Have Insider Information About a Customs-Dodger? Whistleblowing Rewards for Tariff Evasion Are Looking Better Than Ever.
If you have inside information that a company is systematically evading U.S. customs duties, there is a whistleblower reward system that you should know about. Under the federal "Moiety Statute," 19 U.S.C. § 1619, an informant who provides original information leading to a government recovery can receive up to 25% of the money recovered by the government. And unlike a traditional False Claims Act lawsuit, the customs informant program has unusually strong protections for the informant's identity. For years, however, a $250,000-per-case cap put a practical ceiling on the upside. A 2009 decision by the U.S. Court of Federal Claims, White & Case LLP v. United States, changed the picture by holding that a single body of information can give rise to multiple compensable "cases." On the facts of that case, the court found 11 cases rather than one—potentially allowing awards far exceeding $250,000.
What is the federal Moiety Statute?
The Moiety Statute is an old federal customs law that provides a financial incentive for private parties to report customs fraud.
The basic idea is straightforward. If someone provides CBP with original information about fraud against customs revenue or violations of the customs laws, and that information leads to a government recovery, the informant may be entitled to an award of up to 25% of the government's net recovery.
The recoverable amounts can include unpaid duties, fines, penalties, forfeitures, and certain other monetary recoveries.
The program therefore covers the kinds of conduct you might think of as customs or tariff fraud, including situations in which an importer deliberately misrepresents information relevant to the duties it owes.
And this is not merely a theoretical program. CBP itself tells people who submit allegations that, if the government makes a recovery, an informant may be entitled to compensation of up to 25% of the net recovery. CBP also notes that compensation is considered after the relevant civil and criminal proceedings are completed.
The CBP gives whistleblowers unusually strong identity protection
For a potential informant, this may be the most attractive feature of the Moiety Statute.
The applicable CBP regulation is unusually direct:
"The name and address of the informant must be kept confidential."
The regulation goes further. It prohibits disclosure of files or information that could assist in the unauthorized identification of the informant. It also provides specific protection for informant records under the Freedom of Information Act's confidential-source exemption.
That is a significant difference from the traditional federal whistleblowing model (the framework provided by the False Claims Act).
In an FCA case, the whistleblower—known as the "relator"—files a lawsuit. The complaint is initially filed under seal, but if the case proceeds, the relator's identity will ordinarily become known.
The Moiety Statute works differently. The informant provides information to the government and seeks an administrative award. There is no public qui tam complaint naming the informant as a plaintiff.
That does not mean anonymity is guaranteed under every conceivable circumstance. The government may need to use the informant's information in an investigation, and unusual circumstances could potentially expose the source. But the regulations provide a remarkably strong baseline of confidentiality.
For a consultant, customs professional, or other person whose business depends on maintaining client relationships, that distinction can be enormously important.
The catch: the $250,000 cap
There was, however, a major limitation.
The regulations provide that an informant can receive up to 25% of the government's recovery—but the award cannot exceed $250,000 for any one case, regardless of the number of recoveries resulting from the information.
Imagine an informant uncovers a scheme that ultimately results in $20 million in recovered duties and penalties. Twenty-five percent would be $5 million.
But if the entire matter were treated as one "case," the informant's award would be capped at $250,000. That makes the economics considerably less exciting.
And now more than ever, the scale of a customs fraud scheme can be enormous. A company that is deliberately misclassifying goods or falsifying invoices may be doing it hundreds or thousands of times. A whistleblower could provide information that saves the government millions of dollars while receiving, at most, $250,000.
This has historically hindered the appeal of the CBP's Moiety Statute. But recent court decisions have changed the game.
White & Case opens the door to far larger whistleblower rewards
The facts of White & Case LLP v. United States, 89 Fed. Cl. 12 (2009), are remarkable.
White & Case represented Chinese brake-rotor manufacturers and exporters. One of the firm's clients discovered that an importer was using fraudulent documentation to make Chinese brake rotors appear to qualify for an exemption from a 43.32% antidumping duty. White & Case brought the information to Customs and helped the agency distinguish genuine invoices from fraudulent ones.
