The End of “We Didn’t Know”
By Karina Roiuk-Yu, LLM
Licensed Attorney — New York (U.S.) and Brazil
International Tax & Cross-Border Operations · TTMS US
For most finance organizations, customs has lived comfortably far from the CFO’s desk: an operational cost line, managed by brokers and a compliance team, reviewed when something goes wrong. Two documents published in Washington this summer were written to end that comfort — and they say so almost in as many words.
On July 14, 2026, the U.S. Department of Justice announced that its Trade Fraud Task Force — a joint DOJ–Department of Homeland Security initiative launched on August 29, 2025 — had surpassed $1 billion in civil and criminal recoveries, penalties, forfeitures, and charged losses in under a year. The same announcement did three more things. It framed the milestone as a deliberate pivot away from administrative fines toward criminal prosecution and civil enforcement. It created a permanent home for that work — the Global Trade & Commerce Enforcement Section (GTCES) inside DOJ’s National Fraud Enforcement Division. And it published the first joint DOJ–DHS enforcement manual of its kind, A Resource Guide to Trade Fraud Enforcement.
The Guide’s opening chapter, in a section titled “Corporate Oversight,” carries the sentence that has been circulating in trade and finance circles ever since: the era in which a company can “claim ignorance of its upstream partners’ activities,” the government writes, is over.
As a lawyer, my first reaction to that sentence was not that the law had changed. It was that the government had finally said, in one line, what the statutes have quietly permitted for decades — and that it has now built the machinery to act on them. That distinction matters, because it tells you exactly where the exposure sits, and what a finance organization can do about it.
What actually changed
- Executive Order 14411, “Strengthening Customs Enforcement.” Signed June 3, 2026, and published at 91 Fed. Reg. 35125, it is the most consequential customs directive in years. Finance leaders should read it as a repricing of noncompliance:
- Penalty mitigation is closing. Section 4(c) directs a minimum penalty floor of not less than 50 percent of the assessed penalty, absent exceptional national-security circumstances; a minimum floor for liquidated damages; and the elimination of mitigation for repeat offenders. The negotiating room importers historically counted on is being removed by design.
- Importer identity is being re-underwritten. Within 180 days, importers of record must satisfy minimum tangible domestic asset and bonding requirements, disclose ownership and beneficial ownership, maintain “good standing” with CBP, and accept recurrent vetting — extended to affiliates, customs brokers, bonded custodians, and freight forwarders.
- Foreign importers face structural conditions. Foreign importers of record are barred from informal entry and, for formal entries, must either be validated in CTPAT or file through a CTPAT-validated licensed customs broker, with continuous-bond privileges restricted.
- Disclosure is expanding upstream. Section 3 directs heightened certification requirements — including certifying compliance with 18 U.S.C. § 545 and sanctions law — together with detailed supply chain and production-method information and, within 90 days, submission of the documentation the foreign exporter filed with its own customs authority.
- Enforcement priorities are named. Section 4(b) directs DHS and the Attorney General to prioritize forced labor, misclassification, undervaluation, and illegal transshipment, including investigations under the Enforce and Protect Act.
- The prosecution machinery. The Task Force and GTCES exist to convert those priorities into cases. The strategic message of the July 14 announcement is not the dollar figure; it is the posture around it — customs violations, DOJ says, will no longer be treated as a routine cost of doing business.
What did not change: the statutes
This is the part I most want finance leaders to absorb. The “new orientation” is built almost entirely on law that has been on the books for years — in some cases, generations.
Reasonable care — 19 U.S.C. § 1484. The importer of record must use reasonable care in declaring classification, value, and origin — and cannot delegate that duty away. The Court of International Trade held in United States v. Golden Ship Trading Co. (2001) that reliance on the exporter and the broker does not remove the importer’s own obligation.
Section 592 — 19 U.S.C. § 1592. CBP’s core penalty statute reaches materially false statements or omissions at three levels of culpability: negligence, gross negligence, and fraud. Read that list again — the first tier requires no intent at all. Importers are, and always have been, penalized for what they should have known.
The False Claims Act — 31 U.S.C. §§ 3729–3733. This is the hinge of the entire enforcement pivot. Underpaying duties can be pursued as a “reverse false claim,” carrying treble damages — three times the loss — plus per-claim penalties. And the statute defines “knowingly” to include not only actual knowledge but deliberate ignorance and reckless disregard of the truth. In plain terms: under the FCA, engineered not-knowing is knowing. The Act also lets private whistleblowers — employees, competitors, even suppliers — file qui tam suits on the government’s behalf and share in the recovery.
Smuggling and down-chain liability — 18 U.S.C. § 545. The second paragraph of Section 545 criminalizes receiving, concealing, buying, selling, or facilitating goods imported contrary to law — by anyone in the supply chain who acts with knowledge — with a 20-year statutory maximum. Liability does not stop at the importer of record.
