CERATIZIT USA Pays $5.44 Million in False Claims Act Customs Fraud Settlement

by Leanne Alvarado and Rrita Osmani

Abstract

In December 2025, CERATIZIT USA LLC agreed to pay $54.4 million to resolve False Claims Act (“FCA”) allegations that it improperly avoided U.S. customs duties on tungsten carbide products imported from China.  According to the Department of Justice (“DOJ”), the company misclassified the country of origin for these goods to avoid antidumping, countervailing duties, and Section 301 duties.  This case illustrates how customs fraud can give rise to significant liability under the False Claims Act, and how whistleblowers remain key to uncovering corporate schemes that harm U.S. trade enforcement.

$54.4 Million False Claims Act Settlement Over Customs Fraud on Chinese Imports

The DOJ continues to prioritize enforcement actions targeting customs fraud, particularly cases involving the evasion of import duties on Chinese goods subject to higher tariffs.  In a December 2025 announcement, The DOJ’s Office of Public Affairs (“OPA”) reported that the North Carolina-based distributor of tungsten carbide products, Certizit USA LLC, has agreed to pay $54.4 million to resolve False Claims Act violations.   The settlement aims to resolve allegations that Ceratizit knowing avoided paying for millions of dollars in customs duties owed to the U. S. Customs and Border Protect (“CBP”). The US OPA continues to combat False Claims Act violations against the US government brought about by whistleblowers.

Background of the Ceratizit USA Customs Fraud Allegations

Ceratizit is part of a global engineering group that specializes in the manufacture and distribution of tungsten carbide cutting tools used in industrial applications.  According to the DOJ, from August 2020 to March 2024, Ceratizit engaged in a multi-year scheme to reduce its customs duty liability on products manufactured in China.

The government alleged that during this period, Ceratizit imported Chinese-origin tungsten carbide products that were transshipped through Taiwan prior to their arrival in the U.S.  Despite the products’ Chinese origins, Ceratizit allegedly declared that the products originated in Taiwan when importing them into the U.S.  This misrepresentation allowed the company to avoid anti-dumping duties and tariffs imposed under Section 301 of the Trade Act of 1974.

The DOJ further alleged that from June 2015 to March 2024, Ceratizit knowingly misclassified certain imported products under incorrect Harmonized Tariff codes (“HTS”) that carried lower duty rates.  Through this mechanism, Ceratizit was allegedly able to further evade tariff costs and bypass Section 301 requirements on imported goods.

How Import Misclassification and Undervaluation Trigger False Claims Act Liability

• S. customs laws require importers to accurately declare the value,classification, and country of origin of all imported goods. Section 301 of the Trade Act of 1974 provides a set of duties on specific imported goods into the U.S, particularly those from China.  This code was developed by the US Trade Representative with the intention of preventing foreign unfair trade practices that disrupt U.S. commerce.

Ceratizit explicitly imported products from China without marking them without their correct Harmonized Tariff Schedule Code that led to a reduction in the amount of duties payable to CBP.  Misclassifying goods under incorrect HTS codes, undervaluing merchandise, or falsely declaring country of origin directly violates the customs law required by the CBP. When such conduct is done knowingly to reduce liability, it may constitute customs fraud and trigger False Claims Act allegations.

Importantly, transshipment through a third country does not change a product’s country of origin unless the goods undergo substantial transformation. The Ceratizit settlement reinforces the DOJ’s position that routing goods through intermediary countries without meaningful processing will not shield importers from tariff obligations.

The Role of Whistleblowers in Uncovering Customs Fraud

The alleged claims against Ceratizit arose from a qui tam lawsuit filed by whistleblower Mark Stover.  The Whistleblower provision of the False Claims Act allows private parties to bring lawsuits on behalf of the federal government and share in any recovery obtained by the government.  Their firsthand experience with company strategy and internal operations serves as a key resource in informing False Claims allegations.

How can importers avoid FCA liability?

Importers can reduce their risk of False Claims Act liability by implementing robust trade compliance programs and following the guidelines under Section 301 set forth by the US Trade Representative.  Any customs imports should be appropriately labeled under their Harmonized Tariff Schedule code.  In addition, all products should be traced from their country of origin and include any substantial modifications made within other countries before importing into the US.

Importers should also invest in an employee training program to ensure the company remains up to date with the latest trade regulations and tariff requirements.  Various exclusions can apply during open periods, so importers can work closely with customs brokers to navigate new rules and avoid misclassification.

What the Ceratizit Settlement Signals for DOJ Customs Fraud Enforcement

The Ceratizit settlement is a key example of how the DOJ is continuing to crackdown on trade and customs fraud to protect US commercial interests. The DOJ also encourages whistleblowers to report any fraudulent conduct from Customs importers to the federal government under the qui tam provisions of the False Claims Act.

The team of attorneys at Miller Shah LLP has extensive experience representing FCA and qui tam matters.  In 2020, Miller Shah announced a $54 million settlement to resolve a False Claims Act action brought against Teva Pharmaceuticals USA.  If you are facing concerns over potential customs fraud schemes, contact the team at Miller Shah for a free consultation.