Defending Against "Country of Origin" Customs Fraud

Importing goods into the United States requires strict adherence to federal laws, including making accurate and true declarations of where goods are manufactured.

Customs officials are closely watching for signs of "country of origin" customs fraud, in which an importer might declare that the goods originated from a different country to evade higher tariffs.

This type of fraud is typically prosecuted under 18 U.S. Code § 542, which criminalizes making false statements regarding the entry of goods into the U.S. A conviction under this law could result in significant prison time — up to two years per count.

A federal investigation into your import practices can threaten your business, finances, and personal freedom.

However, the attorneys at Eisner Gorin LLP can challenge the government's evidence regarding intent, materiality, and knowledge. If you are under investigation for customs violations, do not wait.

Contact our defense team for a confidential case review. Call (818) 781-1570 or contact us here.

What Is "Country of Origin" Customs Fraud?

Country-of-origin customs fraud involves illegally misrepresenting the country of origin of goods to avoid paying duties.

This offense falls under 18 U.S. Code § 542, which criminalizes the "entry of goods by means of false statements."

In essence, U.S.C. § 542 makes it a federal crime to introduce imported merchandise into U.S. commerce using fraudulent documents, declarations, or any other false statement, whether written or verbal.

The core of this fraud is tariff evasion. The U.S. imposes different tariff rates on goods from different countries. Certain countries face higher duties due to trade policies, such as Section 301 tariffs or anti-dumping and countervailing duties (AD/CVD).

To circumvent these higher costs, an importer might falsely claim their products originate from a country with lower tariffs.

A common tactic is transshipment, where goods are shipped from a restricted country (such as China) to a third, lower-tariff country (such as Vietnam or Malaysia).

In the third country, the goods are relabeled with a false country of origin before being exported to the United States.

While undervaluation of goods is a common form of customs fraud, misclassifying the country of origin is a specific and aggressively prosecuted offense.

The U.S. government pursues these cases vigorously to protect federal revenue and shield domestic industries from unfair competition.

How Do Prosecutors Prove Country of Origin Customs Fraud under U.S.C. § 542?

To convict you of this type of customs fraud, prosecutors must show that you willfully made a false statement regarding the country of origin of imported goods with the intent to deprive the U.S. of any lawful duties.

The federal prosecutor carries the burden of proving several elements beyond a reasonable doubt. Simply making an error on a customs form is not enough; the government must establish criminal intent.

The prosecution must demonstrate the following:

Act: The defendant entered, or attempted to enter, merchandise into the commerce of the United States.
Means: The entry was facilitated through a fraudulent or false invoice, declaration, letter, paper, or other statement.
Materiality: The false statement was material to the importation process. This means the information was significant enough to influence Customs and Border Protection's (CBP) decisions, even if the government was not ultimately deprived of any duties.
Intent/Knowledge: The defendant made the false statement "without reasonable cause to believe the truth of such statement" or engaged in a "willful act or omission" to deprive the U.S. of lawful duties.

It is crucial to distinguish between simple negligence and criminal intent. A clerical error or an honest mistake might lead to an administrative penalty from CBP.

However, a criminal charge investigated by agencies like Homeland Security Investigations (HSI) and prosecuted by the Department of Justice (DOJ) requires a higher level of willful intent to deceive.

What Is the Penalty for Country of Origin Customs Fraud?

Under U.S.C. § 542, the maximum penalty for falsely declaring a country of origin is two years in federal prison and/or fines of up to $250,000.

Bear in mind that this penalty can be imposed per instance of false declaration, so if you have had a habit of wrongly declaring the country of origin, your penalties can add up considerably.

In addition to these penalties, the merchandise in the fraudulent entry may be subject to seizure, and you may be debarred from importing goods in the future.

Frequently Asked Questions

What is country of origin fraud?

Country-of-origin fraud occurs when an importer falsely declares the country of origin of goods to avoid tariffs or duties imposed by the United States.

What is the penalty under 18 U.S.C. § 542?

The maximum penalty is two years in federal prison and fines of up to $250,000 per violation, along with possible seizure of merchandise.

Can a mistake on a customs declaration lead to criminal charges?

Generally no. Criminal charges typically require proof that the false statement was made knowingly and with intent to deceive customs authorities.

What is transshipment fraud?

Transshipment occurs when goods from one country are routed through another country and relabeled to disguise their true origin.

Related Federal Crimes

Several federal criminal statutes are often charged in conjunction with country-of-origin customs fraud under 18 U.S.C. § 542. These offenses involve false statements, trade fraud, or schemes to defraud the United States government.

18 U.S.C. § 545 – Smuggling Goods into the United States

Under 18 U.S.C. § 545, it is a federal crime to knowingly smuggle goods into the United States or to import merchandise by means of fraud or false statements.

This offense may apply when someone attempts to avoid customs duties, bypass inspection procedures, or conceal the true nature or origin of imported goods.

A conviction may result in fines and up to 20 years in federal prison.

18 U.S.C. § 1001 – False Statements to Federal Agents

18 U.S.C. § 1001 makes it a crime to knowingly provide false statements or conceal material information in matters within the jurisdiction of the federal government.

This charge may arise if an importer makes false statements during an investigation by Customs and Border Protection or Homeland Security Investigations.

