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Speak First, Pay Less: The Case for Disclosing Trade Compliance Mistakes

Writer: Destinee Broussard
Destinee Broussard
Oct 7
7 min read

Updated: 7 days ago

Picture a Tuesday afternoon. Your compliance lead is running a routine entry audit and stops on a line that looks wrong. A part your company has imported for two years has been entered under the wrong tariff code, at a lower duty rate.

Nobody did it on purpose. The code was copied from an old entry and carried forward ever since. By the time the spreadsheet is finished, the underpayment is about $180,000.


Then someone asks the question every importer eventually hears in a conference room: "Does anyone actually need to know about this?"


This scenario is familiar to anyone who has worked in trade compliance. The instinct is to fix it going forward and hope nobody asks. Across CBP, BIS, DDTC, OFAC and DOJ, the rules point the other way: coming forward first is treated as a mitigating factor, and staying quiet can count against you.



On October 1, 2026, DOJ's National Fraud Enforcement Division issued

Directive 26-12, which puts tariff evasion, importation fraud, and forced labor on its corporate priority list. The same memo says the Department must credit companies that disclose misconduct, cooperate, and remediate. It also tells prosecutors to give "great weight" to efforts to conceal a problem and to conduct that runs three years or more.


The government is looking harder, and it has told you what it rewards.



What each agency says about coming forward


Every major trade agency has a written rule that rewards disclosure. The details differ, so here is how each one works.


Agency

Rule

If you come forward first

What to watch

CBP

19 U.S.C. § 1592(c)(4) and 19 CFR 162.74

For negligence or gross negligence, the penalty cannot exceed interest on the unpaid duties. For fraud, it cannot exceed 100% of the unpaid duties, or 10% of the dutiable value if no duties were lost. The merchandise is not seized.

The disclosure must be made before, or without knowledge of, a formal investigation, and you carry the burden of proving you did not know. The unpaid duties must be tendered at disclosure or within 30 days of CBP's calculation.

BIS

15 CFR 764.5

A voluntary self-disclosure is a mitigating factor in what sanctions, if any, BIS seeks. Minor or technical violations are generally resolved within 60 days with no action or a warning letter.

A deliberate decision not to disclose a significant apparent violation is an aggravating factor. BIS must receive the disclosure before any U.S. agency learns the same information from another source and opens an investigation. How much weight it gets is in BIS's discretion.

DDTC

22 CFR 127.12

DDTC may consider a voluntary disclosure as a mitigating factor in deciding administrative penalties, if any.

Failure to report a violation will be an adverse factor. DDTC must receive the disclosure before any U.S. agency learns the same information from another source and opens an investigation. If the first notice is incomplete, the full disclosure is due within 60 calendar days.

OFAC

31 CFR Part 501, Appendix A

In a non-egregious case, the base penalty is one-half of the transaction value, up to a per-violation cap. In an egregious case, it is one-half of the statutory maximum.

The disclosure must reach OFAC before, or at the same time as, OFAC or another government agency discovers the violation. It does not qualify if it is materially incomplete, includes false or misleading information, or was prompted by an agency.

DOJ, criminal

Corporate Enforcement and Voluntary Self-Disclosure Policy, March 10, 2026

DOJ will decline to prosecute a company that voluntarily self-discloses to the appropriate DOJ criminal component, fully cooperates, and timely and appropriately remediates, when there are no aggravating circumstances.

The company must pay all disgorgement, forfeiture and restitution, and every declination is made public. A disclosure made only to a regulatory agency generally does not qualify. If a whistleblower reports both internally and to DOJ, the company still qualifies if it self-reports within 120 days of the internal report.

DOJ, civil

Justice Manual § 4-4.112

A proactive, timely and voluntary self-disclosure receives credit when a False Claims Act case is resolved. Credit most often takes the form of reduced penalties or a lower damages multiple.

Credit is in DOJ's discretion. It cannot bring the government's recovery below full compensation for its losses, including interest, investigation costs and the whistleblower's share.



