What OFAC Defines as a “Sham Transaction” 

Sham transactions occur when blocked persons “give up their property on paper only,” while continuing to benefit from or control the asset. These arrangements often involve: 

• Proxies, straw owners, or front companies acting on behalf of sanctioned individuals. 
• Opaque legal structures, including multi‑layered LLCs, partnerships, or trusts. 
• Transfers to family members or close associates who may serve as facilitators. 
• Commercially unreasonable transfers, such as those lacking adequate consideration. 
• Continued use or control of the asset by the blocked person after the purported transfer. 

Pro Tip: Look beyond legal formalities and identify the economic realities of the transaction. 

Red Flags Identified by OFAC 

The advisory outlines several indicators that a transaction may be a sham designed to evade sanctions. These include: 

• Transfers with no legitimate business purpose or to individuals lacking relevant expertise. 
• Complex corporate structures in high‑risk jurisdictions. 
• Inconsistent or incomplete documentation surrounding the transfer. 
• Timing of the transfer, particularly if it occurs close to a sanctions designation. 
• Evasive or vague responses from intermediaries when questioned about ownership or control. 

Pro Tip: No single factor is determinative; look at the totality of the circumstances instead. 

If your organization needs assistance strengthening sanctions compliance, conducting due diligence, or reviewing internal controls, contact Diaz Trade Law today! 

Learn more: 

• Bloomberg Law: Submitting a Voluntary Self-Disclosure to OFAC 
• Bloomberg Law Feature: Voluntary Self-Disclosures: Recent Guidance From BIS, OFAC & DOJ 
• Office of Foreign Assets Control (OFAC) Sanctions Compliance 

What Happened

For a period of over ten years, from June 2011 to March 2023, Harman knowingly imported heat sinks that contained extruded aluminum from China without paying the required antidumping and countervailing duties (AD/CVD).

The settlement also reveals that when Harman discovered its failure to pay AD/CVD, the company concealed this fact and decided not to disclose it to the U.S. government. 

This case arose from a whistleblower lawsuit filed under the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The whistleblower in this case will receive over $2M of the settlement proceeds.

Enforcement is a Top Priority for the U.S. Government

High tariffs in the current trade environment have created a higher incentive to cheat. The U.S. government has made clear that enforcing customs laws is a top priority. 

For example, on May 12, 2025, Matthew Galeotti, the Head of the U.S. Department of Justice’s Criminal Division, sent a memo to all criminal division personnel highlighting the focus areas of the division for white-collar crime.

The memo included a list of “high-impact areas” that the division will prioritize investigating and prosecuting. Trade and customs fraud, including tariff evasion, was second on the list.

The DOJ also revised its Corporate Whistleblower Awards Pilot Program and added “trade, tariff, and customs fraud by corporations” to the priority list.

CBP has also noted that “bad actors violating U.S. trade law will be identified, investigated, and punished to the fullest extent of the law.”

Now more than ever, it is critical for importers to examine their import compliance programs and ensure that adequate procedures are in place to correctly enter goods into the United States. Importers should proactively conduct extensive due diligence in their supply chains to ensure they can detect, report, and remedy any noncompliance with customs requirements. In addition, if an importer becomes aware of the fraudulent conduct of a competitor, they should contact counsel to discuss options for reporting it to the government.

Diaz Trade Law can assist importers in developing compliance plans and guide importers in the event of a customs investigation. Contact us at 305-456-3830 or info@diaztradelaw.com.

Learn More

• Bloomberg Law: What is an Importer’s Reasonable Care Standard?
• Bloomberg Law: Submitting a Prior Disclosure to CBP
• Webinar: Importing 101: A Crash Course in CBP Compliance and Best Practices
• Webinar: Basics on Tariff Classification
• Webinar: Building and Maintaining an Effective Import Compliance Plan
• Webinar: The False Claims Act

The employees were arrested and charged with one count of conspiracy to commit wire fraud and were detained. The company co-owner, who was also charged, remains in Indonesia and has not yet been arrested.

The defendants allegedly engaged in a complex scheme to import over $1.2 billion of jewelry and illegally defraud the United States out of more than $86 million in customs duties and tariffs. 

