Buyer Beware: Trying to Avoid or Reduce Tariffs
As the typical tariffs on many goods from China have soared to at least 45 percent, some suppliers in China are offering U.S. purchasers a way of avoiding or reducing the tariffs. However, U.S. importers should carefully scrutinize such offers. Attempting to lower or avoid tariffs without the proper analysis and exercise of reasonable care could lead to enforcement actions by U.S. Customs and Border Protection (CBP) and significant monetary penalties.
The reported proposal: Some suppliers in China are suggesting to their U.S. customers that the supplier issue an invoice for the imported goods not including engineering, patent licensing, setup, or other overhead costs of manufacturing the goods in China. The suppliers would then invoice the U.S. purchasers separately for those costs. That second invoice would not be sent with the shipped goods.
In other words, the declared, dutiable value of the goods would be lower than the total price actually paid by the U.S. importer to the foreign seller. The amount of duties, which are applied as a percentage of the dutiable value, would thus be lowered.
The problem with such a proposal:
1. Under the U.S. Customs valuation rules, the dutiable value (usually the “transaction value”) is generally the price paid or payable to the foreign seller. If certain pre-import costs such as design or engineering are not included in the price of the goods, those costs must be added to the price of the goods to calculate the dutiable value. All payments made to the foreign seller are presumed to be part of the dutiable value, and the U.S. importer of record bears the burden of overcoming this presumption. Thus, failure to include such costs in the dutiable value generally would be a violation of CBP regulations.
2. The U.S. importer of record bears all the liability for underpayments of duties to CBP and for fines and penalties applied as a result of the violation. Civil fines of an amount up to the domestic value of the imported merchandise can be imposed, and criminal penalties can also be imposed for knowing and willful violations. The foreign seller will have been paid by the U.S. purchaser and will not be responsible for what could be significant amounts owed to CBP.
3. Significant enforcement of tariff evasion on goods imported from China is anticipated, including initiation of False Claims Act cases by the Department of Justice. Furthermore, a presidential proclamation issued in February on additional steel and aluminum tariffs directs CBP to impose maximum penalties for misclassification of such products to evade tariffs.
Given all of these circumstances, U.S. importers should exercise caution when considering any tariff avoidance or reduction proposals offered by suppliers in China.
Beer and Aluminum Cans Subject to New Tariffs
On April 2, 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) posted a draft Federal Register Notice adding two aluminum derivative products that will be subject to the previously announced 25 percent Section 232 aluminum duties/tariffs: beer and empty aluminum cans.
BIS is specifically adding malt beer (classifiable under 2203.00.00, HTSUS) and empty aluminum cans (classifiable under subheading 7612.90.10, HTSUS) to the aluminum derivatives annex. The effective date for the 25 percent derivative duties is on or after 12:01 a.m. (Eastern) on April 4, 2025.
The draft Federal Register Notice does not provide an exemption for USMCA-qualifying beer or empty aluminum cans at this time. It is anticipated that U.S. Customs and Border Protection (CBP) will release guidance instructing the application of the 25 percent duties only on the aluminum can’s value of imported malt beer. Under prior CBP guidance, if the value of the aluminum content is unknown or cannot be proved, a 25 percent duty must be paid on the entire entered value. Furthermore, 25 percent duties will apply to aluminum content in empty aluminum cans.
The U.S. Commerce Department on Wednesday revised President Donald Trump’s 25% tariffs on derivative aluminum products to include all beer and empty aluminum can imports.
www.reuters.com/…
IRS Roundup March 15 – March 28, 2025
Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for March 15, 2025 – March 28, 2025.
IRS GUIDANCE
March 17, 2025: The IRS issued Revenue Ruling 2025-8, providing the April 2025 short-, mid-, and long-term applicable federal rates for purposes of Internal Revenue Code Section 1274(d), as well as other provisions.
March 21, 2025: The IRS released Announcement 2025-8, which displays a copy of the competent authority arrangement entered into by the United States and Switzerland under paragraph 3 of Article 25 of the Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation. The agreement details US and Swiss pension and retirement arrangements, including individual retirement savings plans that may be eligible for benefits.
March 21, 2025: The IRS issued Private Letter Ruling 202512002, concluding that a trust was properly classified as a “liquidating trust” for federal tax purposes, despite several extensions of the trust’s term. Pursuant to Revenue Procedure 94-45, a trust instrument must contain a fixed or determinable termination date, which is usually not more than five years from the date of the trust’s creation. However, Revenue Procedure 94-45 also provides that, if warranted by the facts and circumstances, a trust’s term may be extended for a finite time, subject to the approval of the bankruptcy court with jurisdiction over the case.