Violations can carry penalties of up to five years in federal prison.

18 U.S.C. § 371 – Conspiracy to Defraud the United States

Under 18 U.S.C. § 371, it is illegal for two or more people to conspire to commit a federal offense or to defraud the United States.

In customs fraud cases, conspiracy charges may apply when multiple parties work together to misrepresent import documentation, falsify invoices, or conceal the origin of goods.

Convictions can result in fines and up to five years in federal prison.

18 U.S.C. § 1343 – Wire Fraud

Wire fraud involves using electronic communications, such as emails, phone calls, or electronic financial transfers, to carry out a fraudulent scheme.

In customs fraud cases, prosecutors may file wire fraud charges when electronic communications or wire transfers are used to facilitate fraudulent import transactions.

Wire fraud carries penalties of up to 20 years in federal prison.

19 U.S.C. § 1592 – Civil Customs Fraud

Although primarily a civil statute, 19 U.S.C. § 1592 allows the federal government to impose significant civil penalties when an importer provides false or misleading information during the importation process.

Violations may involve fraud, gross negligence, or negligence.

Penalties can include substantial monetary fines and seizure of imported merchandise.

How Can You Defend Against Country of Origin Fraud Charges?

A good federal defense attorney defends these charges by showing a lack of willful intent, demonstrating that you reasonably believed the country or origin was correct, or proving that the country of origin was legally accurate.

An allegation of customs fraud does not have to lead to a conviction. A knowledgeable federal defense attorney can build a sound defense by scrutinizing the government's case and challenging the evidence. Several key strategies can be employed.

Challenging the Element of Intent (Willfulness)

Proving willfulness is often the highest hurdle for the prosecution. A defense can focus on showing the misstatement was not a deliberate attempt to defraud the government.

Mistake of Fact/Clerical Error: An effective defense may demonstrate that the incorrect country of origin was the result of a genuine administrative mistake, a data entry error, or a misunderstanding of complex regulations, rather than an intentional scheme.
Reliance on Professionals: Importers often depend on customs brokers, freight forwarders, or supply chain consultants. If you can show you relied in good faith on the advice of these professionals, it can negate the element of criminal intent.

Arguing "Substantial Transformation"

The rules for determining a product's country of origin are incredibly complex. In some cases, the declared origin may be legally correct even if the primary components came from another country.

The Concept: If materials or components from Country A undergo a significant manufacturing process in Country B that results in a new product with a different name, character, or use, its legal country of origin may become Country B. This is known as "substantial transformation."
Application: Your defense could argue that the processing performed in the second country was sufficient to legally change the origin of the goods, making your declaration accurate under the law.

Lack of Knowledge

In many international trade transactions, the U.S. importer may be deceived by a foreign supplier.

If your supplier in another country falsified documents or mislabeled goods without your knowledge or consent, you may not have the requisite intent for a criminal conviction. Proving you were a victim of fraud, rather than a participant, is a powerful defense.

What Federal Enforcement Agencies are Responsible for Country of Origin Fraud Charges?

The primary federal enforcement agencies involved in country of origin fraud charges include:

CBP (Customs and Border Protection
HSI (Homeland Security Investigations)
DOJ (The Department of Justice)

Mounting a defense against this combined federal front requires an integrated strategy that addresses CBP's regulatory audits while simultaneously managing the DOJ's criminal prosecutorial reach.

Early Intervention Is Critical in Customs Investigations

When the federal government starts a customs fraud investigation, time is of the essence. Your initial actions can significantly influence the outcome, making it critical to engage an experienced defense attorney for pre-indictment advocacy.

A defense lawyer can communicate with HSI investigators or U.S. Attorney's Office prosecutors before formal charges are filed.

The objective is to present evidence and legal arguments persuading the government to treat the matter as a civil violation, not a criminal case, thereby preventing an indictment.

Your response to initial inquiries, like a CBP Form 28 (Request for Information) or a CBP Form 29 (Notice of Action), is also vital.

Mishandling these requests can provide the government with evidence to build a criminal case against you. An attorney will ensure your responses are accurate and strategically crafted to protect your rights.

Factor	Civil Violation (CBP)	Criminal Fraud (DOJ)
Standard of Proof	Preponderance of Evidence	Beyond a Reasonable Doubt
Primary Intent	Negligence or Error	Willful Intent to Defraud
Agency Involved	Customs & Border Protection	HSI & Federal Prosecutors
Typical Penalty	Monetary Fines/Seizure	Prison Time (up to 2 years)

A Case Study

We recently won a case against the Federal Government in which our client faced over 10 years in prison for fraud. Instead, our client received probation with no jail time.

Act Now to Improve Your Chances Of Exoneration

At Eisner Gorin LLP, our firm is structured to handle cases with serious exposure and high complexity.

We have the resources to analyze thousands of shipping documents, financial records, and communications to identify weaknesses in the government's case.

For high-stakes matters, our clients can expect a multi-lawyer review and a structured second opinion on strategy, ensuring that every angle is considered.

Navigating the regulations of international trade and the pressures of a federal criminal investigation requires a defense team that understands both customs statutes and criminal law.

Protect your business and your freedom. If you are facing customs fraud charges, call Eisner Gorin LLP today at (818) 781-1570, or contact us here for a strategic consultation.

Customs Fraud