New Head of DOJ Trade Fraud Task Force Signals Aggressive Enforcement Shift

Overview

On February 23, 2026, Department of Justice (“DOJ”) Criminal Division Senior Counsel Cody Matthew Herche delivered his first formal remarks as the Head of the Department of Justice’s Trade Fraud Task Force (“TFTF”) as the keynote speaker at the International Trade Investigations, Enforcement & Litigation conference in Arlington, Virginia. In his address, Herche announced a “fundamental shift” in the government’s approach to trade fraud enforcement. (For background on the TFTF’s establishment, see our Legal Update, Departments of Justice and Homeland Security Partnering on Cross Agency Trade Fraud Task Force.)

The address signals a decisive move on the part of DOJ toward criminal investigations and prosecutions, an emphasis on individual accountability, and the expansion of interagency partnerships. Companies with international supply chains should take immediate steps to assess their exposure risk and strengthen their compliance programs.

Key Takeaways

The DOJ has repositioned trade fraud enforcement as a frontline matter of national and economic security. According to Herche, for decades, the legal and business community viewed trade compliance through a narrow lens of administrative filings—but those days are now over. The DOJ appreciates that tariffs and duties are not self-effectuating, and unfair trade practices expose companies to unfair competition while depriving the government of lawful revenue. Entry of unknown or misdescribed goods presents what Herche described as a “profound threat to health and safety,” highlighting the need for interagency coordination, including with the Food and Drug Administration (“FDA”), the Environmental Protection Agency (“EPA”), and the Consumer Product Safety Commission (“CPSC”), among other agencies. In certain circumstances, Herche said, these practices also compromise national security.

The DOJ reported record recoveries of $6.8 billion under the False Claims Act in 2025 alone, and Herche warned that it is only a matter of time before investigations are triggered at companies with compliance gaps, particularly given the DOJ’s heightened interest in receiving information from whistleblowers.

Enforcement Accomplishments

Herche reported significant accomplishments that demonstrate the accelerating pace and severity of enforcement actions related to trade fraud.

First, the size of settlements has increased substantially, with multi-million dollar resolutions now reflecting the full scope of harm. Herche reported that DOJ has recovered $140 million to date, with substantially more in the pipeline.

Second, matters are currently proceeding at a faster pace and are being resolved without protracted litigation. Herche credited advanced data analytics for enabling investigators to “see through shell games” that previously obscured fraudulent conduct.

Third, and most critically, there has been a decisive shift toward criminal investigations and prosecutions. According to Herche, the DOJ is fundamentally realigning its strategy to prioritize criminal statutes, including 18 U.S.C. §§ 541, 542, and 545, making clear that penalties for trade fraud are not simply a cost of doing business. Companies that fail to come forward and cooperate face heightened risk of criminal resolution.

Fourth, the DOJ is emphasizing individual accountability. Herche noted that companies only act through individuals, and if an importer of record is cutting corners, it is because someone directed them to do so. The recent settlement with Global Plastics serves as a cautionary tale, according to Herche: the company’s former CEO pleaded guilty to conspiracy to smuggle goods in violation of 18 U.S.C. § 545, with sentencing scheduled for June 2026.

Common Fraud Schemes Under Scrutiny

Herche outlined some of the specific fraud schemes that the DOJ is actively targeting.

Manipulation of country of origin is the most common scheme, according to Herche, and is accomplished by misrepresenting where ingredients, components, parts, or goods originated, or by transshipment through an intermediate country without transformation. For example, in the Ceratizit matter, the scheme involved tungsten carbide routed through Taiwan. (For more on the DOJ’s use of the False Claims Act in customs enforcement, see our Legal Update, DOJ Continues to Use False Claims Act to Address Customs Violations.)

Misclassification of goods using incorrect Harmonized Tariff Schedule (“HTS”) codes is another prevalent scheme. For example, the DOJ recently secured a $53 million settlement with Wanxiang America Corporation for falsely classifying wheel hub assemblies, allowing it to evade a 92% antidumping duty. Herche reported that the DOJ is well-aware of “HTS drift,” where sudden classification changes occur before goods reach the customs broker.

Fraudsters also engage in double-invoicing schemes, whereby an importer of record issues a real invoice to a customer for payment but submits a false invoice reflecting artificially low prices to Customs and Border Protection. Herche highlighted United States ex rel. Joyce v. Global Office Furniture, a qui tam whistleblower complaint filed by the company’s former office manager.

The DOJ is also targeting the interplay between trade fraud and product safety violations. Forged safety or environmental certifications—required by the EPA or the CPSC—allow non-compliant goods to enter the country. For example, the recent Able Group case involved felony charges for smuggling European infant formula and hiding products subject to safety alerts. Similarly, in Hino Motors, DOJ reached civil and criminal resolutions with the company related to the importation of 105,000 engines with false Clean Air Act certificates.

