A $280 million transshipment complaint against a California tile importer and its chief executive, filed weeks after the Justice Department made trade fraud a corporate enforcement priority, signals that customs penalties are becoming the sharp end of US tariff policy.
WASHINGTON, Oct. 15, 2026 – The Justice Department is pursuing more than $280 million from a California tile and stone importer and its chief executive in a customs fraud case that trade lawyers say illustrates how quickly duty evasion enforcement has escalated since Washington rebuilt its tariff program this summer.
The civil complaint, filed Sept. 28 in the U.S. Court of International Trade against Uni-Tile and Marble, Inc. and its chief executive Xin Mian Pan, and announced by the Justice Department on Oct. 7, drew detailed analysis from the customs bar on Oct. 14. The government seeks $67,922,260.09 in unpaid duties and a fraud penalty of $222,537,664.95 under 19 U.S.C. 1592(c)(1), an amount the complaint equates to the domestic value of the merchandise. The allegations have not been proven and liability has not been determined.
The timing is what practitioners find significant. The complaint landed three days before the Justice Department’s Fraud Division issued Directive 26-12 on Oct. 1, which named tariff evasion, importation of goods or services, and forced labor among four priority areas for corporate investigations. Holland and Knight, reviewing the directive, described a framework in which prosecutors are instructed to “place great weight” on conduct lasting three or more years, conduct spanning three or more federal districts, management knowledge or involvement, and efforts to “conceal fraud from government agencies or auditors.”
For importers, those factors are not abstract. A routine misclassification repeated across several years and several ports can satisfy the duration and multi district criteria almost by default.
What the complaint alleges
According to the analysis published by Diaz Trade Law, the complaint covers roughly 503 entries made between approximately Sept. 22, 2018, and Aug. 28, 2023. About 372 listed Uni-Tile as importer of record. Roughly 130 entries, plus one attempted entry, were filed under five other companies that the government describes as shell importers of record: Green Mountains Trading, Jos Materials, Uncle John Granite and Marble, New Generation Surfaces, and Santa Flo Commercial.
The government advances four interlocking theories. The first is transshipment, alleging that Chinese origin goods were routed through Malaysia and declared as Malaysian. Two Malaysian entities, South Wales Furniture SDN BHD and LLWF Cabinets and Stone SDN BHD, are named in the narrative. The second is undervaluation, alleging that entered values were lower than the amounts actually paid to Chinese manufacturers. The third is misdescription, alleging that quartz surface products were entered as artificial stone or granite, descriptions the complaint says fall outside the relevant antidumping and countervailing duty orders. The fourth is the use of shell importers of record after CBP opened an investigation.
The products sit under some of the heaviest duty rates in the tariff schedule. The combined antidumping and countervailing duty cash deposit rate for Chinese ceramic tile is 689.50 percent. Section 301 duties of 25 percent ad valorem applied to certain of the Chinese goods at issue. Orders on Chinese wooden cabinets and vanities and on quartz surface products are also implicated.
The complaint pleads fraud as the primary theory, with gross negligence and negligence in the alternative, and adds a separate count for aiding and abetting the shell importers. Mr. Pan is named individually and, according to the complaint, is jointly and severally liable with the company.
A parallel criminal case is already pending. The U.S. Attorney’s Office for the Northern District of California announced charges on Dec. 18, 2025, against Mr. Pan, Uni-Tile and Marble, Uni-Stone and Cabinet, a licensed customs broker named Hua Liang Xie, a People’s Republic of China national, and a Shenzhen forwarding company. The charges include conspiracy, conspiracy to commit wire fraud, wire fraud, smuggling, entry of goods by means of false statements, and international money laundering. The criminal announcement alleged more than $109 million in evaded duties across about 520 shipments, figures that differ from the civil complaint.
How the case reached the Justice Department
The Uni-Tile matter did not begin as a criminal referral. According to the Diaz Trade Law account, it followed a sequence that customs practitioners will recognise, because it is the path most large penalty cases travel.
CBP opened an administrative investigation and issued a determination under the Enforce and Protect Act, the statutory mechanism created in 2016 to address evasion of antidumping and countervailing duty orders. Enforcement Act proceedings are administrative, move faster than litigation, and permit interim measures including the suspension of liquidation and the imposition of cash deposit requirements while the inquiry proceeds. For an importer facing a cash deposit rate near 690 percent, interim measures alone can be commercially fatal.
Penalty proceedings followed, with CBP issuing pre penalty and penalty notices. When the demands went unpaid, the agency pursued the sureties that had underwritten the bonds. Only after that administrative track was exhausted did the matter move to the Justice Department for referral to the Court of International Trade.
Two features of that sequence deserve attention. The first is duration. The entries at issue date from 2018 to 2023, the criminal charges were announced at the end of 2025, and the civil complaint was filed in late 2026. Companies that treat an Enforcement Act notice as a discrete administrative episode routinely underestimate how long the resulting exposure persists.
