DOJ’s $5.15 Million FCA Settlement Reinforces Focus on Tariff and Customs Compliance

On August 5, 2026, DOJ announced a $5.15 million settlement with a Taiwanese light-emitting diode (“LED”) manufacturer and its Texas-based subsidiary to resolve allegations under the False Claims Act (“FCA”), the common law, and the Tariff Act of 1930, as amended, that the companies knowingly failed to pay additional tariffs on Chinese-origin LEDs imported into the United States. The claims stem from a qui tam suit filed by a former employee. See United States ex rel. Wang v. Everlight Electronics Co., Ltd., et al., No. TDC-21-cv-1607 (D. Md.). As we reported here and here, this settlement is the latest example of DOJ’s push to target trade fraud through its Trade Fraud Task Force.

The settlement resolves two sets of allegations. First, the Government alleged that from July 2018 through January 2022, the companies “knowingly misrepresented the country of origin” on certain Chinese-manufactured LEDs by transshipping them through Taiwan prior to shipping them to the United States and then representing to U.S. Customs and Border Protection (“CBP”) upon entry that the goods originated in Taiwan. Importers must report accurate information as part of the customs entry process, including the country of origin and classification of their goods and the amount of duties owed, along with other required information. This includes paying any applicable Section 301 tariffs, which applied to the Chinese-origin LEDs. By representing that the products originated in Taiwan, the importer allegedly evaded these additional tariffs applicable to Chinese-origin articles.

Second, the settlement resolves allegations that, from January 2022 through November 2025, the companies continued importing LEDs from Taiwan, “some of which” had allegedly been manufactured in China. According to the Government, the companies failed to separate Chinese-made die from Taiwanese-made die within the LEDs during manufacturing, allegedly resulting in a misrepresentation of the products’ country of origin upon importation into the United States. An LED die is a semiconductor chip inside an LED bulb that allows it to emit light.

The companies did not admit liability as part of the settlement.

This settlement underscores the need for companies to have meaningful internal controls over their import activities. It also makes clear that trade enforcement actions can be initiated by private parties (e.g., former employees or competitors), as well as the Government. The current Administration has invested considerable resources in trade enforcement, and this settlement reflects DOJ’s willingness to scrutinize companies’ import activities and to use the FCA to enforce its trade enforcement objectives. Companies should expect these efforts to continue. According to the press release announcing the settlement, DOJ and CBP “will use all tools available to identify and hold accountable those who commit trade fraud by falsely identifying the country of origin of imported goods to pay lower customs duties than actually owed.” Companies should assess their supply chain practices to ensure that they comply with country-of-origin reporting requirements, including for components within their products.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.