Many of these schemes are paired with “port shopping,” and the DOJ is focused on this tactic because an initial rejection at one port provides evidence of the importer’s knowledge that entry was contrary to law.

Strategic Enforcement Initiatives

The DOJ announced four strategic initiatives that will shape enforcement priorities going forward.

Expanded Agency Partnerships: The TFTF is growing partnerships with agencies responsible for product safety, including the FDA, EPA, and CPSC. For example, the EPA, in conjunction with the DOJ’s Environment and Natural Resource Division, is investigating falsely labeled timber and seafood imports and hazmat products, among others, and have already secured guilty pleas involving the import of pesticides and veterinary drugs.

Schemes to evade tariffs will not be viewed in a vacuum, and accountability will extend to every regulatory program that the fraud circumvents. Herche noted that the TFTF is providing regulators with intelligence regarding fraud schemes.

The TFTF has also partnered with Homeland Security Investigations (“HSI”) and Department of Homeland Security (“DHS”) leadership, as well as civil and criminal components of the DOJ. Herche also noted that the US Attorney’s Office for the Northern District of Illinois was a lead partner in the TFTF’s efforts, having prosecuted one of the largest-ever criminal trade fraud schemes, involving 27 defendants and $260 million in losses, in 2013. According to Herche, the NDIL’s Project Honeygate prosecutions—led by then-Assistant US Attorney Andrew Boutros, who now serves as the US Attorney for the Northern District of Illinois—provide valuable insight into how the TFTF intends to build prosecutions going forward.

Data-Driven Lead Generation: The DOJ is committed to refining data-driven techniques to identify anomalies that signal evasion. Investigators are tracking data shifts that are inconsistent with logistics and that may suggest false statements. A continuous feedback loop is in place to marry leads with actionable cases. Herche also emphasized that expansive venue provisions under 18 U.S.C. § 3237 allow the TFTF to partner with US Attorneys’ offices in any district from, through, or into which goods or persons move.

Engagement with Inspectors General: The TFTF is engaging Offices of Inspector General (“OIGs”) to identify federal contractors that purchase unlawfully imported goods or lack adequate compliance programs. Many federal programs rely on imported goods through exceptions for goods not reasonably available domestically, and disclosure of compliance is legally required. Herche noted that the TFTF is currently working with OIGs to identify importers who have failed to disclose tariff evasion and who lack robust internal controls.

Forced Labor Enforcement Collaboration: The TFTF is collaborating with the Forced Labor Enforcement Task Force to enforce laws that bar the import of goods made by forced labor. Herche noted the staggering scale of the global crisis: 27 million people are currently trapped in forced labor, generating $236 billion in illegal profits. The TFTF is focusing on false statements in connection with these entries, recognizing that falsification of supply-chain audits is the same vector used to evade tariffs and duties. Herche stated that the DOJ will not tolerate willful blindness on the part of importers who ignore red flags.

Guidance for In-House Counsel

Herche posed a direct question to the business community: “Do you have a high-risk supply chain?” According to Herche, the most straightforward cases of trade fraud involve vertically integrated supply chains, where a single entity possesses all relevant data points. However, he also cautioned that a fragmented supply chain is not a shield—if an organization fails to ask necessary questions or act on red flags, it is assuming significant criminal exposure.

Herche emphasized that companies should apply rigor to the economic realities of their supply chains and ask critical questions:

• Why has cost remained flat despite imposition of a tariff?
• Why has a country suddenly become a preferred country of origin?
• Why is there a mismatch between purchase orders and data submitted to customs?
• Why has the corporate name of the importer of record changed multiple times, even with the same personnel and goods involved?

Herche closed with a pointed warning: “If you wouldn’t let a sanctioned regime onto your ledger, why are you letting a tariff evader into your warehouse?”

Voluntary Disclosure and Cooperation

The DOJ emphasized that there is a path forward for companies that discover fraud in their supply chains. The voluntary disclosure program and mandatory disclosure regimes under the Federal Acquisition Regulation (“FAR”) provide mechanisms to come forward and cooperate. The Global Plastics matter resulted in a declination as to the corporate entity, allowing the DOJ to direct resources to individual accountability while rewarding the organization’s cooperation and remediation. Further, the whistleblower pilot program was broadened last year to account for trade fraud claims.

Recommended Actions

In light of this guidance, companies should consider taking the following steps:

1. Conduct a supply chain risk assessment to identify potential exposure to trade fraud, including country-of-origin issues, transshipment risks, and HTS classification practices.
2. Review existing compliance programs to ensure they are calibrated to the heightened enforcement environment, with particular attention to mandatory disclosure requirements under the FAR.
3. Establish robust internal controls to detect red flags such as cost anomalies, sudden changes in country of origin, and mismatches between purchase orders and customs data.
4. Evaluate voluntary disclosure where potential violations are identified, recognizing that cooperation and remediation can result in declinations at the corporate level.
5. Train relevant personnel on the increased focus on individual accountability and the criminal consequences of directing or facilitating trade fraud.