The second is the surety chain. Bond underwriters who paid against CBP demands have their own recovery rights against the principal, which means an importer facing a government penalty claim frequently faces a simultaneous claim from its own surety. That dynamic has made bond sufficiency reviews unusually contentious across the import community this year, particularly in product categories carrying trade remedy orders.
The forced labor dimension
Directive 26-12 grouped forced labor with tariff evasion and import fraud in the same enforcement priority, and that pairing reflects where the two bodies of law are converging.
CBP issued withhold release orders against two Indonesian palm oil producers in early October, continuing a pattern of supply chain interdiction that operates independently of duty liability. A withhold release order does not assess a penalty. It detains merchandise, placing the burden on the importer to demonstrate that the goods were not produced with forced labor, a showing that typically requires upstream documentation most importers do not hold.
The compliance problem is that the evidentiary record needed to answer a forced labor detention overlaps substantially with the record needed to substantiate country of origin in a transshipment inquiry. Companies that have built one are well positioned for the other. Companies that have built neither face both exposures from the same documentary gap.
Separately, the Office of the U.S. Trade Representative’s Section 301 forced labor tariffs, imposed on 60 trading partners effective July 24 at rates of 10 percent or 12.5 percent, have added a duty layer whose correct application depends on origin determinations. Misstating origin to avoid an antidumping order may now also understate a Section 301 forced labor duty, multiplying the duty loss calculation that drives penalty exposure.
A doctrine built on three statutes
What makes the current enforcement environment different from previous tariff cycles is not any single case but the convergence of three legal tools.
Section 1592 of Title 19 remains the customs workhorse. For fraud, penalties can reach the domestic value of the merchandise, which is why the Uni-Tile penalty demand exceeds the duty demand more than threefold.
The False Claims Act, 31 U.S.C. 3729, supplies a second and in some respects harsher route. Customs cases typically proceed as reverse false claims, alleging the knowing avoidance or reduction of an obligation to pay duties. Liability includes treble damages plus a civil penalty per false claim, so exposure can exceed what Section 1592 would produce for identical conduct. The limitations period runs six years and can extend to ten. Qui tam suits filed under seal by competitors, former employees and relator firms must be investigated by the Justice Department, which means a company’s first notice of an investigation often arrives years after the conduct.
Criminal statutes supply the third. Smuggling, false statements and money laundering charges carry individual exposure that no corporate compliance budget can indemnify away.
Holland and Knight flagged a gap that has caught companies out repeatedly: a prior disclosure to CBP does not count as a voluntary self disclosure to the Justice Department under its Corporate Enforcement and Voluntary Self Disclosure Policy. An importer that does the right thing with the customs agency may still face a department that treats the matter as undisclosed.
Enforcement capacity has grown
The institutional buildout behind these cases is substantial.
The Trade Fraud Task Force, launched jointly with the Department of Homeland Security on Aug. 29, 2025, passed $1 billion in civil and criminal recoveries, penalties, forfeitures and publicly charged losses in under a year, according to a July 2026 announcement cited by Holland and Knight. The Fraud Division’s National Fraud Detection Center uses data analytics to open investigations at what the directive describes as a rapid pace. Directive 26-12 also instructs leadership to design programs that incentivize whistleblowers, including some who participated in the misconduct.
CBP has expanded its own analytics in parallel. A weekly trade review published Oct. 12 by Foley and Lardner reported a sharp increase in CF-28 Requests for Information driven by data mining that flags classification, valuation and origin anomalies, and noted that the agency “expects importers to apply the result of any determination across all analogous entries.” In practice, a single adverse CF-28 response can convert a one entry question into a multi year liability.
The Uni-Tile matter is not an outlier. The Justice Department is separately seeking approximately $290 million from a kitchen and bath building materials distributor and its chief executive in another customs fraud suit, and an electronics company recently paid $11.8 million to resolve duty evasion allegations. Enforcement Act investigations into golf cart and low speed vehicle importers have produced interim measures that three additional importers asked the Court of International Trade to block, arguing for immediate constitutional review.
The rulemaking that widens the net
Running alongside the enforcement surge is a proposed rule that would reshape how low value goods enter the United States.
CBP released a 103 page proposal on Oct. 7, scheduled for Federal Register publication Oct. 8, with comments due approximately Dec. 7. According to a KPMG summary, the rule would rework filing and bonding for informal entries of merchandise valued at $2,500 or less and create a new electronic informal entry type for international mail.
Entry type 11 filings would generally have to be made electronically on or before the date of importation, and filers would have to identify the final deliver to party when it differs from the ultimate consignee. A new entry type 13 would apply to eligible international mail valued at $2,500 or less, requiring the shipper or sender and a tracking number, with carriers obliged to provide the tracking number on the inward manifest. Mail not timely and properly entered would be deemed voluntarily abandoned 15 days after importation.
The bonding changes are the sharpest. Both entry types would require a single transaction or continuous basic importation and entry bond. Liquidated damages would generally equal the value of the merchandise, rising to three times that value for restricted or prohibited goods and alcoholic beverages, with a new $1,000 minimum floor for specified bond breaches.
