial sections likely translate into earlier fraud detection and faster charging decisions, particularly for organizations whose revenue flows from federal government programs. The companies and organizations that fare best in this environment will be the ones that treat their own government-facing data as a potential audit target, integrate tax and immigration compliance into government fraud risk assessments, remediate before they are asked to do so, and make a deliberate, well-counseled decision about self-disclosure, while the choice is still theirs to make.

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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If you have questions or concerns about this article, please feel free to reach out to any of the authors or your Â鶹ֱ˛Ą & Lardner attorney. If you would like to see future updates, including our weekly Tariff-ied! updates on This Week in International Trade and our “What Every Multinational Company Needs to Know” compliance and trade series, please sign up for our email list.

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.