The information ultimately led to a five-port investigation and the identification of 98 fraudulent brake-rotor shipments. White & Case sought compensation based on those violations.
CBP took the position that everything constituted one case because it involved the same commodity, the same country of origin, the same general scheme, and one investigation. White & Case argued for the other extreme: 98 separate cases—one for each fraudulent shipment.
The Court of Federal Claims rejected both positions. It held that the record supported 11 separate moiety cases. That distinction matters enormously.
The court reasoned that the number of cases should not simply be determined by whether CBP decided to conduct one investigation. Instead, the analysis had to focus on the nature and originality of the information provided. The court specifically criticized CBP for treating "one investigation" as equivalent to "one case."
So White & Case did not establish a rule that every fraudulent invoice automatically creates a separate $250,000 award. But it did establish something much more useful:
The $250,000 ceiling applies on a per-case basis, and a single investigation can contain multiple compensable cases.
On the facts before the court, 98 fraudulent invoices became 11 cases.
That can make the potential reward much larger
The arithmetic is straightforward.
If 11 separate cases each reached the $250,000 ceiling, the aggregate awards could theoretically reach $2.75 million.
That does not mean an informant is automatically entitled to $2.75 million. The statute still limits the award to up to 25% of the government's net recovery, and the award process is administered by the government. The particular facts will determine how many "cases" exist and how much is actually recovered.
But the important point is that $250,000 is not necessarily the ceiling on the informant's total recovery from a large, multi-faceted customs fraud.
Whistleblowers make incredibly difficult decisions and take notable risks. They often fear near term retaliation or long-term professional consequences. $250,000 might not justify the risk for many whistelblowers. But a multimillion dollar award presents a different calculus.
Who might have this kind of information?
The obvious candidates are people who regularly interact with customs documentation:
Customs brokers
Trade compliance professionals
Import/export managers
Customs entry writers
Freight forwarders
Logistics consultants
Trade compliance consultants
Supply-chain professionals
Customs software and implementation consultants
These professionals may see patterns that are invisible to an ordinary employee.
For example, someone processing customs entries every day might notice that a company's products are suddenly being classified under a different tariff code. A trade compliance professional might know that the company was warned about a classification problem and nevertheless continued using it. A logistics consultant might see the same questionable practice repeated across multiple product lines or import transactions.
Those facts can be particularly valuable because they may establish more than simply that a customs declaration was wrong. They may help establish that the company knew what it was doing.
This is where independent counsel becomes especially important
White & Case also illustrates why someone with potentially valuable customs information should consider obtaining independent legal advice before approaching the government. Navigating the dynamic and complex world of federal whistleblower law requires knowledgeable counsel.
The case was not simply a matter of filling out a tip form and waiting for a check. White & Case provided information to Customs, assisted with the agency's investigation, submitted a formal compensation claim, waited for Customs to act, and ultimately litigated the amount of compensation owed. The court's decision addressed difficult questions about originality, the definition of a "case," administrative exhaustion, ripeness, and the government's interpretation of its own compensation regulations.
In other words, the informant's economic interests can become substantial—and the rules governing those interests are not necessarily intuitive.
Independent counsel can also help an informant think through a separate but critical question: what information can be disclosed lawfully? A consultant, broker, or employee may possess confidential business information, trade secrets, privileged communications, or documents obtained subject to contractual restrictions. The existence of a whistleblower reward does not mean that everything in the informant's possession can simply be copied and handed to the government.
Getting legal advice before making a disclosure can help protect both the informant and the potential claim.
What should you do if you have information about customs fraud?
If you have firsthand information that an importer, manufacturer, broker, or other company is deliberately evading customs duties or falsifying customs declarations, the Moiety Statute may provide a way to report it while preserving a substantial degree of confidentiality—and potentially receive a significant financial award if the government recovers money as a result.
The combination of strong identity protections, a potential award of up to 25% of the government's recovery, and the possibility of multiple compensable cases makes the Moiety Statute worth serious consideration for someone sitting on valuable information.
If you believe you have information about customs fraud or tariff evasion, contact us before approaching CBP or turning over documents. We can evaluate the information, explain your options, and help you determine the best way to protect your interests while pursuing a potential whistleblower award.
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