Multinational companies that sell goods to their own U.S. subsidiaries sit at the intersection of two legal regimes with opposite incentives. Tax law wants the intra-company price high enough to satisfy the IRS. Customs law requires the declared import value to reflect what was actually paid — and the company has every reason to minimize it. When a company knowingly exploits that tension to understate its dutiable value, it has a False Claims Act problem.

Every customs entry filed in the United States rests on a tariff classification chosen under six legally binding rules — the General Rules of Interpretation. The rules are hierarchical, well-defined, and auditable, and it is precisely that auditability that turns deliberate misapplication of any of them into a False Claims Act problem. This post walks through what each GRI actually requires, briefly identifies where each one creates duty-evasion exposure, and points to our more detailed posts on the patterns we have addressed elsewhere.

Antidumping and countervailing duties on goods from China can exceed 200 percent of declared value, and on certain Chinese aluminum extrusions the combined rate has reached 400 percent. That rate level makes AD/CVD evasion the single largest source of False Claims Act exposure in customs law. It explains why a $549.5 million customs fraud settlement announced this week — one of the largest in Justice Department history — came out of an AD/CVD case rather than a Section 301 case, and why the relators included a trade association whose members had spent more than a decade petitioning for the underlying duty orders.

Wooden bedroom furniture from China has been subject to antidumping duties of 216 percent since 2005. That single AD order has generated more False Claims Act settlements than perhaps any other product category in customs law—a cascade of cases in which importers described bedroom dressers as “accent furniture,” disguised wood as metal, manipulated packing-list photographs, and directed Chinese factories to falsify invoices. Combined FCA recoveries in wooden bedroom furniture cases alone exceed $45 million. The furniture and home goods sector remains one of the most active areas of customs fraud enforcement—and one of the most productive for whistleblowers.

GRI 5 governs how containers, cases, and packing materials are classified when imported with the goods they hold. The rule’s purpose is administrative simplicity: a camera case shipped with a camera is classified with the camera, and a cardboard box shipped with its contents is classified with the contents. But GRI 5’s simplicity is also its vulnerability. An importer who understands how the rule works can manipulate the relationship between a container and its contents to reduce the duty paid on one or both — and the result is a false statement on every affected customs entry.

Quartz surface products from China are subject to antidumping and countervailing duties that can exceed 500 percent. In August 2025, Allied Stone Inc. paid $12.4 million to settle False Claims Act allegations that it disguised Chinese quartz countertops as marble and crystallized glass to evade those duties. The Allied Stone case is only the most recent chapter in what has become one of the most enforcement-intensive product categories in all of customs law—a category where transshipment, misclassification, and outright fabrication of product identity have generated dozens of EAPA investigations and millions of dollars in FCA recoveries.

U.S. law restricts duty drawback on goods exported to USMCA countries. Substitution unused merchandise drawback is flatly unavailable for exports to Canada or Mexico. Manufacturing and direct identification drawback are available but capped at the lesser of U.S. duties paid or duties owed in the USMCA country — which, for goods that qualify for preferential tariff treatment, may be close to zero. These restrictions create a powerful incentive to misrepresent export destinations, and a company that acts on that incentive is filing false claims for payment from the United States.

Vehicles and auto parts are classified under some of the most structurally complex headings in the Harmonized Tariff Schedule, with duty rates that can vary by a factor of ten depending on which side of a classification line a product falls. That complexity, combined with massive import volumes and aggressive Section 301 tariffs on Chinese-origin parts, creates fertile ground for customs fraud and False Claims Act liability.

Footwear is one of the most classification-intensive product categories in the entire Harmonized Tariff Schedule. Duty rates on shoes range from zero to nearly 50 percent, depending on factors as granular as whether the upper is leather or textile, whether the sole is rubber or plastic, and whether the shoe is valued above or below $3, $6.50, or $12 per pair. That complexity—combined with the billions of dollars in footwear imported annually and the enormous financial incentive to land in a lower-duty classification—makes the footwear industry a natural source of customs fraud and potential False Claims Act liability.

Unused merchandise drawback allows importers to recover nearly all of the customs duties they paid when imported goods are re-exported or destroyed without being used in the United States. The statute defines “use” narrowly enough that testing, cleaning, repacking, and similar operations do not disqualify the goods. But when merchandise is deployed for its intended commercial purpose — installed at a customer site, sold to a consumer, put into production — it has been used, and a drawback claim that says otherwise is a false claim for payment from the United States.

