What to Do if a Competitor is Cheating on Tariffs
If you’re in the business of importing goods into the United States, you already know how critical tariff compliance is—not only for your bottom line but for maintaining fair competition. But what happens when a competitor undercuts you by cheating the system?
Maybe you’ve seen signs of mislabeling or suspiciously low costs. Maybe you know how the supply chain works for your product line, and it simply doesn’t add up. If you suspect a competitor is dodging tariffs by misrepresenting the country of origin or undervaluing their imports, there’s something you can do about it—and potentially earn a reward for doing so.
Competitors Often Know When Something’s Off
While many successful False Claims Act (FCA) cases involve employees, former executives, or compliance offices, the world of customs fraud is different. Customs violations, particularly around country of origin and valuation, are often transparent to well-informed outsiders.
If you’re in the same industry, either in competition or with a trade association, you may be in a unique position to spot red flags. For example:
Available records, such as those visible in Import Genius, show that a company is importing a certain good, but only selling those goods in the U.S. marked “Made in the United States.”
You know that the inputs used in certain products don’t exist in Country A.
You know the actual production costs in Country B and can tell they’re being misrepresented.
You know that the competitor provided especially valuable “assists” to the exporter, or that products for which a company has used a Chapter 98 HTS code should not qualify due to how they were originally sourced.
You know the shipping routes and suppliers, and something doesn’t match the paperwork.
This knowledge—while not confidential or internal—can be just as valuable under the False Claims Act, which rewards whistleblowers who expose fraud against the government. In my experience, people engaging in tariff schemes keep the circle small. Even customs brokers do not always possess enough knowledge to know that something is wrong — that’s particularly true with undervaluation, which is probably the most common type of tariff fraud. While most people do not know what it costs to produce particular products abroad, someone with experience sourcing that same product may know more than enough to support a successful False Claims Act case.
How to Report Customs Fraud (and What to Expect)
If you believe a competitor is committing customs fraud, you may be able to file a qui tam case under the False Claims Act. This means you, as a private party (the “relator”), bring the case on behalf of the government.
Here’s how the process typically works:
Partner with an Attorney: FCA cases must be filed under seal in federal court. An experienced attorney can help evaluate the strength of the evidence and prepare the case.
Gather Evidence: Documentation, supplier records, trade data, or testimony from freight or logistics personnel can all strengthen your claim—even if you’re not an insider. Of course, an experienced attorney can help determine what evidence would be helpful, and what may be sufficient to support a successful case.
File Under Seal: The case is filed confidentially and remains under seal while the U.S. Department of Justice investigates.
Government Decision: DOJ may intervene and take over the case—or decline, allowing you to proceed on the government’s behalf.
Possible Reward: If there is a recovery, even in cases of settlement while the case is still under seal, the whistleblower can receive 15% to 30% of the amount recovered by the government.
In many cases, this reward can be substantial, especially when the fraud involves years of unpaid duties.
Leveling the Playing Field
Businesses facing substantial tariffs — especially new ones — face difficult choices about whether to raise prices or change the business in some way. These choices become even more difficult if a competitor decides to cope by breaking the rules entirely to avoid tariffs that you must pay. If your business is playing by the rules while your competitor isn't, you shouldn’t be penalized.
Filing a False Claims Act case isn’t just about the reward. It’s about restoring fairness and holding dishonest actors accountable. And in the world of customs enforcement, it may take a competitor—someone who knows the terrain—to see the truth and take action.