The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).
TRANSFER PRICING
March 27, 2025: The IRS released its annual report on advance pricing agreements (APAs) for 2024 as part of its Advance Pricing and Mutual Agreement Program. The report summarized key APA trends and statistics, including the number of applications filed, pending APAs, and executed APAs. The report also details APA trends and statistics executed by country and by industry and provides a breakdown of the types of transactions covered by APAs, the transfer pricing methods used, and other APA characteristics from 2024.
US Tariffs Update: Universal and Reciprocal Tariffs Imposed (as of April 4)
Go-To Guide:
President Donald Trump imposed a 10% universal tariff, effective April 5, 2025, covering imports from all countries into the United States.
Reciprocal tariffs were also imposed on over 50 countries with rates ranging from 11% to 50%, effective April 9, 2025.
USMCA-compliant goods from Canada and Mexico will continue to enter duty-free.
Steel and aluminum products subject to the 25% additional tariffs, effective March 12, are exempt from the universal and country-specific reciprocal tariffs.
Autos and auto parts, subject to 25% additional tariffs effective March 26, are exempt from the universal and country-specific reciprocal tariffs.
Copper, pharmaceuticals, lumber, semiconductors, bullion, energy and certain critical minerals not available in the United States, and products that may be subject to Section 232 tariffs in the future are not included in the tariffs announced April 2 but may be subject to additional tariffs later.
De minimis shipments from China and Hong Kong will no longer be duty-free.
Many countries will likely announce retaliation plans.
Importers should consider sourcing and duty-mitigation strategies to manage increased costs.
On April 2, 2025, the Trump administration announced 10% global tariffs on 100% of goods imported into the United States. The new tariffs are effective April 5 at 12:01 a.m. Goods that are on the water as of that date are exempt from the additional tariffs. On April 9 at 12:01 a.m., merchandise from more than 50 countries will face supplemental “reciprocal” tariffs including:
Vietnam 46%
Bangladesh 37%
China 34%
Indonesia 32%
Taiwan 32%
India 26%
South Korea 25%
Japan 24%
EU 20%
The on-the-water exception applies to the reciprocal tariffs as well. Accordingly, for the listed countries, the rates in effect will increase from 10% to the country-specific rate. Should the United States content of the entered merchandise be 20% or greater, the new tariffs will only apply to the non-U.S. content. According to the Executive Order, the tariffs are being imposed pursuant to the International Emergency Economic Powers Act of 1977 (IEEPA) due to economic and national security implications of the country’s global trade deficits.
Regarding Canada and Mexico, the 25% tariffs imposed on all merchandise since March 4 except for “energy or energy resources” or “critical minerals,” which have a 10% tariff, remain in effect. Note that USMCA-compliant goods continue to enjoy duty-free treatment. Previously announced sectoral tariffs of 25% on imports from Canada or Mexico continue to apply, with steel and aluminum effective March 12, autos effective April 3, and auto parts effective May 3. See April 1 GT Alert on auto tariffs. However, the Executive Order is silent on other free-trade agreements, which may indicate that goods imported pursuant to other free-trade agreements enter the United States duty-free for general duties but still must pay the country specific reciprocal or universal tariff.
For importers of raw materials, components, or finished products, the new universal and reciprocal tariffs are in addition to General duties, 20% tariffs on products of China effective March 4, Section 301 duties on most products of China, Section 201 duties on solar products, and any anti-dumping or countervailing duties, and other duties and fees. For example, a steel product from China may carry: General duties + 20% + Section 301 (25% or 7.5%) + 34% + 25% for steel products. The steel and aluminum tariffs are imposed only on products covered under the listed Harmonized Tariff Schedule provisions.
The Executive Order also includes the following:
Merchandise entering free-trade zones (FTZs) must be entered under “privileged foreign status,” which means that when the goods enter the U.S. commerce area, the duty rates in effect at entry to the zone must be paid.
Noticeably, drawback, which enables a U.S. importer/exporter to qualify for duty refunds, is not mentioned in the April 2 executive order and thus may be utilized. However, drawback is not permitted for the additional tariffs on steel, aluminum, the 20% on China, the 25% on products of Canada or Mexico, or the 25% on autos and auto parts.
On April 2, the Trump administration also issued an Executive Order stopping de minimis shipments, those valued under $800, from China and Hong Kong from entering duty free as of May 2.
Notably, the Executive Order specifically exempts certain products from the universal and reciprocal tariffs. Those products are listed in Annex II of the Executive Order and include products such as copper, pharmaceuticals, semiconductors, lumber articles, energy and energy products, and certain critical minerals.