The alleged scheme included two parts:

• First, UBS Gold made jewelry in Indonesia and shipped it to Jordan, which had a Free Trade Agreement with the United States, before sending it to the United States. The defendants then falsely claimed that UBS Gold jewelry had been manufactured in Jordan, which avoided the duty that would otherwise apply.
• Second, when the U.S. announced additional tariffs on Indonesia and Jordan earlier this year, the company began shipping scrap gold from the U.S. to Jordan, which they falsely claimed was gold jewelry that simply needed to be assembled or finished in Jordan. Instead, the defendants and co-conspirators swapped the scrap gold for UBS Gold jewelry made in Indonesia, which they then shipped from Jordan to the U.S. The defendants falsely claimed that the jewelry had been manufactured in the U.S., so they could avoid paying the tariffs that would otherwise apply.

The wire fraud conspiracy charge carries a maximum of 20 years in prison and a maximum fine of either $250,000 for the individual defendants or $500,000 for the corporate entity or twice the gain or loss from the offense, whichever is greater.

​​This case demonstrates the government’s focus on enforcement and the importance of prioritizing compliance programs. Although this case was egregious, importers can still face substantial fines and penalties when they fail to exercise reasonable care and misclassify goods or misstate the country of origin. 

Diaz Trade Law can help create an import compliance plan for your business or review and update an existing one. To learn more about how we can help, contact us at info@diaztradelaw.com or call us at 305-456-3830.

Learn more:

• Crash Course in the Harmonized Tariff Schedule of the United States
• A Primer on Customs Classification
• Webinar: Importing 101 – Introduction to U.S. Customs
• ACE: Auditing Your Import History
• Why Pre-Compliance is a MUST
• Webinar: Importing 101: A Crash Course in CBP Compliance and Best Practices
• Webinar: Basics on Tariff Classification
• Webinar: Building and Maintaining an Effective Import Compliance Plan

What makes this potential shutdown different from previous lapses in funding is the lack of contingency plans within the relevant agencies. The White House’s Agency Contingency Plan page is blank. 

Until agencies update their guidance, we can only look to previous contingency plans.

Below is a breakdown of previously issued agency guidance. ,

U.S. Customs and Border Protection

According to the Department of Homeland Security’s most recent contingency plan (March 2025) cargo inspection functions at ports of entry will remain active during a shutdown. However, certain activities, such as training and auditing, are not required to be carried out during this time. In addition, back-office support positions are not likely to be deemed essential and will be furloughed. Refunds, audits, ruling requests, etc., would be delayed until the shutdown ends.

There remains uncertainty around which specific offices will be deemed essential. For example, Forced Labor Communications may be furloughed, resulting in delays in reviewing the Enforce and Protect Act (EAPA) and Uyghur Forced Labor Prevention Act (UFLPA) allegations.

U.S. Department of Commerce

According to the Department of Commerce’s most recent contingency plan (September 2023), some International Trade Administration (ITA) activities, such as trade policy negotiations, will be considered necessary for national security and will operate during a shutdown. However, many other activities are not likely to be deemed essential. For example, in the last shutdown in 2019, the ITA and the Bureau of Industry and Security operated with a significantly reduced staff and budget. All antidumping and countervailing duty (AD/CVD) investigations and administrative proceedings will stop.

U.S. Department of State

According to the department’s most recent contingency plan (August 2023), many administrative functions will be subject to furloughs, which will result in a delay in licensing and other regulatory functions.

Food and Drug Administration (FDA)

Unlike many other agencies that are funded solely by government appropriations, the majority of FDA staff is funded by other revenue (agency fees) and is therefore exempt from a government shutdown. According to the agency’s most recent contingency plan (December 2023), 77% of FDA staff will be retained in the event of a lapse of appropriation. Entry reviews and exams will continue, as well as high-risk investigations. However, importers should expect delays in the processing of import transactions.

While many agencies and employees critical to international trade will not be subject to furloughs during a shutdown, companies should still expect delays and disruptions. Diaz Trade Law will continue to monitor developments and provide updates when they become available.

Extending 301 Exclusions

There are currently 178 effective exclusions in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. These products are exempt from additional 301 duties. USTR has extended these exclusions several times, including a recent 90-day extension through November 29, 2025. USTR is seeking public comment on whether any of the 178 effective exclusions warrant further extension beyond November 29, 2025.

Comments are due October 16, 2025.