Aluminum extrusions from China have been subject to antidumping and countervailing duty orders since 2011, with combined duty rates that can exceed 300 percent. In October 2023, the U.S. Aluminum Extruders Coalition filed new AD/CVD petitions covering fifteen additional countries, requesting duties as high as 256 percent. The combination of punishing duty rates, broad product scope, and widespread evasion has made aluminum extrusions one of the most litigated product categories in customs fraud—and one of the most promising for False Claims Act whistleblowers.

The United States imports more than $60 billion in medical devices annually, a figure that has grown rapidly as multinational device companies have shifted manufacturing operations to Ireland, Germany, Costa Rica, and other countries. Much of this trade is between related parties: a U.S. parent company importing from its own foreign subsidiary, or a foreign parent importing through its U.S. affiliate. That related-party structure, combined with the genuine complexity of classifying medical devices across multiple HTSUS headings and the obligation to declare the value of assists like engineering and tooling, creates a distinctive set of customs fraud risks.

Every duty drawback claim depends on proof that goods were actually exported from the United States. The claimant must certify the export and support it with shipping records, Internal Transaction Numbers from the Automated Export System, and other documentation. When those records are fabricated, inflated, or unverifiable — when the drawback claim says goods left the country that did not actually leave, or left in smaller quantities than reported — every resulting payment is a false claim under the False Claims Act.

GRI 2 is the classification rule most importers never think about — and the one most easily exploited by those who do. GRI 2(a) requires that incomplete or unassembled goods be classified as the finished article they will become. GRI 2(b) extends material-specific headings to cover mixtures and combinations. When importers deliberately misapply either rule — shipping finished goods as “parts,” or concealing a product’s true material composition — the result is a false statement on every customs entry, and the False Claims Act consequences can be substantial.

Foreign Trade Zones allow companies to import, store, and manufacture goods without paying customs duties until the goods enter U.S. commerce — and to pay no duties at all on goods that are re-exported. These are legitimate and valuable tools for U.S. manufacturers and distributors. But the same features that make FTZs attractive for lawful commerce make them attractive for fraud: removing merchandise from a zone without proper entry, manipulating the inverted tariff election to pay a lower rate than the law allows, and using zone-to-zone transfers to obscure the origin or classification of goods. Each of these generates a false statement on a customs entry, and each is actionable under the False Claims Act.

The duty drawback system allows importers to recover nearly all of the customs duties they paid when imported goods — or goods manufactured from them — are later exported or destroyed. Under the substitution drawback provisions of 19 U.S.C. § 1313(b), an importer can claim a refund even when the actual exported goods are not the same goods that were imported, provided they are commercially interchangeable. That flexibility is essential to the program’s function. It is also the source of its most significant fraud risk: when a company claims drawback on exports of domestic merchandise that is not, in fact, interchangeable with the imported goods that generated the duty, every drawback claim is a false claim for payment from the United States.

Every product imported into the United States must be classified under a mandatory set of rules called the General Rules of Interpretation. The first rule — classify according to the terms of the headings and any relative section or chapter notes — resolves the vast majority of classification questions. It is also the rule whose misapplication has produced more False Claims Act settlements than all the others combined.

Many U.S. companies pay foreign engineers, designers, and developers to create the specifications, drawings, and technical files that their overseas manufacturers need to produce imported goods. When that work is performed outside the United States and is necessary for production, its value must be added to the declared customs value of the finished goods — whether or not it appears on any invoice. Companies that quietly offshore their product development without adjusting their customs declarations may be underpaying duties on every shipment, and that underpayment is a False Claims Act violation.

The rules that govern how imported goods are classified — the General Rules of Interpretation — are legally binding and hierarchical. When an importer deliberately misapplies them to make a high-duty product disappear into a low-duty classification, the result is a false statement on every customs entry. GRI 3(b), which governs how “sets” of goods are classified, is particularly susceptible to this kind of manipulation, and the consequences under the False Claims Act may be significant.

Many U.S. companies believe that shipping their own materials or components to a Chinese manufacturer reduces what they owe in customs duties when the finished goods come back. Sometimes it does. More often, it does the opposite — and companies that fail to account for those materials in their import declarations are quietly underpaying duties on every shipment. That underpayment is a False Claims Act violation, and employees who know about it can be paid to report it.