CUSTOMS ENFORCEMENT | 2026-09-19

A $5.15 Million Customs Settlement Started With One Employee: False Claims Act Risk in Country-of-Origin Reporting

A Taiwanese LED manufacturer resolved allegations that it routed Chinese goods through Taiwan to avoid Section 301 duties — and the former employee who reported it collected $876,146.

Customs enforcement used to arrive from CBP. Increasingly it arrives from the Department of Justice, on a statute written for defense procurement fraud, filed by someone who used to work at the company. The Everlight settlement announced in August 2026 is a compact illustration of how that works: a transshipment allegation, a reverse False Claims Act theory, treble-damages exposure, and a relator's share large enough to motivate the next report.

What Happened

On August 5, 2026, the United States Attorney's Office for the District of Maryland, together with U.S. Customs and Border Protection's Office of Trade, announced that Everlight Electronics Co. and its Texas subsidiary, Everlight Americas, agreed to pay $5.15 million to resolve False Claims Act and administrative allegations relating to evasion of customs duties.

The allegations described two distinct periods of conduct.

From July 2018 through January 2022, the government alleged that the company knowingly misrepresented the country of origin of LEDs manufactured in China, which were transshipped to Taiwan and then shipped to the United States as Taiwanese-origin goods, avoiding Section 301 duties applicable to Chinese-origin merchandise.

From January 2022 through November 2025, the allegations shifted in character: the company continued importing LEDs declared as Taiwanese while failing to adequately segregate Chinese-made components from Taiwanese-made components during manufacturing.

The case began as a complaint by Tao Wang, a former employee, under the False Claims Act's whistleblower provisions. The relator's share was $876,146.

Why the False Claims Act Reaches Customs at All

The False Claims Act is usually associated with claims for government money — invoices submitted to Medicare or the Defense Department. Customs duty evasion is the mirror image: the company is not asking the government to pay, it is avoiding paying the government.

That conduct is captured by the reverse false claim provision, 31 U.S.C. § 3729(a)(1)(G), which reaches a person who knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay money to the United States. An entry declaring an incorrect country of origin, where duty turns on origin, fits that description.

The consequences of proceeding under this statute rather than the customs penalty statute are substantial:

Treble damages plus per-claim civil penalties, rather than the culpability-tiered structure of 19 U.S.C. § 1592.

A six-year limitations period, extendable in certain circumstances — in this matter the alleged conduct reached back to 2018.

"Knowingly" includes reckless disregard and deliberate ignorance. Actual intent to defraud is not required. An importer who suspected an origin problem and chose not to look can satisfy the standard.

Private parties can initiate the case. This is the structural change that matters most.

The Whistleblower Economics

A relator who brings a successful qui tam action is entitled to a share of the recovery — generally 15 to 25 percent where the government intervenes, and more where it does not. Here that share was $876,146 for one former employee.

Every person who has seen an origin decision inside a company is a potential relator: logistics staff, customs brokers' contacts, quality engineers who know where components actually come from, finance staff who see the duty line. Retaliation against them is independently actionable under the statute's anti-retaliation provision.

This inverts the usual assumption that customs exposure surfaces through a CF-28 request for information or a focused assessment. It can surface instead through a sealed complaint the company does not learn about for a year or more.

The Second Allegation Is the More Instructive One

Straightforward transshipment — make it in China, route it through a third country, declare the third country — is a well-understood fact pattern. The 2022 to 2025 allegation is subtler and far more common: genuine manufacturing operations in a third country, but inadequate segregation of Chinese components from local ones.

Country of origin for these purposes generally turns on substantial transformation — whether processing in the second country produced a new and different article of commerce with a distinct name, character or use. That analysis fails in practice for reasons that are operational rather than legal:

Chinese and non-Chinese components are stored in shared bins, so no one can say which went into which unit. Production records do not tie a finished lot back to a component lot. A supplier's origin statement is accepted without asking what it is based on. Or a conclusion reached correctly in 2019 is never revisited after the bill of materials changes.

A company can be entirely sincere about its origin declarations and still be unable to prove them. Under a recklessness standard, that gap is the exposure.

What California Importers Should Do

Test whether your origin claims are provable, not merely believed. Take three products and trace each back from the entry to the bill of materials to the supplier documentation. If the chain breaks, it breaks the same way under scrutiny.

Look hardest where duty turns on origin. Section 301, Section 232, and forced-labor measures all make origin financially consequential, which is exactly where the government and relators look.

Ask what a supplier's origin statement rests on. A certificate asserting Taiwanese origin is not evidence of substantial transformation; the underlying manufacturing facts are.

Treat internal reports as the most important signal you will get. An employee who raises an origin concern is giving the company the chance to fix it through prior disclosure rather than learning about it through a complaint. Investigate promptly and never retaliate.

Use prior disclosure while it is available. A valid disclosure under 19 U.S.C. § 1592(c)(4), made before a formal investigation commences and accompanied by tender of the loss of duties, caps liability — for negligence and gross negligence at interest on lost duties, for fraud at the lost duties themselves. That statutory cap is not something an enforcement policy can narrow, and its value has risen as administrative mitigation has tightened. The window closes once the government is already looking.

How Trembach Law Helps

Trembach Law represents importers, manufacturers and distributors in customs enforcement matters — country-of-origin and substantial transformation analysis, internal investigations of origin and classification claims, prior disclosures, penalty defense under 19 U.S.C. § 1592, responses to CF-28 and CF-29 notices, focused assessments, and False Claims Act exposure arising from customs declarations. Attorney Anatolii Trembach is admitted to practice before the U.S. Court of International Trade.

The firm is based in Calabasas, serves importers at the Ports of Los Angeles and Long Beach, and represents importers nationwide.

This article is for general information and is not legal advice. It describes a publicly announced settlement in which the allegations were resolved without a determination of liability. How any statute applies depends on specific facts, and no outcome is guaranteed.

Contact Trembach Law Firm at (818) 514-7680 for a confidential consultation.

Trembach Law Firm | 27001 Agoura Road, Suite 350, Calabasas, CA 91301