Tariffs and Trickery: A Forensic Accounting Perspective on How the U.S. Tariff System Fuels Fraud

In today’s complex global economy, tariffs are more than just economic tools, they're flashpoints for fraud. As an experienced forensic accountant, we can see how evolving trade policies and tariff structures have opened the door to a wide array of deceptive practices. The U.S. tariff situation, intensified by geopolitical tensions and shifting supply chains, has created the perfect storm for illicit financial activity.

At Turning Numbers, our work in fraud detection and prevention often involves tracing the financial breadcrumbs left behind by organizations attempting to manipulate the system. 

The following are the most common fraud schemes we're encountering in today’s tariff-driven business climate.

1. Customs Valuation Fraud

This scheme involves underreporting the value of imported goods to reduce the amount of tariffs owed. Fraudsters manipulate invoices and financial records to make high-value items appear far less costly on paper. The ripple effect not only impacts revenue collection but also creates an uneven playing field for honest businesses.

Customs valuation fraud is often executed with the cooperation of foreign suppliers who issue separate invoices, one showing the real value and another showing the “declared” value. These schemes can be difficult to detect without deep forensic analysis of international payments, logistics costs, and intercompany agreements. A forensic accountant will often look for inconsistencies between the shipping documents and the internal books or analyze currency exchange irregularities that signal deception.

2. Misclassification of Goods

Tariff codes exist for a reason, but that hasn’t stopped some entities from misclassifying goods under less expensive categories. For example, labeling luxury electronics as industrial parts can shave off significant tariff costs, until auditors uncover the discrepancy.

Misclassification can be both accidental and intentional, which makes it a legal gray area that fraudsters exploit. When businesses repeatedly "misclassify" items that result in major tariff reductions, that’s where forensic accountants step in. We often analyze import logs and code histories over time, looking for patterns of abuse, sudden changes in classification, or employee emails suggesting intent to deceive. These indicators form the basis for fraud detection and legal escalation.

3. Transshipment Fraud

One of the more sophisticated tactics, transshipment fraud involves rerouting goods through third-party countries to disguise their true origin. This is often done to bypass tariffs imposed on specific countries. The complexity of international trade routes makes this a challenging fraud to detect without the precision of forensic accounting.

For example, goods manufactured in a country with high tariffs might first be shipped to a “friendly” country with low or no tariffs and then forwarded to the U.S., falsely labeled as originating in the intermediate country. Forensic accountants use customs entry data, Bills of Lading, and shipping container records to identify anomalies in the supply chain. Data analysis often reveals implausible shipping times or inconsistent port activity that suggest transshipment is being used to obscure the true origin.

4. False Country of Origin

Closely tied to transshipment fraud, this involves blatantly misrepresenting where goods are manufactured. A product made in a tariffed country might be labeled as originating from a trade-friendly nation. Without thorough fraud detection and prevention procedures, such lies can go unnoticed for years.

Manufacturers may also alter physical product packaging, including labels and tags, to mislead customs authorities. A forensic accountant may investigate this by cross-referencing supplier certifications, examining product serial numbers, and auditing quality assurance data to match product batches with known factories. In many cases, whistleblower statements or digital forensics help reveal how companies manipulate origin records to deceive import authorities.

5. Undervaluation of Invoices

Falsified invoices showing lower values than the actual sale price are a go-to method for tariff evasion. As a forensic accountant, I’ve examined cases where a deep dive into supplier agreements, emails, and bank records was required to expose the true value of transactions.



One common tactic includes dual invoicing - where a legitimate invoice is issued for domestic accounting while a fraudulent one is used for customs purposes. This leaves a trail of conflicting documentation. Forensic accountants also investigate discrepancies in wire transfers and analyze freight insurance coverage values, which often reflect the true value of the shipment, not the manipulated invoice amount.

6. Smuggling

The most blatant and illegal method — smuggling — sidesteps tariffs entirely. Smugglers rely on weak customs enforcement and falsified documents to bring unreported goods into the U.S. market. This poses not just an economic threat, but also potential national security concerns.

