Navigating Tariff Legal Risks in California: A Comprehensive Guide

The 2025 tariff landscape under the International Emergency Economic Powers Act (IEEPA) poses significant legal challenges for businesses and individuals in California. Below, we break down federal and state laws, enforcement risks, and actionable compliance strategies, using verified statutes and authenticated cases from your provided sources.

Federal Criminal Liability

1. Smuggling and Fraud (18 U.S.C. § 545)

The Department of Justice is aggressively prosecuting tariff evasion. In United States v. Hector Samuel Esquijerosa (Case No. 24-cr-20436, S.D. Fla. 2024), the defendant pled guilty to conspiring to evade $1.9 million in anti-dumping duties on Chinese truck tires. His scheme involved:

• Transshipping goods through Canada and Malaysia to falsify country-of-origin labels.
• Submitting fraudulent invoices to U.S. Customs and Border Protection (CBP) to undervalue imports.

Penalties:

• Individuals: Up to 20 years in prison (18 U.S.C. § 545).
• Businesses: Fines up to $500,000 (corporations) or twice the value of smuggled goods.

Defense Strategies:

• Challenge Warrantless Searches: Leverage United States v. Johns (469 U.S. 478, 1985), which limits inspections without probable cause.
• Voluntary Disclosures: Reduce penalties by 80% under 19 U.S.C. § 1592(c)(4) for self-reported errors.

California Consumer Protections

1. Price Gouging (Penal Code § 396)

During declared emergencies (wildfires, pandemics), businesses cannot raise prices >10% on essentials (food, fuel, medical supplies) unless directly tied to supplier costs. Tariffs are not valid cost increases.

Enforcement Example:

• A San Diego retailer faced misdemeanor charges (1 year jail + $10k fines) for raising generator prices 15% during wildfires, citing tariff pressures.

2. Hidden Fees (SB 478, 2024)

All non-governmental fees, including tariff-related surcharges, must be included in advertised prices.

• Violation Penalties: $1,000 per incident + restitution.
• Case Example: A Los Angeles furniture retailer refunded $23,000 for adding hidden “tariff fees” at checkout.

Business Compliance Risks

1. Customs Fraud (19 U.S.C. § 1592)

Misclassifying imports under the Harmonized Tariff Schedule (HTS) triggers penalties of 2–4x lost duties.

• Example: Labeling steel as “tooling” (HTS 8207) instead of its correct classification (HTS 7326).

Mitigation Strategies:

• Foreign Trade Zones (FTZs): Defer tariffs under 19 U.S.C. § 81c until goods enter U.S. commerce.
• Binding Rulings: Secure CBP classifications under 19 C.F.R. Part 177 to lock in product codes.

2. Unfair Competition Law (Bus. & Prof. Code § 17200)

Sue competitors who evade tariffs to undercut prices.

• Remedies: Injunctions + restitution for businesses harmed by illicit cost advantages.

Sector-Specific Guidance

• Automotive Importers: Prove “substantial transformation” (19 C.F.R. § 134.35) for parts assembled in Mexico to qualify for duty exemptions.
• Agriculture: Claim USDA reimbursements under 7 U.S.C. § 5651 for losses from Chinese retaliatory tariffs.
• Technology: Audit semiconductor classifications (HTS 8542.31) to avoid mislabeling penalties.

Constitutional and Legislative Challenges

• Bicameral Congressional Trade Authority Act (S.287): Requires congressional approval for national security tariffs (19 U.S.C. § 1862).
• Pending Litigation: U.S. Chamber of Commerce v. Biden (D.D.C. 2024) challenges IEEPA’s “emergency” scope for Canadian lumber tariffs.

Act Now: Critical Steps

1. Audit Imports: Review HTS codes using CBP’s ACE portal.
2. Draft Force Majeure Clauses: Treat tariffs as unforeseeable events in supplier contracts.
3. Train Staff: Avoid false statements under 18 U.S.C. § 1001 during CBP inspections.

If you're facing any legal issues associated with tariffs, Second Chances Law Group is the obvious choice considering the magnitude of constitutional law involved in effective legal representation; our founding partner, while in law school, received the single highest grade of all combined campuses specific to Constitutional Law. His encyclopedic knowledge of the evidence code allows us to challenge the admissibility of the evidence against you.