Forced labor — 19 U.S.C. § 1307 and the UFLPA. Since December 2021, the Uyghur Forced Labor Prevention Act (Public Law 117-78) has applied a rebuttable presumption: goods connected to the Xinjiang region or to listed entities are presumed made with forced labor and denied entry unless the importer proves otherwise by clear and convincing evidence. It is the one place in customs law where the burden of upstream knowledge is formally reversed — and the list of high-priority enforcement sectors has grown to twelve, now including aluminum, steel, copper, and lithium. Criminally, 18 U.S.C. § 1589(b) reaches anyone who knowingly benefits from a venture using forced labor, with reckless disregard sufficient.
For public companies — the securities laws. The same underlying facts can implicate the books-and-records and internal-controls provisions (15 U.S.C. § 78m(b)(2)) and disclosure obligations. If entry data is wrong, the financial statements built on it inherit the problem. Customs data is financial data.
What the numbers say
The Guide is unusually candid in illustrating its point with resolved matters. The pattern across them is instructive:
- Ford Motor Company — $365 million (March 2024), resolving civil claims that imported vehicles were misclassified and undervalued.
- Hino Motors, a Toyota subsidiary — over $1.6 billion (January 2025), after pleading guilty to submitting falsified emissions data to obtain the certificates required for entry.
- A domestic importer of Chinese automotive components — over $53 million (December 2025), resolving claims it misclassified tapered roller bearings to evade antidumping duties above 92 percent.
- Ceratizit USA — $54.4 million (December 2025), over tungsten carbide transshipped through a third country under a false country of origin.
- Perfectus Aluminum and related companies — $549.5 million (May 2026), one of the largest duty-evasion resolutions to date, involving aluminum extrusions disguised as finished pallets.
- Boise Cascade (April 2026), criminally sentenced under the Lacey Act on a willful-blindness record: the company placed ten additional orders within two weeks of learning its supplier’s warehouse had been raided.
Different industries, different statutes, one common thread: most of these matters turned less on what the company declared than on what it knew — or arranged not to know — about its own supply chain.
Fifty years looking downstream. Now look up.
The government’s upstream language may sound new, but the discipline is not. For nearly fifty years, U.S. compliance law has told companies to know the people who represent them, the parties they pay, and the customers or end users who receive controlled products.
What changed this summer is the direction, not the principle. Executive Order 14411 and the July DOJ–DHS guidance point the same discipline upstream — to suppliers, their suppliers, countries of origin, valuation support, and production conditions. And under the False Claims Act, “knowingly” already includes deliberate ignorance and reckless disregard. In this setting, not looking is not a safe position; it may become part of the evidentiary record.
Upstream diligence is harder because it cannot live in a questionnaire alone. It is continuous and factual: declared values, origin evidence, supplier representations, production methods, broker records, and finance data all must reconcile. In many companies, that evidence sits in separate systems owned by procurement, trade, tax, logistics, finance, and outside brokers. A company cannot verify what its own organization cannot see.
Three questions for the CFO
If I were advising a finance leadership team this quarter, I would put three questions on the table.
First: could you evidence — today — the values, countries of origin, and supplier declarations behind your import entries? Not assert them; evidence them. Under the FCA’s knowledge standard, the absence of verification is not a defense. It is the theory of the case.
Second: would your controls surface a mismatch before an entry files — or would the government’s analytics find it first? For public companies, this is simultaneously a customs question and an internal-controls question.
Third: who owns the workflow between customs data and financial reporting? If duty amounts, origin claims, and supplier representations move through separate teams without a shared verification process, the control gap is structural — and structural unverifiability is exactly the condition the government has just re-priced.
The uncomfortable truth in the July guidance is also its most useful instruction: ignorance was sustainable only because the data was allowed to remain scattered. Consolidate the data and connect the functions that own it, and the same standard that creates exposure becomes the roadmap for eliminating it.
Compliance as operating intelligence
That is the practical opportunity hidden inside the enforcement risk. The same verified supply-chain data that answers the government’s questions also helps management see where costs are accumulating unnecessarily, where duty exposure is increasing, where suppliers create fragility, and where better sourcing or documentation can create margin. In that sense, upstream compliance is not a defensive exercise alone. Done properly, it becomes operating intelligence — a way to make the company easier to defend because it is finally easier to see.
TTMS helps multinational companies build the connected, client-owned data foundation upstream verification now requires — with experts validating every conclusion before questions arise from regulators, auditors, or enforcement authorities.
This article is published by TTMS for general educational and informational purposes only. It does not constitute legal advice, does not create an attorney–client relationship, and should not be relied upon as a substitute for advice from qualified counsel on your specific facts. TTMS is not a law firm.