While smuggling often seems like a customs enforcement issue, it frequently intersects with white-collar fraud. In many cases, smuggled goods are laundered into legitimate supply chains using shell companies, fake inventory reports, and falsified invoices. As forensic accountants, we analyze discrepancies in inventory records, unexplained revenue sources, or gross margin inconsistencies that suggest unreported imports.

7. Document Forgery

Whether it’s falsified certificates of origin, shipping manifests, or inspection records, document forgery continues to be a persistent threat. Our forensic accounting team often identifies these forgeries by cross-referencing supplier data, financial records, and digital forensics.

Modern fraudsters use sophisticated editing software and document templates to create near-perfect forgeries. However, digital metadata, such as document creation dates, IP addresses, and user credentials, can reveal discrepancies. Forensic accountants collaborate with IT security experts to identify altered files, false signatories, and unauthorized access to sensitive databases. Even minor inconsistencies in language or formatting can be red flags during document audits.

8. Circumvention

By making minor alterations to a product, such as changing its composition or adding superficial features, companies can reclassify goods under a different tariff schedule. While it may appear legal at first glance, this practice is often designed purely to dodge financial obligations.

A notable example includes altering the design of steel products or mixing textiles just enough to shift classification codes. In these cases, forensic accountants may work with industry experts to assess whether the modification is truly material or simply cosmetic. Financial audits can also show suspicious patterns, such as cost increases without a corresponding change in production materials, that raise red flags.

9. Trade-Based Money Laundering (TBML)

In this complex scheme, fraudsters manipulate trade invoices to move illicit funds across borders while also avoiding tariffs. TBML often hides in plain sight among legitimate trade activities, making fraud detection and prevention especially difficult without specialized expertise.

TBML schemes often involve over- or under-invoicing, phantom shipments, or mismatched cargo and payment records. A forensic accountant investigates these cases by triangulating financial transactions, shipping data, and contract terms. TBML not only violates customs regulations but also implicates a business in broader financial crimes like tax evasion, terrorism financing, or organized crime.

10. Re-Labeling

Changing labels or packaging to mislead customs officials about a product’s origin or classification is increasingly common. A product that’s actually made in a tariff-heavy country might bear the logo and barcode of a different, low-tariff nation.

Re-labeling operations can occur at warehouses, in shipping containers, or even offshore prior to entry. Forensic accountants can identify re-labeling schemes by matching inventory SKUs with manufacturing logs or examining discrepancies between physical inventory and declared import data. Photographic evidence and third-party inspections often confirm that products are being misrepresented, sometimes with counterfeit certifications.

Why This Matters Now

The combination of unpredictable tariff changes, global supply chain disruptions, and increasing pressure on margins has pushed many businesses, knowingly or unknowingly, toward risky behavior. But the consequences are severe. Financial penalties, supply chain interruptions, and reputational damage can cripple even the most resilient companies.

How Forensic Accountants Help

As a Certified Fraud Examiner (CFE) and Master Analyst in Financial Forensics (MAFF), my role is to help organizations navigate this minefield. Through detailed audits, digital investigations, and strategic risk assessments, our team at Turning Numbers supports companies in identifying vulnerabilities and building fraud-resistant systems.

Forensic accounting is not just about uncovering fraud after the fact — it’s about building a culture of transparency and ethical compliance that protects your business before it’s too late.

Final Thoughts

Tariffs are here to stay, and with them, the potential for fraud will only grow more sophisticated. Companies that fail to invest in fraud detection and prevention tools and practices risk far more than fines — they risk their future. 

At Turning Numbers, we stand ready to help you uncover the truth, protect your assets, and navigate the complexities of international trade with confidence.

Need help assessing your exposure to tariff-related fraud?
Contact Turning Numbers Forensic Accounting Firm today for a confidential consultation.

About Turning Numbers

Turning Numbers is a Philadelphia-based forensic accounting firm that uncovers the financial truth behind fraud, disputes, and mismanagement. We investigate discrepancies, protect assets, and deliver the clarity needed to act decisively.

Tagline: Numbers don’t lie, but people do.

Learn more at:www.turningnumbers.com