Note that as other countries announce retaliation plans, the Trump administration may change its stated reciprocal rates. We expect to issue an Alert on retaliation plans next week.
Sourcing and Mitigation Strategies
There are numerous duty-mitigation and sourcing strategies importers can utilize to potentially blunt the impact of the reciprocal and universal tariffs, including reducing the value of imported goods by taking all possible legal deductions, such as international and foreign inland freight, and by using “first sale” in a multi-tier transaction that shrinks the value declared at entry by shaving off middleman profit and administrative expenses. For certain duties, drawback can also be used for duty refunds and bonded warehouses for duty deferral. With a bonded warehouse, duties are due only when the goods leave the warehouse and enter the commerce of the United States. Importers are also advised to review the origin of imported products, which is based on the product’s essential character and in which country it is substantially transformed. Country of final assembly or export is not necessarily country of origin.
The Lobby Shop: Post Liberation Day Blues [Podcast]
In the aftermath of President Trump’s “Liberation Day” tariff announcements, the Lobby Shop team breaks down the philosophy behind President Trump’s new tariffs and the real world ramifications for both domestic and foreign policy. The team also examines reactions from the private sector and Congress, including the potential impact on the timing for the Republicans’ plan to move forward on a tax package. With a multitude of scenarios playing out at once, the Lobby Shop team discusses the one question on many Americans minds: where do we go from here?
President Trump Announces World-Wide Reciprocal Tariffs
In a “Liberation Day” speech on April 2, 2025, President Trump announced the imposition of world-wide reciprocal tariffs on the United States’ trading partners. The White House shortly thereafter released an Executive Order entitled “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits“ (the Reciprocal Tariffs E.O.). The President also issued a supplemental Executive Order titled “Further Amendment to Duties Addressing the Synthetic Opioid Supply Chain in the People’s Republic of China as Applied to Low-Value Imports“ that removes the $800 de minimis exception for goods sent to the US from China or Hong Kong (the China De Minimis E.O.).
According to the President, the Reciprocal Tariffs E.O. is aimed at addressing the US goods trade deficit through the imposition of reciprocal tariffs on imports from various trading partners. The order seeks to rebalance trade by enforcing higher tariffs on foreign goods, while also encouraging US manufacturing and protecting national security interests. The Administration has asserted that the tariffs are a response to long-standing trade imbalances, where foreign economic policies and non-reciprocal trade practices have contributed to deficits and undermined US industrial capacity.
Both Executive Orders utilize the International Emergency Economic Powers Act (IEEPA) to impose tariffs, a move that was unprecedented prior to this Administration. As this represents a novel use of IEEPA, the courts have yet to directly address the legal implications of imposing tariffs under this authority.
This alert outlines key provisions of the new Executive Orders and the potential implications for businesses and trade practices moving forward.
Reciprocal Tariff Rates
Global 10% Tariff on All Imports: A 10% additional tariff will apply to all imports from all trading partners, unless specifically exempted.
Higher Tariffs for Certain Countries: Higher country-specific tariff rates will apply to imports from certain trading partners listed in Annex I of the Reciprocal Tariffs E.O. The country-specific tariffs range from 11% (Democratic Republic of the Congo) to 50% (Lesotho).
China is assessed a 34% tariff, while countries in the European Union have a 20% tariff. Tariff lists separately released on the White House X account include many smaller countries not included on Annex I, meaning Annex I could be subject to change. Neither Annex I nor the X account lists specify tariffs for Canada, Mexico, or Russia.
Tariffs Are Additional to Other Duties: The new tariffs do not replace existing duties, fees, taxes, or charges. They stack on top of any other applicable trade measures, unless subject to specific exceptions.
Timing of Implementation
General 10% Tariff Implementation (April 5, 2025)
The 10% additional tariff will apply to all imported goods entering the US starting at 12:01 a.m. (EDT) on April 5, 2025.
This tariff applies to goods that are either entered for consumption (formally brought into the US market) or withdrawn from a warehouse for consumption on or after this date.
However, there is an exception: Goods that were already loaded onto a vessel at the port of origin and were in transit as of 12:01 a.m. on April 5, 2025, will not be subject to the additional tariff, even if they arrive and clear customs after this date.
Country-Specific Tariff Implementation (April 9, 2025)
The separate set of country-specific tariffs (as detailed in Annex I of the order) will take effect at 12:01 a.m. (EDT) on April 9, 2025.
These country-specific tariffs apply only to goods from specific trading partners listed in Annex I.