The context is the end of de minimis. The exemption for shipments valued at $800 or less has been suspended for all countries since Aug. 29, 2025, and is scheduled to terminate by statute on July 1, 2027. Shipments that once moved without entry filings are migrating into informal entry procedures, and the proposed rule attaches bonds, deadlines and identified parties to each of them.
Reactions: compliance teams brace, brokers push back
The reaction from the trade community has been less about the merits of any individual case than about the compounding of exposure.
Holland and Knight’s assessment to clients was direct. Exposure is not limited to duties, because fraud penalties can reach the domestic value of the goods and False Claims Act damages are trebled. Individuals are at risk, as the naming of Uni-Tile’s chief executive alongside the company demonstrates. Third parties including customs brokers, freight forwarders and shell entities can be reached through aiding and abetting theories. Parallel civil and criminal proceedings should be expected. And disclosure to CBP alone is not enough.
The firm recommended privileged internal reviews covering origin, valuation, classification, antidumping and countervailing duty exposure, Section 301 duties and forced labor risk.
Diaz Trade Law’s guidance was more operational: verify the importer of record on every entry, support country of origin claims with production evidence rather than supplier assertions, treat Enforcement Act notices, CF-28s and pre penalty notices as enforcement events rather than paperwork, review broker relationships, understand individual and surety exposure, and conduct diligence on domestic suppliers who are themselves importing.
Customs brokers have raised concerns about the low value rulemaking, arguing that the bond requirements and pre arrival filing obligations will fall hardest on small consignees and on carriers handling mail volumes. The comment period closing in early December will test how much of that resistance translates into changes.
Economic stakes
The enforcement push is occurring against a tariff wall that gives evasion an unusually large payoff.
Modelled estimates from Global Trade Alert’s U.S. tariff dataset put the trade weighted average applied U.S. tariff on imports from China at 27.77 percent as of Oct. 15, across approximately $433.8 billion in covered trade, with 11.4 percent of tariff lines carrying rates above 50 percent. When a product line carries a combined antidumping and countervailing duty rate approaching 690 percent, as Chinese ceramic tile does, the incentive to misstate origin is correspondingly extreme, and so is the penalty when the misstatement is found.
The macro backdrop offers little relief. The U.S. goods and services deficit widened 13.7 percent in August to $105.6 billion, the largest since March 2025, as imports climbed 4.3 percent to a record $420.8 billion. Record goods deficits were recorded with Mexico, Vietnam and Malaysia, three of the jurisdictions most frequently examined in transshipment investigations. Rising volumes through those corridors are not themselves evidence of evasion, but they are the haystack in which CBP’s analytics are searching.
There is also a cost of compliance question that rarely makes headlines. Every additional origin substantiation requirement, bond obligation and pre arrival filing adds administrative expense that falls disproportionately on smaller importers, who are least able to spread it across volume. Some of that cost will reach consumers. Federal Reserve Bank of New York economists reported on Oct. 6 that nearly 90 percent of the 2025 tariffs passed through into U.S. import prices within a month, and that a one percentage point rise in average tariffs lifts consumer goods prices by roughly 0.25 percent over a year.
What importers should do now
The practical response falls into five areas.
First, reconstruct origin. Companies should be able to produce manufacturing records, not just supplier declarations, for goods sourced through third countries in sectors subject to antidumping or countervailing duty orders. A commercial invoice naming a Malaysian seller is not origin evidence.
Second, audit the importer of record field. Entries filed under unfamiliar entities, whether arranged by a broker, a forwarder or a supplier, are the single clearest marker in the Uni-Tile narrative. Importers should reconcile their own purchase records against CBP entry data periodically.
Third, treat inquiries as events. A CF-28, an Enforcement Act notice or a pre penalty notice should trigger a documented internal review, not a form response. The expectation that determinations be applied across analogous entries means the scope of a single inquiry is rarely limited to the entries it names.
Fourth, examine broker and forwarder relationships. Aiding and abetting counts reach service providers, and importers relying on a broker’s assurances have limited protection if the arrangement looks engineered.
Fifth, revisit disclosure strategy with counsel. Given that a CBP prior disclosure does not satisfy the Justice Department’s policy, the sequencing and scope of any disclosure is now a legal judgment rather than a compliance formality.
Exporters and domestic manufacturers have a different stake. Trade remedy orders exist to protect them, and under enforced orders are a direct commercial injury. The qui tam mechanism gives competitors standing to act on suspicions, and relator firms are actively recruiting in sectors where import volumes diverge sharply from reported capacity in the declared country of origin.
Outlook
Both the Uni-Tile civil and criminal cases were pending as of mid October. The comment period on the low value entry rule closes in early December. Directive 26-12 is now the operating framework for Fraud Division charging decisions, and the National Fraud Detection Center continues to generate referrals from data rather than tips.
For importers, the message practitioners are delivering is consistent. The tariff program may be unsettled, with major components in litigation, but the penalty regime attached to it is not.