National Trade Estimate Report

Each year, USTR publishes the National Trade Estimate Report on Foreign Trade Barriers (NTE Report). USTR is seeking input to assist it in identifying significant foreign barriers to, or distortions of, U.S. exports of goods and services and U.S. foreign direct investment. 

Commenters should submit information related to one or more of the following categories of foreign trade barriers:

• Import policies
• Technical barriers to trade
• Sanitary and phytosanitary measures
• Government procurement
• Intellectual property protection
• Services
• Investment
• Subsidies
• Anticompetitive practices
• State-owned enterprises
• Other non-market policies and practices
• Labor
• Environment
• Other barriers

Comments are due October 30, 2025.

Joint Review of USMCA

Article 34.7 of the United States Mexico Canada Agreement (USMCA) requires government representatives from the three countries to meet on the sixth anniversary of the agreement (July 1, 2026) to conduct a Joint Review of the operation of the Agreement. Ahead of this meeting, the USTR is seeking input from the public and trade community in advance of the joint review. 

In particular, USTR invites comments regarding:

• Any aspect of the operation or implementation of the USMCA.
• Any issues of compliance with the Agreement.
• Recommendations for specific actions that USTR should propose ahead of the Joint Review.
• Factors affecting the investment climate in North America and in the territories of each Party
• Effectiveness of the USMCA in promoting investment that strengthens U.S. competitiveness, productivity, and technological leadership.
• Strategies for strengthening North American economic security and competitiveness.

Comments are due November 3, 2025.

Make your voice heard by filing a comment! Diaz Trade Law can assist you in preparing a filing and also help determine how these initiatives impact your business. Contact us at 305-456-3830 or info@diaztradelaw.com.

Read more:

• USTR Finalizes Action on 301 Tariffs
• White House Announces Further Section 301 Tariff Hikes on Chinese Goods
• Tariffs are Bad, So Are Non-tariff Barriers
• Bloomberg Law: USMCA Import Considerations for Practitioners

As part of the plea agreement, Cadence will pay criminal penalties of nearly $118 million. 

In addition to the charges, the Department of Commerce’s Bureau of Industry and Security (BIS) also announced the resolution of a civil enforcement action against the company in which Cadence agreed to pay over $95 million in civil penalties. 

The DoJ and BIS have coordinated the resolution of the parallel investigation, and each agreed to a partial credit against their fine for payments made to satisfy the other agency’s fine. Under the coordinated agreement, Cadence will pay criminal and civil penalties of more than $140 million.

Cadence committed criminal violations of the export control laws by selling hardware, software, and semiconductor design intellectual property to the National University of Defense Technology (NUDT) in China. NUDT was added to the Department of Commerce’s Entity List in February 2015. The university was involved in the development of supercomputers with applications for military and nuclear explosive simulations. 

Cadence and its Chinese subsidiary engaged in a conspiracy to commit export control violations by exporting this technology to NUDT without obtaining the requisite licenses from BIS. 

Court documents reveal that Cadence continued exporting software even after acknowledging via email that NUDT had been added to the Entity List.

In negotiating the plea agreement, the DoJ considered that Cadence was cooperative when the investigation commenced, but also noted the company’s failure to voluntarily disclose the misconduct to NSD. Accordingly, the amount of the monetary penalty reflects a 20% reduction of the statutory maximum fine.

​​This case demonstrates the government’s priority in enforcing export controls and the importance of prioritizing compliance programs.

Diaz Trade Law can help create a new export compliance plan for your business or review and update an existing one. To learn more about how we can help, contact us at info@diaztradelaw.com or call us at 305-456-3830.

Read more:

• The Importance of Regular Export Compliance Training for Your Business
• Building a Strong Export Compliance Plan
• Building & Maintaining an Effective Export Compliance Plan
• Introduction to Export Controls
• ICYMI: State Department Reaches $200M Settlement with RTX Corporation for Export Violations

Grosfillex submitted false forms to Customs and Border Protection (CBP) claiming that furniture parts made of extruded aluminum from China were not subject to AD/CVD. The company attempted to hide the aluminum extrusions by falsely packing them as sham “furniture kits.” Additionally, for a different subset of extrusions, the company failed to correct customs forms it had submitted previously, even after learning that the forms contained false information.

The investigation arose from a whistleblower lawsuit filed under the False Claims Act by a former employee of Grosfillex. Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery. In this case, the whistleblower will receive $962,662.74.

