Expanding Reach of IEEPA Tariffs: Shifting Import Practices and Rising Risk of Customs Fraud
The International Emergency Economic Powers ACT (IEEPA) has been a key tool to respond to foreign threats through targeted sanctions and trade restrictions. More recently, the IEEPA has taken on a broader role in U.S. trade policy, with sweeping orders and sweeping tariff regimes aimed at confronting strategic and economic adversaries, particularly China. Reshaped global trade flows are creating new opportunities and incentives for customs fraud, including conduct actionable under the False Claims Act.
IEEPA as a Tariff Tool
IEEPA, codified at 50 U.S.C. §§ 1701-1708, was enacted in 1977 to empower the president to regulate commerce during a national emergency. Traditionally used to freeze assets and prohibit transactions with specific individuals or entities, IEEPA’s flexibility has been used to restrict or condition imports and exports more broadly.
In 2018, President Trump issued a series of executive orders targeting China under IEEPA, citing threats to national security and economic stability. These actions led to Section 301 tariffs as part of the broader U.S.-China trade war. Many of these policies remained in place under President Biden. In 2025, IEEPA has been the basis of more sweeping changes to trade policy.
How IEEPA Tariffs Reshape Trade Behavior
IEEPA-based tariffs now apply to hundreds of billions of dollars’ worth of goods, often layered atop antidumping, countervailing, and Section 301 duties. These tariffs, some exceeding 100%, have significantly altered how importers manage supply chains and structure transactions.
Faced with steep tariff burdens, many companies have reassessed everything from sourcing to packaging to inventory strategy. Many are shifting manufacturing operations out of China, investing in bonded warehouses, or restructuring contracts to recharacterize the location and nature of transactions. These adjustments, while often legitimate, can also involve manipulation or misrepresentation when intended to reduce duty liability.
On-the-Ground Impact for Trade Professionals
Trade professionals are seeing firsthand how IEEPA-based tariffs are disrupting routine practices. Customs brokers report increased client inquiries about tariff engineering, tariff classification strategies, and compliance documentation. Some may be asked to validate valuations or origins that raise red flags, putting brokers and logistics providers at risk of being drawn into potential violations.
Freight forwarders and shipping companies are also grappling with new routing complexities and compliance burdens, especially when clients seek to shift volume through alternate countries or shipping methods. These operational changes are also generating delays, rebooking issues, and documentation discrepancies that can result in additional scrutiny.
Industry workers in manufacturing and retail fulfillment are feeling the pressure as well. With sourcing patterns shifting rapidly, some manufacturers face layoffs or plant closures in China, while U.S. warehouses report labor and logistical strain from sudden spikes in bulk imports. These disruptions cascade through the global supply chain and may create incentives for expedited — but potentially noncompliant — workarounds.
Common forms of Customs Fraud in the IEEPA Era
While high tariffs have always created incentives for misreporting and evasion, the layered and expansive nature of IEEPA-based tariffs magnifies the risk in several key ways:
Transshipment and Origin Fraud. With Chinese goods subject to significant duties, some exporters reroute shipments through third countries like Vietnam, Mexico, or Malaysia. The schemes often involve repackaging, falsifying documents, or conducting minor processing to disguise origin. If importers falsely declare a product’s country of origin to Customs and Border Protection, they risk liability under the False Claims Act.
Valuation Fraud. High ad valorem tariffs incentivize under-invoicing — intentionally declaring a lower value than the true transaction price. This can involve dual invoicing, where one invoice is used for payment and another for customs entry. Even without formal collusion, importers who “should have known” of systematic undervaluation may face FCA exposure.
Misclassification under HTSUS. IEEPA-based tariffs apply to specific tariff lines under the Harmonized Tariff Schedule of the U.S. (HTSUS). Fraudulent reclassification of goods to lower-duty categories is a known form of evasion. With more product-specific tariffs in place, especially in technology and apparel sectors, classification fraud may rise.
Manipulating Transaction Structure. Importers may restructure transactions on paper — such as by declaring a non-Chinese company as the seller or intermediary, or by breaking up orders across multiple invoices — to obscure the origin or value of goods. When done with the intent to deceive CBP, these tactics may constitute fraud.
Exploiting Enforcement Gaps Across Entry Channels. Some importers may shift from express carriers to postal services or use free trade zones to exploit perceived gaps in enforcement. Fraudulent declarations or shipments disguised as exempt categories may also increase.
Enforcement Trends and the Role of Whistleblowers
DOJ has already signaled a renewed focus on customs fraud, especially where government procurement or trade restrictions are involved. Recent FCA settlements with companies like Barco Uniforms, Evolutions Flooring, and Pure Collection illustrate how misstatements to CBP can give rise to FCA liability. The statute’s qui tam provisions allow insiders, competitors, and customs brokers to bring suits on the government’s behalf.
With a growing reliance on IEEPA for trade enforcement, whistleblowers have more opportunity—and motivation—to come forward. Companies with substantial import operations must take note: supply chain shortcuts that once seemed clever may now carry serious legal risk.
