DOJ Announces the Largest Customs Fraud Settlement in False Claims Act History

Takeaway: The Department of Justice (“DOJ”) continues to take customs fraud seriously. With the Department of Justice’s newly launched Trade Fraud Task Force, the government has signaled a zero-tolerance policy for customs evasion—particularly regarding Chinese goods.  DOJ’s recent $54.4 million settlement with Ceratizit, the largest customs fraud settlement in False Claims Act history, underscores these priorities. And the substantial $9.75 million whistleblower award issued in the case confirms that whistleblowers remain key weapons in detecting complex transshipment and misclassification schemes.

———————————————————————————————————————

On December 18, 2025, the U.S. Department of Justice announced a $54.4 million settlement with Ceratizit USA LLC (“Ceratizit”), a distributor of tungsten carbide products, to resolve customs fraud allegations. The case revolved around claims that Ceratizit knowingly evaded customs duties on goods imported from the People’s Republic of China. The whistleblower is expected to receive approximately $9.75 million of the settlement proceeds.

The lawsuit, United States ex rel. Stover v. Ceratizit USA, et al. (E.D. Mich.), alleged that Ceratizit engaged in a multi-faceted scheme to avoid paying duties on tungsten carbide, a material used for manufacturing cutting tools. The allegations center on the claim that Ceratizit was importing Chinse tungsten but made it appear that the product was being imported from Taiwan.

From August 2020 through March 2024, Ceratizit allegedly transshipped Chinese-manufactured products through Taiwan before importing them into the United States. DOJ claimed that by falsely declaring to U.S. Customs and Border Protection (“CBP”) that the goods originated in Taiwan, the company evaded significant Section 301 tariffs. Additionally, the settlement resolves allegations that Ceratizit misclassified products by using incorrect Harmonized Tariff Schedule (“HTS”) codes and failed to properly mark merchandise with its country of origin. So, the case involved a trifecta of alleged customs fraud: transshipment, misclassification, and marking fraud.

This settlement comes on the heels of the DOJ’s August 29, 2025 launch of a cross-agency Trade Fraud Task Force. The newly launched task force, which leverages resources from DOJ’s Civil and Criminal Divisions as well as the Department of Homeland Security, was designed specifically to combat the type of evasion alleged in the Ceratizit matter. While customs fraud is no stranger to the False Claims Act, recent years have shown a marked uptick in such FCA actions fraud. The Trump administration’s protectionist trade policies suggest that this trend will grow stronger in the years ahead.

The Ceratizit case is a prime example of how whistleblower suits under the False Claims Act can pierce the veil of complex supply chains. Tariff evasion schemes are notoriously difficult for CBP to detect without insider information. That is because the payment of appropriate customs duties relies, to a large extent, on an honor system (not unlike the federal tax system). Importers are called upon to appropriately classify goods and pay appropriate import duties, yet oversight of that process is imperfect and relies largely on voluntary compliance. That provides bad actors the opportunity to engage in fraud. Many importers reason that they can evade their customs obligations and never get caught. That is why whistleblowers are invaluable for detecting customs fraud. Corporate insiders and others with knowledge of tariff evasion can provide the government crucial information of wrongdoing that the government would otherwise be unable to unearth.

The Ceratizit case will surely embolden the DOJ and whistleblowers going forward. The sheer size of the recovery—$54.4 million—sets a significant benchmark for customs fraud settlements. The Trade Fraud Task Force is now fully operational and will continue to produce results. Meanwhile, the higher duties imposed on a laundry list of goods by the Trump administration will further incentivize unscrupulous actors to engage in customs fraud—because bad actors can save more money by evading these duties. We expect to see an increase in FCA investigations targeting importers who attempt to game the tariff system, larger recoveries, and larger rewards for the whistleblowers who expose these schemes.