Navigating Tariff Legal Risks: Comprehensive Strategies for Individuals and Businesses

The implementation of tariffs under statutes such as the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. § 1701) has created a complex legal environment for businesses and individuals engaged in international trade. At Second Chances Law Group, we specialize in defending against allegations of customs fraud, smuggling, and tariff evasion while guiding clients toward proactive compliance with federal and state regulations. Whether confronting criminal charges, civil penalties, or administrative scrutiny, our expertise ensures clients are equipped to mitigate risks and protect their rights. Below, we provide a detailed analysis of the legal landscape and actionable strategies to navigate tariff-related challenges.

Criminal Defense: Protecting Individuals in High-Stakes Cases

The Department of Justice has intensified efforts to prosecute tariff evasion, as exemplified by the case of United States v. Hector Samuel Esquijerosa (Case No. 24-cr-20436, S.D. Fla. 2024). Esquijerosa, owner of two Miami-based import companies, pled guilty to conspiring to evade over $1.9 million in anti-dumping duties on Chinese truck tires by transshipping goods through Canada and Malaysia and submitting fraudulent invoices to U.S. Customs and Border Protection (CBP). This case underscores the severe consequences of deceptive practices, including potential prison sentences for individuals who orchestrate such schemes.

Key Legal Risks for Individuals

1. Smuggling (18 U.S.C. § 545): Knowingly importing goods through false statements (e.g., mislabeling country of origin) carries penalties of up to 20 years in prison and fines up to $500,000 for corporations.

2. False Claims Act Violations (31 U.S.C. § 3729): Submitting fraudulent customs declarations can result in treble damages and penalties of $13,508 to $27,018 per false claim. Whistleblowers may recover 15-30% of recovered amounts.

3. Antidumping and Countervailing Duty Violations (19 U.S.C. § 1673): Circumventing duties on unfairly traded goods (e.g., rerouting Chinese steel through third countries) may lead to fines exceeding 200% of evaded duties.

Proven Defense Strategies

• Challenge the Legality of Searches: Leverage precedents such as United States v. Johns, 469 U.S. 478 (1985), which limits warrantless inspections of commercial shipments without probable cause.

• Negotiate Pre-Indictment Resolutions: Secure reduced penalties through voluntary disclosures under 19 U.S.C. § 1592(c)(4), which allows businesses to self-report errors in exchange for penalty reductions of up to 80%.

• Asset Protection: Preempt forfeiture actions by structuring ownership through legal entities or trusts, ensuring personal and business assets remain shielded.

Administrative Defense: Mitigating Civil Penalties and Compliance Risks

Businesses face significant administrative penalties for inadvertent errors, such as misclassifying goods under the Harmonized Tariff Schedule (HTS). For example, labeling steel products as exempt “tooling parts” (HTS 8207) instead of their correct classification (HTS 7326) can trigger penalties of four times the lost duties under 19 U.S.C. § 1592.

Strategies for Compliance and Penalty Mitigation

Foreign Trade Zones (FTZs):

• Under 19 U.S.C. § 81c, businesses can defer tariff payments by storing goods in FTZs until they enter U.S. commerce. This strategy saved a Long Beach logistics firm $620,000 annually by avoiding upfront duty costs.

Binding Customs Rulings:

• Obtain advance rulings from CBP (19 C.F.R. Part 177) to lock in product classifications, reducing the risk of disputes. For instance, a solar panel importer avoided $2 million in penalties by securing a ruling validating transshipment practices through Cambodia.

Voluntary Disclosures:

• Proactively report errors to CBP under 19 U.S.C. § 1592(c)(4). A client recently reduced a $1.2 million penalty to $240,000 by disclosing inadvertent misclassifications.

Sector-Specific Compliance Guidance

Tailored strategies are critical for industries with unique exposure to tariffs:

Automotive Importers:

• Demonstrate “substantial transformation” under 19 C.F.R. § 134.35 for parts assembled in Mexico. For example, proving that Chinese components underwent welding, painting, and assembly in Mexico can qualify them for duty exemptions.

Solar Panel Importers:

• Navigate antidumping duties on Chinese solar cells by securing country-of-origin rulings for goods routed through Southeast Asia.

Technology Companies:

• Audit classifications under HTS 8542.31 for semiconductors. Misclassifying microchips as “consumer electronics” instead of “integrated circuits” can trigger audits and retroactive duties.

Act Now: Protect Your Business and Future

The window to address compliance gaps is narrowing. Proactive steps include:

1. Conduct a HTS Code Audit to rectify misclassifications.

2. Implement FTZ strategies to defer tariffs and improve cash flow.

3. Train staff on 18 U.S.C. § 1001 to avoid false statement allegations during CBP inspections.

For businesses and individuals navigating this turbulent landscape, Second Chances Law Group offers end-to-end solutions—from criminal defense to administrative compliance. Let us transform legal complexity into strategic advantage.