Duty Evasion is on the Rise

This case is just one example of the growing incentive to cheat that comes with higher tariffs. Whether it’s through misclassifying goods, undervaluing imports, or using deceptive transshipment routes, some companies think they are being creative, but, instead, are participating in outright illegal strategies to reduce their tariff liability.

Higher tariffs have even contributed to the emergence of a cottage industry of “tariff reduction” companies that suggest ways to cut import costs. However, many of these so-called strategies amount to evasion, putting importers at serious civil and criminal risk.

The Department of Justice (DoJ) and U.S. Customs and Border Protection (CBP) have both made clear that duty evasion is a top enforcement priority.

Now more than ever, it is critical for importers to examine their import compliance programs and ensure that adequate procedures are in place to correctly enter goods into the United States. Importers should proactively conduct extensive due diligence in their supply chains to ensure they can detect, report, and remedy any noncompliance with customs requirements. In addition, if an importer becomes aware of the fraudulent conduct of a competitor, they should contact counsel to discuss options for reporting it to the government.

Diaz Trade Law can assist importers in developing compliance plans and guide importers in the event of a customs investigation. Contact us at 305-456-3830 or info@diaztradelaw.com.

Learn more: 

• CIT Hands Down $3.4M Penalty for Duty Evasion
• DOJ Targets Trade Fraud: Importers Now on Notice as Criminal Division Ramps Up Enforcement
• Bloomberg Law: What is an Importer’s Reasonable Care Standard?
• Bloomberg Law: Voluntary Self-Disclosures: Recent Guidance From BIS, OFAC & DOJ
• Bloomberg Law:  Submitting a Prior Disclosure to CBP
• Webinar: The False Claims Act
• Webinar: Importing 101: A Crash Course in CBP Compliance and Best Practices
• Webinar: Basics on Tariff Classification
• Webinar: Building and Maintaining an Effective Import Compliance Plan

The Case

The government’s case was filed in 2023, alleging that the importers had falsely declared that Chinese-origin goods as Thai origin to evade duties. The government asserted this false declaration avoided payment of ordinary 6% duties, Section 301 duties ranging from 10% to 25%, and 234.51% antidumping duties. 

The government asked the court to impose a penalty for negligence. The penalty amount is twice the loss of revenue or the domestic value, whichever is lower. After the importer failed to answer the complaint (a huge mistake), the U.S. moved for summary judgment.

The CIT granted the government’s motion and ordered the importer to pay a nearly $3.4 million penalty as well as all unpaid duties, taxes, and cash deposits on the unliquidated entries in question.

Duty Evasion is on the Rise

This case is just one example of the growing incentive to cheat that comes with higher tariffs. Whether it’s through misclassifying goods, undervaluing imports, or using deceptive transshipment routes, some companies are turning to creative or outright illegal strategies to reduce their tariff liability.

These incentives have even contributed to the emergence of a cottage industry of “tariff reduction” companies that suggest ways to cut import costs. However, many of these so-called strategies amount to evasion, putting importers at serious civil and criminal risk.

The Department of Justice (DoJ) and U.S. Customs and Border Protection (CBP) have both made clear that duty evasion is a top enforcement priority.

Now more than ever, it is critical for importers to examine their import compliance programs and ensure that adequate procedures are in place to correctly enter goods into the United States. Importers should proactively conduct extensive due diligence in their supply chains to ensure they can detect, report, and remedy any noncompliance with customs requirements. In addition, if an importer becomes aware of the fraudulent conduct of a competitor, they should contact counsel to discuss options for reporting it to the government.

Diaz Trade Law can assist importers in developing compliance plans and guide importers in the event of a customs investigation. Contact us at 305-456-3830 or info@diaztradelaw.com.

Learn more: 

• DOJ Targets Trade Fraud: Importers Now on Notice as Criminal Division Ramps Up Enforcement
• Bloomberg Law: What is an Importer’s Reasonable Care Standard?
• Bloomberg Law: Voluntary Self-Disclosures: Recent Guidance From BIS, OFAC & DOJ
• Bloomberg Law:  Submitting a Prior Disclosure to CBP
• Webinar: The False Claims Act
• Webinar: Importing 101: A Crash Course in CBP Compliance and Best Practices
• Webinar: Basics on Tariff Classification
• Webinar: Building and Maintaining an Effective Import Compliance Plan

The Federal register notices are available here (UAS) and here (polysilicon).

