In a move that could reshape the landscape of cross-border trade, the U.S. Department of Justice (DOJ) has announced a major expansion of its efforts to combat tariff evasion, a development that legal experts warn could have far-reaching implications for Canadian companies operating in the U.S. market.
At the heart of this shift is the DOJ’s reorganization of its Criminal Division Fraud Section, which now includes a specialized unit dedicated to investigating trade-related crimes. The new Market, Government, and Consumer Fraud Unit (MGCF) is tasked with aggressively pursuing cases involving tariff evasion, a practice that has long been illegal but rarely prioritized. With U.S. tariff policy now playing a central role in both economic and foreign policy, enforcement has become a top priority.
Canadian businesses, particularly those engaged in cross-border trade, are being urged to take notice. Lawyers warn that companies involved in exporting, importing, or operating U.S. subsidiaries could face heightened scrutiny and increased legal risks. The DOJ’s expanded focus isn’t limited to deliberate tariff evasion; even inadvertent errors, such as lapses in customs compliance or inaccurate documentation, could trigger investigations.
At issue are practices like misclassifying goods, undervaluing shipments, or transshipping products through other countries to disguise their origin. These tactics, often used to avoid higher tariffs, are now under the microscope. The DOJ’s new unit will also target falsified documentation designed to secure lower tariff rates.
Legal experts cited in Canadian Lawyer caution that U.S. authorities are not limiting their focus to domestic offenders. Foreign-based companies, including those in Canada, could face investigation and enforcement if implicated in U.S. customs violations. Moreover, the DOJ is increasingly likely to pursue individual executives and managers, holding them personally liable for corporate misconduct.
Adding to the complexity, the DOJ’s enforcement push may also lead to parallel investigations by other agencies, such as U.S. Customs and Border Protection (CBP) and the Department of Homeland Security. This multi-agency approach could amplify the legal and financial risks for companies under scrutiny.
Compounding these challenges is the expansion of whistleblower programs. Individuals with information about tariff evasion can now receive financial rewards for coming forward, creating a heightened risk of internal leaks or tips that could trigger investigations. At the same time, the DOJ has updated its Corporate Enforcement and Voluntary Self-Disclosure Policy, encouraging companies to self-report violations in exchange for potential leniency.
While self-disclosure could reduce penalties in some cases, legal experts emphasize that this is no guarantee, especially in instances of repeated or egregious conduct. For Canadian companies, the message is clear: proactive compliance and vigilance are no longer optional but essential to navigating this new enforcement landscape.
The DOJ’s enhanced focus on tariff evasion is part of a broader strategy to strengthen enforcement of U.S. trade laws, with significant implications for Canadian companies. The reorganization of the Criminal Division Fraud Section and the creation of the Market, Government, and Consumer Fraud Unit (MGCF) signal a proactive approach to addressing trade-related crimes. This specialized unit is equipped to investigate complex cases involving tariff evasion, ensuring that violations are identified and prosecuted more effectively.
Canadian companies engaged in cross-border trade must now contend with a heightened risk of legal exposure. The DOJ’s expanded enforcement efforts are not limited to deliberate tariff evasion but also encompass inadvertent errors, such as lapses in customs compliance or inaccurate documentation. These issues can arise from oversight in monitoring suppliers, failure to adhere to customs regulations, or insufficient due diligence in verifying the origin of goods. Even unintentional violations can trigger investigations, underscoring the need for robust compliance measures.
The DOJ’s enforcement push is further complicated by the expansion of whistleblower programs. Individuals, including employees or former employees of Canadian companies, can now receive financial rewards for reporting tariff evasion or customs fraud. This creates a heightened risk of internal leaks or tips leading to investigations. At the same time, the DOJ has updated its Corporate Enforcement and Voluntary Self-Disclosure Policy, encouraging companies to self-report violations in exchange for potential leniency. While self-disclosure may reduce penalties in some cases, it is not a guarantee, particularly in instances of repeated or egregious misconduct.
Legal experts recommend that Canadian companies with U.S. operations or significant cross-border trade take immediate steps to mitigate risks. This includes conducting comprehensive audits of customs compliance programs, training staff and management on U.S. customs laws and regulations, and ensuring strict monitoring of supply chains. Companies should also be prepared for potential investigations, including document requests or visits from U.S. authorities. Additionally, reviewing and strengthening protocols for whistleblower complaints and internal investigations is critical to navigating this new enforcement landscape.
Conclusion
The DOJ’s intensified focus on tariff evasion signals a significant shift in enforcement strategies, particularly impacting Canadian companies involved in U.S. trade. This initiative, coupled with the reorganization of the Fraud Section and the establishment of the MGCF unit, underscores the importance of robust compliance measures. Companies must address both intentional and unintentional violations, navigate whistleblower risks, and consider self-disclosure policies to mitigate legal exposure. Proactive steps, including audits, staff training, and supply chain monitoring, are essential for companies to safeguard against investigations and potential penalties.
Frequently Asked Questions
What does the DOJ’s enhanced focus on tariff evasion mean for Canadian companies?
It means increased scrutiny and legal risks, requiring companies to ensure compliance with U.S. customs regulations to avoid penalties.
What are the risks for Canadian companies under the DOJ’s new enforcement strategy?
Risks include legal exposure from both deliberate and inadvertent violations, such as customs errors, with potential investigations and penalties.
How can Canadian companies protect themselves from tariff evasion risks?
Companies should conduct compliance audits, train staff, monitor supply chains, and prepare for potential investigations to mitigate risks.
What role do whistleblowers play in the DOJ’s enforcement efforts?
Whistleblowers can report violations, potentially leading to investigations, highlighting the need for strong internal protocols to handle such cases.
Why is self-disclosure important under the DOJ’s new policy?
Self-disclosure may reduce penalties, encouraging companies to report violations voluntarily, though it doesn’t guarantee leniency in all cases.
