What's Happening?
The Department of Justice (DOJ) National Fraud Enforcement Division has issued Directive 26-12, making trade fraud a top corporate enforcement priority. This directive, effective October 1, 2026, outlines ten factors prosecutors must weigh when deciding
whether to charge a company. A key warning from a government official is that a prior disclosure filed with U.S. Customs and Border Protection (CBP) does not qualify as a voluntary self-disclosure for DOJ purposes. The DOJ's Corporate Enforcement Policy generally states that disclosures made only to regulatory agencies do not qualify. The official emphasized that country of origin fraud is the leading pattern in trade fraud cases, accounting for over half of the past year's cases. The DOJ has built a dedicated Trade Fraud Program, including the Global Trade & Commerce Enforcement Section, and has seen criminal trade fraud charges increase in 2026.
Why It's Important?
This new directive significantly escalates the risk for importers and companies involved in international trade, as it signals a more aggressive stance from the DOJ on trade fraud. The distinction between CBP and DOJ disclosures means that companies cannot rely on compliance with one agency to protect them from prosecution by the other, creating a more complex and demanding compliance landscape. The focus on country of origin fraud highlights a critical area of vulnerability for businesses, requiring meticulous supply chain diligence. The increased criminal charges and the 'whole-of-government enforcement' approach, involving multiple federal agencies, indicate a coordinated effort to crack down on trade violations. This will likely lead to higher compliance costs for businesses and a greater need for robust internal controls to avoid severe penalties, including criminal charges and forfeiture of goods.
What's Next?
Importers and their buyers are advised to audit country of origin declarations first, as this is where most cases arise. Companies must decide on a disclosure path, assessing a potential DOJ self-disclosure under the Corporate Enforcement Policy (CEP) before or alongside a CBP prior disclosure, especially if facts suggest knowing conduct. The 'termination test' is suggested: if internal review would lead to employee discipline or termination, a potential DOJ voluntary disclosure should be evaluated. Training lead buyers and supply chain officers on origin and pricing red flags is crucial. Companies must also ensure complete and accurate responses to CBP inquiries and preserve records, including those from messaging apps. The DOJ's emphasis on 'tone at the top' and 'tone in the middle' means that compliance responsibilities extend beyond senior executives to all levels of the supply chain.
Beyond the Headlines
The DOJ's intensified focus on trade fraud and the inadequacy of CBP disclosures for federal prosecution avoidance reveal a broader shift towards a 'zero trust model' in trade enforcement. This development reflects a growing concern within the U.S. government about the economic and national security implications of fraudulent trade practices. The emphasis on forced labor diligence, as outlined in the Resource Guide, also highlights the ethical dimensions of supply chain management and the increasing pressure on companies to ensure their goods are produced without human rights abuses. This directive could lead to a re-evaluation of global supply chain strategies, pushing companies to prioritize transparency and ethical sourcing over cost-cutting measures. The increased scrutiny also underscores the importance of robust legal counsel for companies navigating the complex and evolving landscape of international trade regulations.