Like the general 10% tariff, these new duties apply to goods that are either entered for consumption or withdrawn from a warehouse for consumption on or after April 9, 2025.
Again, there is an exception: Goods that were already loaded onto a vessel and were in transit before 12:01 a.m. on April 9, 2025, will not be subject to the country-specific tariff, even if they arrive and clear customs after this date.
Goods Exempt From the New Tariffs
National Security Exemptions: Goods covered under 50 USC. 1702(b), which generally includes essential humanitarian items such as food, medicine, and medical devices.
Steel and Aluminum Products: Any steel or aluminum products (and their derivatives) that are already subject to Section 232 tariffs under previous Presidential proclamations, including:
Proclamation 9704 (2018): Aluminum tariffs
Proclamation 9705 (2018): Steel tariffs
Proclamation 9980 (2020): Derivative steel and aluminum tariffs
Proclamation 10895 (2025): Updated aluminum tariffs
Proclamation 10896 (2025): Updated steel tariffs
Automobiles and Auto Parts: Any automobiles and automotive parts that are already subject to Section 232 tariffs under Proclamation 10908 (2025).
Future Section 232 Actions: Any goods that may be subjected to future Section 232 tariffs, meaning additional exemptions could apply if new trade restrictions are enacted under national security grounds.
Specific Product Exemptions: Various goods explicitly exempted in Annex II of the Reciprocal Tariffs E.O., including:
Copper;
Pharmaceuticals;
Semiconductors;
Lumber articles;
Certain critical minerals; and
Energy and energy products, including electricity (note that electricity was already exempt from merchandise entry requirements, including paying import duties and fees).
Goods Subject to Column 2 Tariffs: Any goods imported from a country that falls under Column 2 of the Harmonized Tariff Schedule of the United States (HTSUS), which applies to nations without normal trade relations with the US (i.e., Cuba, North Korea, Russia, and Belarus).
US Content Limitation
Tariffs Apply Only to Non-US Content: If an imported product contains at least 20% US content, the new tariffs will apply only to the non-US portion of the product’s value. This means that products with significant US components or processing will have a lower effective tariff burden.
Definition of US Content: “US content” includes materials or components that are: (1) entirely produced in the United States, or (2) substantially transformed in the United States, meaning they undergo a significant change in form, function, or character within the US.
Interaction Between New Tariffs and Existing Canada, Mexico and China Tariffs
China: The new tariffs are added on top of the recent China IEEPA tariffs. The China De Minimis E.O. also confirms that the Secretary of Commerce now has adequate systems in place to collect tariff revenue and ends the duty-free de minimis treatment for goods from China and Hong Kong valued at or under $800, subjecting them to applicable duties.
Postal items shipped to the US valued at or under $800 will face a duty rate of either 30% of their value or $25 per item, increasing to $50 after June 1, 2025. US Customs and Border Protection (CBP) may also require postal packages to go through formal entry procedures, in which case they will be subject to all applicable duties, taxes and fees.
Canada and Mexico: The new tariffs will not be applied on top of the recent Canada and Mexico IEEPA tariffs.
If those tariffs are terminated, then: (1) United States Mexico Canada Agreement (USMCA) goods originating from Canada and Mexico will not face additional tariffs and (2) non-USMCA-originating goods will be subject to a 12% tariff (instead of 25%).
The new tariffs will not apply to: (1) energy, energy resources, and potash from Canada and (2) US-manufactured products that incorporate duty-free Canadian or Mexican parts under USMCA.
Tariff Mitigation Strategies
Foreign Trade Zones (FTZs): Goods must be admitted as “privileged foreign status” under 19 CFR 146.41. This means the duty rate is locked in at the time of FTZ admission, and the product will be taxed at that rate even if its classification changes later. Goods that qualify for “domestic status” under 19 CFR 146.43 (typically US-origin goods or goods that have cleared customs duties) are not subject to this restriction.
Duty-Free De Minimis Treatment: Goods qualifying under 19 U.S.C. 1321(a)(2)(A)-(B) will continue to receive duty-free de minimis treatment.
With the exception of goods covered by the China De Minimis E.O., goods qualifying under 19 U.S.C. 1321(a)(2)(C) (i.e., small-value shipments under $800) will continue to receive duty-free treatment until the Secretary of Commerce determines that US systems can efficiently process and collect duties on them. Once the Secretary of Commerce notifies the President that enforcement systems are ready, duty-free de minimis treatment will be revoked for affected goods under 19 U.S.C. 1321(a)(2)(C).
