DOJ Settlement Highlights Customs, FCA Risks for Importers
On March 25, 2025, the U.S. Department of Justice (DOJ) announced an $8.1 million settlement in a civil case under the False Claims Act (FCA) related to alleged customs evasion by a California importer of wood flooring. The private whistleblower who reported the conduct received over $1.2 million in the matter. As we suggested in a blog post in February, these sorts of enforcement actions will proliferate under the Trump DOJ.
Importer Knowingly Evaded Paying Duties on Imports from China
According to the DOJ, Evolutions Flooring Inc. (Evolutions) and its owners, Mengya Lin and Jin Qian, knowingly evaded certain antidumping, countervailing, and Section 301 duties on multilayered flooring products from China. The company submitted false information to U.S. Customs and Border Protection (CBP) regarding the identity of the manufacturers and the country of origin of the imported flooring.
For instance, Evolutions inaccurately labeled products to indicate that they were not subject to antidumping and countervailing duties. Similarly, Evolutions falsely reported that their products were produced in Malaysia by a Malaysian manufacturer. (According to the DOJ, an Internet search indicated that the purported manufacturer had no flooring factory.) According to the Complaint, across the wood flooring industry, annual imports from China, made from 2015 through 2019, saw a sharp decrease, accompanied by a parallel increase in imports from Malaysia.
False Claims Act as Uniquely Effective Way to Enforce Import Requirements
An individual or entity violates the FCA if they knowingly:
- Present, or cause to be presented, a false or fraudulent claim to the government for payment or approval, or
- Make, use, or cause to be made or used, a false record or statement material to a false or fraudulent claim.
In addition, a defendant may face liability for a “reverse” false claim if the defendant knowingly fails to repay the money or return the property to the government that it should not have received. The FCA also reaches defendants who conspire to commit any of these violations.
Violations of the FCA are punishable by treble (3x) damages, plus civil penalties per each false claim. At present, penalties may be imposed in the amount of between $14,308 and $28,619 per claim and are adjusted annually for inflation.
In the customs context, as in the Evolutions matter, “falsity” may take the form of under-representing duties owed. Importantly, the materiality requirement ensures that the FCA applies only when false or fraudulent conduct is important enough that it would probably have influenced a government decision. Yet with the proliferation of tariffs and the increase in imports for which duty is due, there is a corresponding expansion of opportunity for FCA scrutiny.
While the U.S. government has several means by which to pursue importers that underpay or avoid duties – goods can be seized, civil penalties can be pursued – the FCA allows for both the government and private parties under the statute’s qui tam provision to stand in the shoes of the government and bring suit on its behalf and receive a portion of any recovery. Given the enormous number of imports that enter the United States each day, the FCA effectively serves as a force multiplier. As part of the Evolutions resolution, the whistleblower will receive $1.2 million – or roughly 15% – of the total recovery.
Trade Policy and Tariff Changes Create Unpredictability, Increase Risk
To date, the Trump Administration’s threat, implementation, and removal of tariffs and other import measures have been chaotic and created significant uncertainty for importers. Changes in policy and duty obligations sow confusion. This in turn enhances the risk of regulatory noncompliance for importers and, in some cases, FCA exposure.
Notably, in the press release announcing the resolution, DOJ highlighted the role of CBP in making factory visits, detaining shipments, analyzing import records, and conducting witness interviews. We expect such cooperation to continue and with it the compliance challenges for importers, particularly given the need to remain abreast of precise details in a rapidly shifting import and tariff landscape.
If you have any questions about this article, please contact the authors or any other point of contact you have at Bass, Berry & Sims.
