Footwear Import Fraud and the False Claims Act: Classification, Valuation, and Country of Origin
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.
The Classification Minefield
Chapter 64 of the HTSUS divides footwear across six headings, each of which branches into dozens of subheadings based on a cascade of physical characteristics. The first question is the material of the outer sole: rubber, plastics, leather, composition leather, wood, or something else. The second question is the material of the upper: leather, textile, rubber, or a combination. Then the classification narrows further based on whether the shoe is “athletic” or not, whether it covers the ankle, whether it is designed for men, women, or children, and—critically—its declared value per pair.
The duty consequences of these distinctions are enormous. A textile-upper athletic shoe valued over $12 per pair is dutiable at 20 percent ad valorem under subheading 6404.11.90. A nearly identical shoe classified as “non-athletic” under 6404.19.90 may face a duty rate of only 9 percent. A leather-upper shoe under heading 6403 may attract 8.5 to 10 percent. And some classifications trigger rates as high as 37.5 percent—a slipper with a textile sole under 6405.20.90 was the subject of a well-known CBP ruling in which an importer argued for reclassification to a lower heading.
Whether a shoe qualifies as “athletic” is often a judgment call. CBP has ruled that shoes need not possess every characteristic of athletic footwear to be classified as such—if the shoe “resembles athletic footwear in construction and styling,” it will be classified in the athletic subheading regardless of whether the importer characterizes it differently. A 2022 CBP ruling reclassified certain women’s closed-toe shoes from non-athletic (9 percent) to athletic (20 percent), illustrating how a single classification change can more than double the duty rate on a product.
Samsung C&T: The Footwear Misclassification Case
The risk is not hypothetical. In February 2023, Samsung C&T America, Inc. settled a False Claims Act lawsuit originally filed by a whistleblower. Samsung admitted that between 2016 and 2018 it misclassified imported footwear under the HTSUS and underpaid customs duties. Samsung further admitted that it had reason to know that documents provided to its customs brokers inaccurately described the construction and materials of the imported footwear, and that it failed to verify the accuracy of that information before passing it along.
The Samsung case is instructive because the fraud did not require elaborate concealment. Samsung, as the importer of record, provided its customs brokers with invoices and product descriptions that classified the footwear in lower-duty subheadings. The brokers relied on those documents to prepare entry summaries submitted to CBP. The duty rates applicable to the footwear “varied significantly” depending on classification. The case settled, and the whistleblower—who first identified the discrepancies—received a share of the recovery under the FCA’s qui tam provisions.
The DOJ has since identified trade and customs fraud, including tariff evasion, as a top enforcement priority. A May 2025 memorandum from the DOJ Criminal Division chief listed customs fraud as the second-highest white-collar prosecution priority, and the Department expanded the Corporate Whistleblower Awards Pilot Program to explicitly cover trade and customs fraud.
How Footwear Misclassification Creates FCA Liability
Every entry summary filed with CBP is a claim for payment—or, more precisely, a representation that the duties tendered are the duties owed. When an importer classifies a shoe under a subheading that produces a lower duty rate than the correct subheading, each entry summary constitutes a false claim within the meaning of 31 U.S.C. § 3729(a)(1)(A).
The footwear-specific fraud vectors include:
Material misrepresentation. An importer declares that a shoe’s upper is “leather” when it is actually “composition leather” or a textile-leather blend, or vice versa, to reach a lower-duty subheading. Because Chapter 64 classifies the upper by the material having the greatest external surface area, a small change in how materials are measured—or a deliberate misstatement about material composition—can swing the duty rate by 10 points or more.
Athletic vs. non-athletic misclassification. As the Samsung case illustrates, the line between “athletic” and “non-athletic” footwear can be blurry, and the duty consequences are sharp. An importer that systematically classifies athletic-style shoes as non-athletic to capture a 9 percent rate instead of 20 percent generates substantial false claims over time.
