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Navigating Insurance Coverage for Customs and FCA Risks in a Shifting Trade Landscape

In a recent post, we briefly explored potential insurance coverage for tariff- and trade-related losses, particularly in the context of escalating global trade tensions and U.S. enforcement trends. Since then, enforcement activity under the False Claims Act (FCA) continues to intensify, particularly around customs compliance. U.S. Customs and Border Protection (CBP) and the Department of Justice (DOJ) are closely examining how goods are classified, valued and routed. These developments present complex compliance challenges and potential exposure for companies across industries, including importers, logistics providers and government contractors.

Understanding FCA Exposure Tied to Import Practices
The FCA has become an increasingly prominent enforcement mechanism in customs-related cases, as regulators and whistleblowers focus on potential underpayment of customs duties. U.S. customs law requires importers to accurately record merchandise’s country of origin, its classification in the Harmonized Tariff Schedule, and its valuation. While failure to accurately record that information may result in administrative fines, forfeitures of merchandise, and other penalties under 19 U.S.C. 1592 and its implementing regulations, more concerning is the heightened exposure under the FCA, which imposes treble damages plus penalties for “knowingly” making false customs declarations.

Earlier this year, the DOJ issued its white-collar enforcement roadmap, “Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime,” emphasizing that it will focus its resources on this administration’s top policy priorities, including illegal foreign trade practices and customs fraud. The memo not only elevated these cases within the Criminal Division but also expanded DOJ’s Corporate Whistleblower Awards Pilot Program to reward tips that lead to forfeiture in customs fraud matters. At the FBA Qui Tam Conference, DOJ officials spoke about this shift, stating that reverse FCA cases involving avoided duties and false customs declarations would receive heightened attention in 2025. Consistent with this approach, the DOJ recently filed a complaint alleging that an importer underpaid customs duties by undervaluing merchandise through deceptive invoices. While private whistleblowers have initiated qui tam FCA actions against importers for alleged misrepresentations in customs declarations, we expect direct government intervention to increase in this heightened enforcement environment.

Reflecting the growing federal focus on trade enforcement, last year the House of Representatives passed the Protecting American Industry from International Trade Crimes Act, which would require the DOJ’s Criminal Division to establish a Trade Fraud Task Force focused on prosecuting international trade crimes. Even unintentional compliance lapses can lead to whistleblower complaints or regulatory inquiries, making it important for companies to understand potential insurance implications and prepare accordingly.

Potentially Responsive Insurance Products
In the face of a potential FCA duty-evasion claim, policyholders should evaluate their full insurance portfolio. Certain coverage lines may help offset defense costs and, in some cases, contribute to indemnity.

  • Directors & Officers (D&O) Liability: D&O insurance is often the primary coverage for FCA matters. These policies cover claims against the company’s leaders for alleged wrongful acts. An FCA lawsuit or DOJ investigation alleging fraudulent import practices may fall within a D&O policy’s coverage for “wrongful acts” (e.g., misstatements or misconduct by the insured). D&O insurance will typically advance defense costs, and many policies treat government subpoenas or investigations as covered “claims.”
  • Errors & Omissions (E&O)/Professional Liability: E&O policies cover liability arising from the insured’s professional services. Their applicability to tariff-related claims depends on the circumstances. E&O coverage may help when liability stems from errors in providing services to a client, but it generally does not cover the insured’s deliberate evasion of law.
  • Representations & Warranties (R&W) Insurance: R&W insurance, used in mergers and acquisitions, can indirectly cover tariff and FCA exposures that pre-date a deal. If a target company falsely represented compliance with customs laws (e.g., “all duties paid” or “no material violations”) and the buyer later faces an FCA investigation for pre-closing duty evasion, then the breach of that representation could trigger the R&W policy.

Key Policy Language Considerations
Insurance coverage for FCA-related investigations or enforcement actions depends heavily on the specific language in your policies. When reviewing your coverage, focus on the following policy provisions:

  • Fraud and Dishonesty Exclusions: Most liability policies exclude losses from fraud or willful misconduct. Favorable policies limit this exclusion to cases where such conduct is established by final adjudication. Without a finding of fraud, coverage—especially for defense costs—typically remains intact.
  • Prior Knowledge Exclusions: Coverage may be denied if the insured had knowledge of the circumstances giving rise to the claim before the policy period began. D&O and R&W policies often include exclusions tied to known issues. Disclosing any existing audits, government inquiries, or internal investigations during the application or renewal process can help preserve future coverage.
  • Definition of “Claim”: A broad definition of “Claim” is key to ensuring coverage for early-stage government activity, such as subpoenas Civil Investigative Demands, or sealed whistleblower complaints. Some policies define “Claim” to include these events, while others may require a formal complaint or lawsuit. Understanding this trigger is essential for timely notice.

Practical Takeaways for Policyholders
In today’s heightened trade enforcement environment, companies should proactively assess whether their insurance programs are positioned to respond to potential FCA or customs-related claims. Reviewing D&O and related policies for key terms—such as the definition of “claim,” fraud exclusions, and notice provisions—is essential. If there is any indication of government interest, early engagement with insurance counsel and timely notice to carriers can help preserve coverage.

More broadly, in today’s environment, duty mitigation efforts may trigger relator claims or even attract DOJ scrutiny. If your organization handles imports—particularly in highly regulated sectors—proactive trade compliance, documentation of internal audits, and targeted False Claims Act risk assessments are also essential. In-house leaders should engage insurance and compliance counsel early to mitigate FCA and customs enforcement exposure.


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