Fighting Trade Cheats Act of 2025
- Sponsor
- Rep. Bost, Mike [R-IL-12]
- Committees
- Ways and Means Committee (primary)
- Last action
- Feb 13, 2025
Bottom line
This bill substantially strengthens enforcement against customs fraud by increasing penalties, empowering private lawsuits, and restricting participation in a key import program, aiming to deter illicit trade practices and protect domestic industries.
What it actually does
This bill significantly increases civil penalties for fraudulent and grossly negligent violations of United States customs laws, introducing a presumption of knowledge for repeat offenders dealing with affiliated persons. It establishes a new private right of action, allowing domestic industries and unions to sue for damages and injunctive relief against customs fraud. Additionally, it prohibits persons found guilty of such violations, and their affiliated entities, from participating in the Importer of Record program.
Proponents argue
Proponents argue that the bill is crucial for combating unfair trade practices, protecting domestic industries and workers from foreign competitors who evade customs duties and regulations, and ensuring a level playing field. They believe stronger penalties and the new private enforcement mechanism will deter fraud, recover lost revenue, and provide necessary recourse for those harmed by illicit imports.
Opponents contend
Opponents might argue that the increased penalties and the new private right of action could lead to an overly aggressive enforcement environment, potentially burdening legitimate businesses with excessive litigation risks and compliance costs. They may also raise concerns about the broad definition of 'affiliated person' and its potential to unfairly penalize entities for actions of distant affiliates or to create an uneven application of trade law.
The bill is relatively short, but its legal amendments and the introduction of a private right of action require careful reading to understand the full implications for trade enforcement and business operations.
Section 2(1) of the bill, amending Section 592(a) of the Tariff Act of 1930 (19 U.S.C. 1592(a))
Presumption of Knowledge for Fraudulent/Grossly Negligent Customs Violations by Affiliated Persons
This provision creates a legal presumption that if a person purchases merchandise from two or more affiliated entities that have previously been found guilty of customs fraud or gross negligence, the buyer is presumed to have known about the violation when purchasing from the second or subsequent affiliated entity. This makes it easier for U.S. Customs and Border Protection (CBP) to prove knowledge in enforcement actions.
Supporters argue
Supporters argue this closes a loophole where bad actors might use multiple affiliated entities to continue fraudulent activities, making it harder to evade responsibility by simply switching suppliers within the same corporate network. It strengthens CBP's ability to prosecute repeat offenders and ensures accountability.
Critics contend
Critics might argue this presumption could unfairly penalize purchasers who may not have actual knowledge of violations by their suppliers' affiliates, especially in large, complex corporate structures. They contend it could increase due diligence costs for importers and lead to unintended consequences.
Tradeoffs
This provision balances the need to deter repeat customs fraud and simplify enforcement against the potential for burdening legitimate businesses with an increased evidentiary standard and the costs associated with disproving presumed knowledge.
Section 2(2)(A) of the bill, amending Section 592(c)(1) of the Tariff Act of 1930
Triple Damages and 5-Year Import Ban for Fraudulent Violations
This provision significantly increases the civil penalty for fraudulent customs violations from the domestic value of the merchandise to three times the domestic value. Additionally, it prohibits persons who commit such violations, and their affiliated persons, from importing merchandise into the U.S. for five years beginning on the date of entry of a final judgment with respect to such violation.
Section 2(2)(B) of the bill, amending Section 592(c)(2) of the Tariff Act of 1930
Increased Penalties and 2-Year Import Ban for Grossly Negligent Violations
This provision increases the civil penalty for grossly negligent customs violations. For violations where the U.S. is deprived of duties, the penalty changes from the lesser of domestic value or four times the loss of duties to the lesser of three times the domestic value or ten times the loss of duties. For violations not involving duty deprivation, the penalty increases from 40% of the domestic value to three times the domestic value. It also imposes a two-year import ban on violators and their affiliated persons.
Section 3 of the bill, inserting new Section 592B into the Tariff Act of 1930
Creation of Private Right of Action for Injured Interested Parties
This provision allows 'interested parties' (e.g., domestic manufacturers, unions, trade associations of like or competing merchandise) whose business, property, or financial interest is injured by customs fraud or gross negligence to bring a civil action in federal court. Successful plaintiffs can recover compensatory damages, an additional penalty of three times compensatory damages, equitable relief (like import injunctions), and attorney's fees. The U.S. government can intervene as a matter of right.
Section 4 of the bill, amending Section 114 of the Trade Facilitation and Trade Enforcement Act of 2015 (19 U.S.C. 4320)
Ineligibility and Revocation for Fraudulent/Grossly Negligent Violators from Importer of Record Program
This provision makes any person found to have committed customs fraud or gross negligence, along with their affiliated persons, ineligible to participate in the Importer of Record (IOR) program. It also requires the Secretary to revoke IOR numbers for such persons. The definition of 'affiliated person' is expanded to include those deemed affiliated based on information suggesting a formal or ongoing relationship, such as similarities in imported merchandise or common exporters, specifically to prevent the use of shell companies.
The bill repeatedly references 'affiliated person' as having the meaning given in section 771(33) of the Tariff Act of 1930 (19 U.S.C. 1677(33)). This definition is crucial for understanding the scope of the presumption of knowledge, import bans, and IOR program exclusions.
Section 2(1)(B), 2(2)(A)(iii), 2(2)(B)(iii), and 4(3)(A)
Why it matters:This is standard legislative practice to avoid redundancy and ensure consistency with existing legal definitions across different parts of the Tariff Act. It's a technical shortcut rather than an attempt to hide information.
Case for: Referencing existing definitions streamlines legislation, ensures legal consistency, and avoids creating conflicting interpretations of a common term across different statutes. It relies on established legal precedent.
Case against: Requires external research for a full understanding, potentially making the bill less accessible to a general audience or those without specialized legal knowledge of trade law. The full impact is not immediately apparent from the bill text alone.
Estimated impact: The scope of who is affected by the new penalties and prohibitions hinges entirely on this definition, which broadly includes persons controlling, controlled by, or under common control with another person, as well as family members and officers/directors. This significantly expands the reach of the bill's enforcement mechanisms.
For the specific purpose of excluding persons from the Importer of Record program, the bill allows a person to be 'deemed' an affiliated person based on factors like similarities in imported merchandise (including article classification), common declared exporters and shippers, and historical import volumes, specifically to prevent commercial fraud and the use of shell companies.
Section 4(3)(B)
Why it matters:While placed within the definition, its specific application and criteria for 'deeming' affiliation are crucial for understanding the IOR exclusion's breadth and could be overlooked as a mere clarification. It's intended to be a robust anti-evasion measure against sophisticated fraudsters using new entities.
Case for: Proponents argue this expanded definition is essential to prevent sophisticated fraudsters from circumventing IOR exclusions by creating new entities that are technically not 'affiliated' under the standard definition but are clearly part of the same fraudulent network. It's a necessary tool to combat evolving evasion tactics.
Case against: Critics might argue that this 'deemed affiliated' clause grants significant discretionary power to CBP and could lead to arbitrary or overly broad exclusions, potentially impacting legitimate businesses that share common supply chain characteristics without being involved in fraud. It could create uncertainty and increase compliance burdens.
Estimated impact: Could significantly broaden the scope of IOR exclusions, making it much harder for entities associated with past fraud to continue importing, even if their formal corporate structure changes. This could lead to more effective prevention of repeat offenses but also potentially more disputes over affiliation.