Trump Administration Intensifies Crackdown on Tariff Evasion [Photo courtesy of the Korea International Trade Association]

Close monitoring and proactive measures are required from our exporting companies, as the Donald Trump administration is strengthening its crackdown on "tariff evasion" practices aimed at avoiding high tariffs.

In a report titled "Trends in Strengthening Responses to US Tariff Evasion," released on the 21st, the Korea International Trade Association's Center for International Trade and Investment Research advised that our exporting companies must thoroughly prepare for the US trend of intensified import declaration verification.

According to the report, the US is currently trending towards stricter import declaration verification and crackdowns on tariff evasion.

This is because the US government has determined that attempts to evade tariffs by laundering country of origin through third countries or misclassifying items have increased due to the introduction of high tariffs. In particular, the intensity of crackdowns is expected to further escalate now that President Trump signed an executive order on the 3rd to strengthen customs enforcement.

The methods of sanction are also changing. In the past, even if tariff evasion attempts were detected, they often resulted in administrative sanctions such as tariff collection and fines by U.S. Customs and Border Protection (CBP). However, the report indicates that recently, depending on the severity of the case, it can even lead to civil lawsuits or criminal prosecution.

Notably, tips from insiders who are well-acquainted with a company's internal affairs, such as competitors or current and former employees, are being utilized as a key avenue for detection.

Whistleblowers can file civil lawsuits on behalf of the government under the US False Claims Act (FCA), and violating companies can be held liable for damages up to three times the government's losses.

The incentive for reporting has further increased, as it has recently been highlighted that whistleblowers can receive 15-30% of the recovered damages as a reward in tariff evasion cases.

However, the report suggests that not all tariff declaration errors lead to civil lawsuits or criminal prosecution, so there is no need to be overly anxious.

Criminal prosecution primarily targets intentional trade fraud activities, such as document forgery and country of origin laundering through third-country transshipment, and a significant number of these cases involve Chinese products.

It was emphasized that even if errors occur, the extent of the sanctions is determined by whether the company exercised reasonable due diligence and its level of cooperation during the investigation. Therefore, it is important to diligently provide explanations if related allegations are raised.

Lee Yu-jin, a senior researcher at the Korea International Trade Association, stated, "Our companies must thoroughly pre-inspect key declaration items such as product classification, country of origin, and dutiable value, and strengthen their internal compliance management systems by immediately rectifying any discovered errors. Even if selected for investigation, they must actively utilize remedies such as submitting explanatory materials and requesting mitigation to minimize damage."