Back to our importer and its $180,000 mistake. Without a prior disclosure, CBP could seek a penalty of up to $360,000 for negligence, or up to $720,000 for gross negligence, on top of the duties. With a valid prior disclosure, the company pays the $180,000 it always owed, plus interest.


What it looks like in real cases


Recent cases show the pattern. Com

panies that came forward first kept more control over how the story ended.

Case

Agency

Came forward first?

Outcome

MGI International, 2025

DOJ and CBP

Yes. In 2024 it disclosed false country-of-origin declarations to CBP and the U.S. Attorney.

Paid $6.8 million in a civil settlement with cooperation credit. DOJ then declined to prosecute the company.

Ceratizit USA, December 2025

DOJ

No. A whistleblower filed suit in 2022.

Paid $54.4 million to resolve allegations of evading Section 301 duties. The whistleblower's share was $9.75 million.

BAE Systems, Inc., August 2026

DDTC

Yes. It disclosed all but one of 104 alleged ITAR violations.

$36 million penalty, with $18 million suspended to pay for compliance improvements.

Indiana University, June 2024

BIS

Yes.

42 export violations resolved with no fine: required training and a one-year suspended denial order.

Darling Industries, February 2019

DDTC

Yes, but 22 months after finding the problem.

DDTC credited the disclosure and counted the delay against the company. $400,000 penalty, half suspended.

No two cases are identical, so the dollar figures are not a direct comparison. The difference worth noticing is who spoke first. MGI brought its own facts to the government. Ceratizit's case started with someone else's complaint.


When DOJ announced the MGI decision, the Deputy Attorney General said the resolution shows companies what the incentives are to disclose and remediate.


What disclosure does not do


Back in that conference room, the next question is usually, "If we tell them, are we safe?" Not entirely. Disclosure lowers the cost of a mistake. It does not make the mistake free, and it helps to know the limits before you start.


  • It does not erase what you owe. Unpaid duties still get paid. MGI had already repaid the evaded tariffs before DOJ closed its case.

  • It does not guarantee a zero penalty. Exyte paid BIS $1.5 million after disclosing transfers worth about $2.8 million to an Entity List party. Bosch paid $36.2 million over Huawei shipments worth about $72 million, in a case BIS called an example of the benefits of disclosing.

  • It does not protect individuals. In the MGI case, the former chief operating officer was charged and agreed to plead guilty.

  • Credit at one agency is not credit at another. DOJ's policy says a disclosure made only to a regulatory agency generally does not qualify for DOJ credit. Each agency has its own door.

  • Late is not the same as first. CBP's reduced penalties end once you know a formal investigation has started. Darling's 22-month wait cost it part of its credit.


Before you pick up the phone


A disclosure is only as good as the facts behind it. These five steps come first.

  1. Stop the activity that caused the problem.

  2. Scope it. Know which entries or shipments are affected, how far back it goes, and how much is at stake.

  3. Bring in legal counsel early, especially if anyone may have known, or if more than one agency is involved.

  4. Decide which agencies need to hear it. Each has their own process.

  5. Fix the root cause and write down what you changed. Agencies look at remediation when they decide how much credit to give.


One more reason not to wait: Directive 26-12 tells DOJ to build programs that incentivize whistleblowers. If your team has no clear place to raise a concern inside the company, the first report may go somewhere else.


Find it before they do


Our importer has two endings. In one, it files the disclosure, pays the duties and interest, corrects its broker instructions and moves on. In the other, it says nothing and spends years hoping no audit, no CBP inquiry and no former employee ever raises it.


The companies in the strongest position are the ones that find their own mistakes. That is the work we do at The Trade Pros: entry audits, classification and origin reviews, compliance assessments, and the documentation that shows how your decisions were made.


If a review turns up something that may need to be disclosed, we help you get the facts straight and work alongside your counsel on what comes next.


Want a second set of eyes on your process before someone else takes a look? Let's talk.


This post is general information, not legal advice. Whether and how to disclose depends on your facts, so talk with qualified counsel before you file.


-Dee



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