Trade Expert Predicts Tariff Fraud Crackdowns to Increase 200%

As a new round of tariffs began to take effect Thursday, trade expert Rennie Alston warned importers that regulators will be stepping up efforts to ensure duties on a growing list imposed by the Trump administration are being properly paid.

"Today every importer is paying more tariffs than they did prior to 12:01am this morning -– it’s challenging to stay abreast of them," Alston, CEO of customs consulting firm Alston Group, told attendees at a supply chain summit hosted by 3PL Jarrett.

Alston was referring to the latest round of tariffs the administration announced last week, which took effect Thursday. Along with those and prior duties has come a level of compliance oversight from the government – specifically the U.S. Department of Justice (DOJ) – that he has not seen before.

"What is new, over the last year, is direct communications from the Department of Justice on issues in which the [customs compliance] matter is referred from customs to the Department of Justice for immediate enforcement action."

Alston, a licensed customs broker who advises the administration as a member of U.S. Customs and Border Protection's (CBP) Commercial Customs Operations Advisory Committee (COAC), said CBP is looking more closely at import documents to check for accurate information on the value of goods, country of origin, or whether importers are masking the country of origin through transshipment.

"Circumvention of tariffs in my professional opinion will be the number one revenue generating penalty that supersedes valuation and record keeping [penalties], which had been the number one and two [penalty categories] over the last 20 years," Alston said.

"I anticipate that Department of Justice activity is going to increase by 200% as a result of tariffs and the reaction of the trade community."

Kirti Reddy, an attorney with the law firm Quarles & Brady, told FreightWaves earlier this year that the speed and scope of the new duties on U.S. trading partners will likely result in a higher number of cases prosecuted under the False Claims Act.

"Especially with the tariffs being so steep, companies and individuals might be inclined to figure out how they’re going to meet their costs” by circumventing compliance, she said.

One such evasion tactic “evolving right before our eyes," by evading compliance, she said.

One such evasion tactic that is "evolving right in front of us," Alston said, is Modified Delivery Duty Paid (MDDP) – “a blatant scam” from CBP’s perspective, he noted.

"It is where a company talks you into allowing someone else to be the importer of record, and the foreign supplier says, ‘don’t worry about the entry, I’ll be the importer, you just keep buying from me and don’t worry about what I declare to customs’."

This is fraudulent, Alston warned, emphasizing the liability of all parties involved in the transaction regardless of whose name is on the fraudulent entry.

Customs brokers can help importers understand the consequences of misinterpretation on customs documents, he said, because CBP holds the view that such compliance errors are intentional.

"Understand that your actions are critical to your company’s ability to sustain itself, because penalties could be far beyond the value of the merchandise."

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Source: Phaata.com (According to Freight Waves)

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