BIS is specifically interested in the following information:

1. The current and projected demand for these products and the extent to which domestic production can meet this demand
2. The role of foreign supply chains, particularly of major exporters, in meeting United States demand 
3. The concentration of U.S. imports from a small number of suppliers and the associated risks
4. The impact of foreign government subsidies and predatory trade practices 
5. The economic impact of artificially suppressed prices due to foreign unfair trade practices and state-sponsored overproduction
6. The potential for export restrictions by foreign nations
7. The feasibility of increasing domestic capacity to reduce import reliance
8. The impact of current trade policies on domestic production and whether additional measures, including tariffs or quotas, are necessary to protect national security

The deadline to submit comments is August 6, 2025.

The investigations could result in new trade restrictions, including tariffs. If you import products covered under these investigations, make your voice heard by filing a comment.

Contact Diaz Trade Law for assistance in drafting comments and for help in determining how these investigations may impact your business. 

Learn more:

• BIS Releases New Edition of “Don’t Let This Happen to You”
• BIS Issues Final Rule on VSD Policies and Penalty Guidelines
• BIS Issues Guidance to Financial Institutions on Best Practices for Compliance with the Export Administration Regulations
• ICYMI: BIS Updates Boycott Requester List

The Executive Order (effective July 1, 2025) revoked the following six prior executive orders dating back to 2004:

• Executive Order 13338 of May 11, 2004 (Blocking Property of Certain Persons and Prohibiting the Export of Certain Goods to Syria),
• Executive Order 13399 of April 25, 2006 (Blocking Property of Additional Persons in Connection With the National Emergency With Respect to Syria)
• Executive Order 13460 of February 13, 2008 (Blocking Property of Additional Persons in Connection With the National Emergency With Respect to Syria)
• Executive Order 13572 of April 29, 2011 (Blocking Property of Certain Persons with Respect to Human Rights Abuses in Syria)
• Executive Order 13573 of May 18, 2011 (Blocking Property of Senior Officials of the Government of Syria)
• Executive Order 13582 of August 17, 2011 (Blocking Property of the Government of Syria and Prohibiting Certain Transactions with Respect to Syria).

The revocation of Executive Order 13338 ended the national emergency that underpinned the subsequent executive orders.

The Executive Order also waived certain sanctions imposed by the Syria Accountability Act and the Chemical and Biological Weapons Control and Warfare Elimination Act.

On June 30, the U.S. Office of Foreign Assets Control (OFAC) took action to implement the executive order by removing 518 previously sanctioned persons and companies from the Specially Designated Nationals and Blocked Persons (SDN) List, restoring their access to U.S. financial systems. 

The U.S. has had sanctions on Syria since 1979, when the U.S. designated it a state sponsor of terrorism. The U.S. expanded those measures in 2004 over Syria’s military presence in Lebanon and again in 2011 in response to President Bashar Assad’s crackdown on protesters.

Why Now

The revocation of sanctions fulfills a commitment Trump made during a visit to Saudi Arabia in May to lift all sanctions on Syria. Saudi Arabia and Turkey have both pushed for the U.S. to remove the restrictions to facilitate reconstruction after the overthrow of the Assad regime in 2024. The move aligns the U.S. with recent actions by the European Union and the U.K., both of which lifted economic sanctions earlier this year.  

Some Sanctions Still Remain

Some sanctions can only be removed through congressional action. For example, sanctions under the Caesar Act that target individuals, entities, and governments supporting the Syrian regime of Bashar al-Assad will remain in place. Syria also remains designated as a State Sponsor of Terrorism, which continues to restrict investment and diplomatic engagement. However, the executive order directed relevant agencies to examine these restrictions and assess what is required to suspend them.  

Targeted sanctions remain in place against Bashar al-Assad, his inner circle, terrorist organizations, and entities linked to drug trafficking, chemical weapons, and Iranian proxies. 

If you have questions on sanctions or export-related matters, contact Diaz Trade Law today at info@diaztradelaw.com or 305-456-3830.

Read more:

• Office of Foreign Assets Control (OFAC) Sanctions Compliance
• Bloomberg Law: US Sanctions Lists
• ICYMI: Congress Doubles the Statute of Limitations for Sanctions Violations