One (Trade) Battle After Another

As federal prosecutors intensify investigations into tariff evasion and trade fraud schemes, some attorneys say the U.S. has entered a chapter of trade enforcement driven by heightened scrutiny and more aggressive national security arguments.

One defense lawyer says the enforcement landscape is “rapidly evolving,” shaped by rising tariffs, a new federal task force and more rigorous oversight of how companies handle imports and exports.

“We are seeing a significant pivot at the Department of Justice toward investigating and prosecuting tariff evasion fraud,” said Adams Duerk & Kamenstein LLP partner (and former federal prosecutor) Anthony Pacheco.

“This shift in resources does not mean DOJ is suddenly treating every routine mistake as a criminal case. Instead, the government appears committed to far more aggressive investigations and prosecutions aimed at holding companies and individuals accountable – especially in an era of sharply increased tariffs and rising trade protectionism.”

The combination of higher duties and President Donald Trump’s strategy of using tariffs to aid national security has created strong incentives for prosecutors and civil enforcement offices, Pacheco added.

“The administration has been explicit that it views tariffs as a national security tool, and DOJ has followed suit by dedicating far greater resources to investigating and enforcing tariff evasion. In practice, the administration is using tariffs as a tax on foreign goods to raise revenue and relying on DOJ to ensure companies comply with those increased duties,” Pacheco said.

In August, the Justice Department and Department of Homeland Security launched a cross-agency Trade Fraud Task Force aimed at targeting importers who avoid duties through misclassification, undervaluation, deceptive country-of-origin labeling and other tactics.

The Daily Journal sought comments from the Justice Department and former federal prosecutors about how the changing trade export landscape may be affecting litigation strategies. They did not respond.

A spokesman for the office of First Assistant U.S. Attorney Bilal A. Essayli in Los Angeles said he was unaware of such a task force in the Central District of California and did not have a comment on the matter. Emails sent to the Justice Department in Washington, D.C. and the other three California federal districts were not answered.

When Trump was inaugurated in January, he issued the “America First Trade Policy,” which directed agencies to tighten enforcement, pursue tariff evasion cases more aggressively and treat trade violations as national security concerns.

Speaking at an event last month hosted by the Los Angeles Chapter of the Federal Bar Association, Larson LLP partner Hilary L. Potashner said that criminal charges are already appearing in cases involving false statements, money laundering and “run-of-the-mill crimes that we’ve seen, but in this context with the fact pattern of trying to avoid the tariffs.”

As tariffs rise, she added, “there’s more of a financial incentive,” which means “we’re going to see it more,” and “there’s going to be more focus on prosecuting those crimes.”

A tariff, in this context, is a border-collected tax on imported goods – a duty the government requires importers to pay when their products enter the country. The Justice Department has said in a related news release that Trump views tariffs not only as a source of revenue but argues that stricter collection enforcement and higher rates help protect U.S. industries and deter what the administration sees as unfair or destabilizing foreign trade practices.

Recent prosecutions have included allegations of undervaluing imports, falsified country-of-origin information and container tampering used to slip high-duty goods past inspection. Other conduct falls into gray areas, Potashner noted.

She said she has defended cases “where it was not clear, in my mind, that the items were subject to the tariff that the government thought that they were subject to.” Complex classification rules under the Harmonized Tariff Schedule, she added, create “a lot of space for experts in terms of analyzing whether or not a particular tariff actually applies.”

Whistleblower reports and data-driven targeting add further complexity to the landscape, attorneys who spoke at the Federal Bar event said. They pointed to an increase in tariff evasion complaints in the U.S. Customs and Border Protection “e-Allegations Program.” The system logged a 160% increase in such complaints from March to May compared to the same period a year earlier, the attorneys said.

This program is aided by financial incentives and pressure from rival companies within the import sector. “I guess from the government’s point of view, this program is working,” Potashner said.

The legal foundation for many current tariff actions is under review at the U.S. Supreme Court, which is weighing whether the administration exceeded its authority under the International Emergency Economic Powers Act, when it used the law to impose sweeping tariffs. In August, the U.S. Court of Appeals for the Federal Circuit found that the act, known as IEEPA, does not authorize the tariffs imposed by Trump’s executive orders. The statute authorizes the president to regulate international commerce after declaring a national emergency.

The case stems from a Court of International Trade ruling this year, later affirmed by the Federal Circuit. The dispute, appealed by the administration, is pending before the U.S. Supreme Court. Donald J. Trump, President of the United States, et al. v. V.O.S. Selections Inc., et al., 25-250, (2025).

Pillsbury Winthrop Shaw Pittman LLP partner Ronald L. Cheng said the key question is whether IEEPA’s authorization to regulate trade includes the power to impose duties.

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“It’s not that simple,” Cheng said, explaining that even if the Supreme Court overturns some or all of the tariffs, prosecutions tied to those duties may not automatically fall away. Outcomes could depend on factors such as the timing of the alleged conduct and the defendant’s intent,” he said, noting that these cases can be “extremely vexing” for companies and individuals navigating parallel criminal and civil exposure.

Cheng added that he “gave up a long time ago” trying to predict Supreme Court rulings, but said the case “will definitely be one of the cases in this term that will garner a significant amount of attention,” with a decision expected next year.

Pacheco warned that the eventual ruling could trigger “continued litigation across multiple trade and export-control fronts,” potentially affecting cases already in progress depending on timing and the defendants’ intent.

“This is a fast-moving area marked by a troubling level of uncertainty and the likelihood of years of further court battles and policy shifts after the Supreme Court acts,” Pacheco said. “The court’s eventual rulings may constrain – or at least redefine – the administration’s ability to impose tariffs and to compel companies to pay them. What will follow is almost certainly a period of continued litigation across multiple trade and export-control fronts, along with potential new legislation and other significant congressional activity.”

The Los Angeles/San Francisco Daily Journal is a publication for lawyers practicing in California, featuring updates on the courts, regulatory changes, the State Bar and the legal community at large.