News
Chip Mulaney, a principal in Goldberg Kohn's Litigation Practice Group and founder of the firm's White-Collar Defense and Investigation Practice, has published "Tariff Ruling Will Not Save Tariff Evaders," in the March 9, 2026, edition of Westlaw Today and in Reuters.
On Feb. 20, 2026, the Supreme Court ruled that President Trump exceeded his authority when the government collected at least $133 billion in tariffs over the last year. As importers seek refunds of those duties because the ruling is presumptively retroactive, the process may indirectly shine a light on those importers who avoided or reduced their IEEPA tariffs unlawfully. Chip's article, published in full below, discusses liabilities under the False Claims Act and the other civil and criminal statutes that may apply to those evaders.
The Supreme Court's Ruling
In Learning Resources, Inc. v. Trump, the Court addressed whether two sets of tariffs were authorized by the International Emergency Economic Powers Act (IEEPA). On February 1, 2025, President Trump imposed a 25% tariff on Mexico and Canada, and a 10% tariff on China, citing a national emergency related to fentanyl trafficking and border security.
On April 2, 2025 (dubbed "Liberation Day"), President Trump imposed a baseline 10% tariff on imports from nearly all countries, framing the measure as necessary to protect U.S. manufacturing and address persistent trade imbalances. Both sets of IEEPA tariffs were later modified as Trump cut trade deals.
Almost immediately, small businesses like Learning Resources (a toy company) challenged both sets of tariffs. In its decision on February 20, 2026, more than a year after the tariffs took effect, the Supreme Court held that IEEPA does not authorize tariffs.
The Court reasoned that tariffs are a form of taxation — squarely within Congress's exclusive Article I power — and that Congress did not delegate that authority to the Executive through IEEPA's general authorization to "regulate ... importation."
The Court did not resolve the question of remedies for tariffs already paid. At oral argument, Justice Barrett asked whether unwinding the tariffs through refunds would be a "mess."
In response, petitioners' counsel Neal Katyal said that the Court could avoid this mess by making its ruling prospective only. The Court declined to do so, leaving importers to seek refunds through existing administrative processes and, where necessary, litigation in the lower courts.
Impact on Tariff Evasion Enforcement
Approximately $3.3 trillion in goods were imported in the last year. Tariff evasion is common because U.S. Customs and Border Protection ("CBP") must rely on importers to accurately report the type, quantity, and value of goods that they import. The most common types of evasion are undervaluing the goods or reporting a false country of origin.
To undervalue goods, some importers engage in "double" or "split" invoicing by submitting to CBP an invoice that reflects only a portion of the amount actually billed by the foreign supplier. To disguise the true country of origin, some importers "transship" goods through a third country after manufacture, to claim the lower tariff rate applicable to the last country before entry into the United States.
After the Supreme Court's decision, President Trump announced that he was imposing 15% tariffs under Section 122 of the Trade Act of 1974, which applies for 150 days absent an Act of Congress.
The President's actions and rhetoric indicated that the administration is not walking away from imposing and enforcing tariffs in order to save as much of the IEEPA revenue as possible. Against this backdrop, importers should be on the lookout for a rise in tariff enforcement action.
Was There an 'Obligation to Pay' Under the False Claims Act?
The False Claims Act is a powerful civil tool used to combat fraud against the United States. It authorizes whistleblowers to bring suit on the government's behalf and pursue the action even if the government declines to intervene.
The Act imposes liability on those who use a false record or statement to avoid or decrease an "obligation to pay" the government. This "reverse false claim" provision is used to combat tariff evasion based on false customs declarations.
Now that the Supreme Court has invalidated the IEEPA tariffs, the question is whether importers had an "obligation to pay" the government under the False Claims Act.
Courts interpreting this provision focus on whether the defendant had an established duty to pay at the time of the false claim. But those cases address obligations that were contingent on future regulatory action, not obligations that were later struck down by the courts.
Importers will argue that, because the tariffs are retroactively void, no "obligation to pay" ever existed. Whistleblowers will argue that a knowing violation of an obligation to pay cannot be excused based on subsequent changes in the law. These two interpretations could be the subject of prolonged litigation in the years ahead.
Other Civil and Criminal Statutes Still Apply
Even if the False Claims Act were not an avenue for recovery, the government may still seek civil penalties for false statements in entry documents under 19 U.S.C. § 1592, which applies "[w]ithout regard to whether the United States is or may be deprived of all or a portion of any lawful duty, tax, or fee." 19 U.S.C. § 1592(a)(1).
Those penalties are imposed under a customs enforcement framework initiated by U.S. Customs and Border Protection, with disputed penalties litigated by the government if necessary. A self-disclosure provision allows importers to minimize the impact of a potential enforcement action before it begins.
Importers may also face criminal liability under 18 U.S.C. § 542 for using false statements or documents in connection with the importation of goods that were subject to the IEEPA tariffs. To obtain a conviction, the government must prove that the defendant knowingly made or used a false statement or document, acted with intent to defraud the United States, and that the falsity was material.
Materiality requires a showing that the false statement had a natural tendency to influence the actions or decisions of CBP. Because materiality is assessed at the time of the importation, the subsequent invalidation of the tariff by the Supreme Court does not, by itself, defeat a 18 U.S.C. § 542 prosecution. Like 19 U.S.C. § 1592, the government does not need to show a monetary loss to obtain a conviction.
Conclusion
While the Supreme Court has resolved the legality of the IEEPA tariffs, they have not resolved the consequences that importers will face if they evaded those tariffs. The upcoming refund process "mess" may indirectly shine a light on those importers who avoided or reduced their IEEPA tariffs unlawfully.
Importers may wish to review their entries over the past year, and voluntarily disclose any misclassifications, before whistleblowers or enforcement officials discover it.
