As the Trump administration’s tariff battle against China heats up, U.S. Customs and Border Protection is gearing up for a major enforcement operation. While the political drama surrounding tariff hikes captures the public’s attention, fears of fraudsters exploiting the tariff system are emerging.
The surge in tariffs, particularly on Chinese goods, has created an opportune environment for customs fraud. Importers facing steep duties are resorting to creative, and sometimes illegal, methods to avoid paying the required fees. Mislabeling goods, undervaluing shipments and falsely declaring the country of origin are just a few tactics being employed to bypass customs inspections. These actions can cost the U.S. government billions in lost revenue, creating a headache for both enforcement agencies and compliant businesses.
These types of fraudulent activities have already had significant financial implications. In one case from the early 2000s, a group of importers used fraudulent schemes to misrepresent the country of origin of textiles from China to evade tariffs. In that instance, the perpetrators were caught, but not before costing the U.S. Treasury over $100 million in lost duties.
Another case involved a California-based electronics company in 2018, which underreported the value of goods from China to avoid paying tariffs. The company eventually settled, but the case served as a reminder of the vulnerabilities in the U.S. customs system.
With the ongoing increase in tariffs, the threat of such fraud is once again rising, prompting CBP officials to brace for reported massive enforcement tasks.
Compounding this issue, legal experts have noted that customs fraud is increasingly being pursued through the False Claims Act, which allows private parties to file lawsuits on behalf of the government. This has led to a rise in lawsuits brought by whistleblowers who have insider knowledge of fraud. In some cases, these whistleblowers can receive a reward, creating an incentive for employees and competitors to expose fraudulent activities. The act has already resulted in several large settlements, including one in 2016 in which a company was forced to pay $11 million after submitting false claims regarding imported goods.
House bill targets staged truck crashes 💥
A new bill introduced in the U.S. House, the Staged Accident Fraud Prevention Act, seeks to combat the growing issue of fraudsters staging truck accidents to file frivolous lawsuits against trucking companies.
Sponsored by Rep. Mike Collins, R-Ga., and Rep. Brandon Gill, R-Texas, the legislation classifies intentionally causing or arranging a collision with a commercial motor vehicle as a federal crime. Perpetrators could face up to 20 years in prison, with harsher penalties if the crash results in serious injury or death.
Staged crashes often involve con artists in passenger vehicles deliberately colliding with trucks to secure substantial settlements. These scams not only endanger public safety but also drive up insurance costs, disproportionately affecting small trucking businesses and owner-operators. The bill also targets co-conspirators such as attorneys and medical professionals who knowingly participate in these schemes.
One of the most notable cases of staged truck crashes, Operation Sideswipe, has been ongoing since 2019 in Louisiana, resulting in multiple indictments. Advocacy groups like the American Trucking Associations and the Owner-Operator Independent Drivers Association have strongly supported the bill, arguing it will help protect the industry from costly and dangerous fraud.
Read more about the bill’s efforts here.
Did DC cops apply for PPP as truckers? 👮♂️
Federal prosecutors and the Washington police department’s internal affairs unit are investigating more than two dozen officers accused of fraudulently securing federal pandemic relief funds, including through the Paycheck Protection Program (PPP). Prosecutors allege some officers even claim to operate nonexistent trucking businesses.
The investigation focuses on whether the officers intentionally misrepresented their business activities to obtain loans meant to help struggling companies during the COVID-19 pandemic. If proven guilty, they could face up to 20 years in prison.
One notable case involves former D.C. officer Kalynn Fields, who is accused of fraudulently applying for $35,000 in PPP loans by falsely claiming to operate a long-haul trucking business, among other ventures. Prosecutors allege that Fields used the loan money for personal expenses, including meals, liquor and designer items, and sought loan forgiveness despite not having a legitimate business.
Learn more about the investigation here.
Registration open for May Freight Fraud Symposium in Dallas 🎉
Be part of the solution that stops freight fraud in its tracks. Let’s cut through the noise and address this issue head-on!
Freight fraud has reached a crisis level, and it impacts everyone in the industry. It’s time for us to come together to address this critical problem and share best practices on how to mitigate it.
Join us on May 14 in Dallas at the Freight Fraud Symposium, where transportation executives, freight leaders and technology buyers will come together to discuss the issues we all face, share lessons learned and get insights on the latest technology to tackle this problem.
Space is limited, so register now to save your spot!
Fighting freight fraud an immediate focus at annual meeting of brokers’ group