Value bracket manipulation. Chapter 64 contains value-based breakpoints—shoes valued over $3 per pair, over $6.50 per pair, or over $12 per pair may fall in different subheadings with different rates. An importer that undervalues shoes to fall below a value threshold (for example, declaring a $7 shoe at $6 to remain in a lower bracket) commits both a valuation fraud and a classification fraud simultaneously.
Country of Origin and Transshipment
The United States imports approximately $28 billion in footwear annually, with Vietnam, China, and Indonesia as the three largest sources. Since the imposition of Section 301 tariffs on Chinese goods beginning in 2018, Chinese-origin footwear has faced additional tariffs of up to 25 percent on top of the already-substantial Chapter 64 duty rates.
This tariff differential creates a powerful incentive for transshipment—routing Chinese-manufactured shoes through Vietnam, Cambodia, or another country to disguise their true origin. The shoes may be relabeled, minimally repackaged, or subjected to minor finishing operations that do not constitute “substantial transformation” under customs law. When the shoes arrive in the United States declared as products of Vietnam, the importer avoids the Section 301 surcharge entirely.
CBP has identified Vietnam, Thailand, Malaysia, and Cambodia as significant hubs for transshipped Chinese merchandise. For footwear specifically, the concern is acute: Vietnam’s footwear exports to the United States surged in the years following the imposition of Section 301 tariffs, and trade data suggest that at least some of that surge reflects transshipment rather than genuine Vietnamese manufacturing. Employees at factories, freight forwarders, and logistics companies who observe shoes arriving from China and being relabeled with Vietnamese origin markings before re-export to the United States are potential FCA whistleblowers.
Valuation Fraud
Because footwear duties are assessed ad valorem—as a percentage of the declared transaction value—undervaluation directly reduces the duties owed. A shoe imported at a declared value of $10 per pair that should have been declared at $15 per pair reduces the duty by one-third at any applicable rate. The Delta Uniforms case, in which a federal court entered a $1.3 million judgment for a decades-long double-invoicing scheme involving clothing and footwear imported from China, Korea, Bangladesh, and Pakistan, illustrates how valuation fraud works in practice: the importer used one set of invoices reflecting the actual transaction value and a second set with underreported values for submission to CBP.
For footwear importers, valuation fraud may also intersect with classification fraud through the value-bracket subheadings. An importer that understates the value of a shoe to keep it below $6.50 per pair, for instance, may land the shoe in a subheading with both a lower per-pair value basis and a different ad valorem rate—a compounding effect that multiplies the underpayment on every entry.
What Employees Should Watch For
Employees at footwear importers, customs brokers, freight forwarders, and sourcing companies are in the best position to identify potential fraud. Warning signs include:
Inconsistencies between the physical product and the customs documentation. A shoe that looks and feels like an athletic sneaker but is classified as “non-athletic” on the entry summary. Product specifications listing “textile upper” when the shoe has a predominantly leather upper, or vice versa.
Declared values that seem unrealistically low. If you know the factory price of a shoe is $12 and the entry documentation declares $5.50, the importer may be manipulating value brackets.
Unexplained routing. Shoes manufactured in China that ship to Vietnam or Cambodia for “finishing” before re-export to the United States—particularly if the “finishing” consists of nothing more than attaching labels or inserting the shoes into retail packaging.
Pressure to avoid asking questions. An importer that instructs its customs broker to “just use the classifications on the invoice” without independent verification, or that discourages employees from raising concerns about documentation accuracy, is exhibiting the kind of deliberate ignorance that supports scienter under the FCA.
Footwear customs fraud cases can generate significant recoveries. The combination of high import volumes, wide duty-rate spreads, and per-entry FCA penalties means that even a mid-size footwear importer that systematically misclassifies or undervalues its imports can accumulate millions of dollars in false claims over a period of years. If you have information about potential footwear customs fraud, an experienced customs fraud and False Claims Act attorney can evaluate your information and advise you on whether a qui tam action may be appropriate. Consultations are confidential and protected by the attorney-client privilege.