Duty Drawback: The Reciprocal Tariffs E.O. does not specifically prohibit duty drawback, unlike some of President Trump’s other recent tariff actions, including the IEEPA tariffs on Canada, Mexico and China. The absence of an explicit prohibition suggests that, unless CBP determines otherwise, businesses may still be eligible to claim duty refunds on imported goods that are offset by exported goods – including exports of items manufactured from imported components, export of items similar but not identical to imported goods, and even items exported by different companies. This leaves open the possibility for importers to recover duties paid on qualifying goods, which could provide some relief for businesses engaged in re-exporting operations. However, as with previous tariff regimes, it is important for companies to stay informed and monitor CBP guidance for any additional clarifications or restrictions that may be issued regarding duty drawback under this order.
Customs Valuation: Certain costs can be excluded from the customs valuation of imported goods to help reduce the tariff burden, such as expenses for transportation, insurance, and related services incurred during the international shipment process. These exclusions can provide a opportunity for businesses to lower their overall import costs. However, it’s important to note that customs valuation rules are stringent, and with the recent implementation of new tariffs, these practices are likely to be subject to increased scrutiny by CBP—particularly since the President noted during his Liberation Day speech that “we’re going to be very severe on the people at the gate that watch tariffs and watch the products coming in . . . we’re going to treat them so good, but if they cheat the repercussions are going to be extremely strong.” Companies should exercise caution and fully comply with the applicable regulations to avoid potential penalties or adjustments.
Potential Tariff Modifications
Additional Action if Current Tariffs Are Ineffective: The Secretary of Commerce and the United States Trade Representative, in consultation with other key officials, will recommend additional actions to the President if the current tariffs do not effectively address the emergency conditions, such as: (1) the increase in the overall trade deficit; and (2) the expansion of non-reciprocal trade arrangements by US trading partners that threaten US economic or national security.
Response to Retaliation: If a trading partner retaliates by imposing tariffs on US exports or taking other countermeasures, the President may choose to modify the HTSUS to increase or expand the scope of duties to counteract such actions and ensure the tariffs remain effective.
Adjustment Based on Positive Developments: If a trading partner takes significant steps to align with the US on trade and national security issues, the President may modify the HTSUS to reduce or limit the duties imposed under the order, as a sign of goodwill and to encourage further cooperation.
Impact of US Manufacturing Conditions: Should US manufacturing capacity and output continue to worsen, the President may decide to increase the duties under the order to further protect domestic manufacturing.
10 Important Insights for Procurement Fraud Whistleblowers in 2025
If you have information about procurement fraud, providing this information to the federal government could lead to the recovery of taxpayer funds and put a stop to any ongoing fraud. It could also entitle you to a financial reward. In addition to providing strong protections to procurement fraud whistleblowers, the False Claims Act entitles whistleblowers to financial compensation when the information they provide leads to a successful enforcement action.
Whether you are interested in seeking a financial reward or you are solely focused on ensuring integrity and accountability within the federal procurement process, if you have information about procurement fraud, it will be important to make informed decisions about your next steps. While protections and financial incentives are available, whistleblowers who wish to expose procurement fraud must meet various substantive and procedural requirements, and they must come forward before someone else beats them to it.
“Federal procurement fraud is a pervasive issue, and whistleblowers play a critical role in the government’s fight against fraudulent bidding, contracting, and billing practices. For those who are thinking about serving as procurement fraud whistleblowers, understanding the federal whistleblowing process is critical for making informed decisions about their next steps.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
So, what do you need to know if you are thinking about reporting procurement fraud to the federal government? Here are 10 important insights for whistleblowers in 2025:
1. Suspecting Procurement Fraud and Being Able to Prove Procurement Fraud Are Not the Same
Filing a whistleblower complaint for procurement fraud requires more than just suspicion of wrongdoing. To qualify as a federal whistleblower—and to become eligible for the protections and financial compensation that are available—you must be able to help the federal government prove that a contractor or subcontractor has violated the law, whether through false statements, bid rigging, overbilling, or other fraudulent actions.
As a result, if you just have general concerns about procurement fraud, these concerns—on their own—will generally be insufficient to substantiate a procurement fraud whistleblower complaint. However, if you have inside information about a specific form of procurement fraud, then this is a scenario in which filing a whistleblower complaint may be warranted.
2. You Don’t Need Conclusive Proof to Serve as a Procurement Fraud Whistleblower
To be clear, however, filing a whistleblower complaint does not require conclusive proof of government procurement fraud. Instead, to file a whistleblower complaint under the False Claims Act in federal court, you must be able to make allegations that “have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation.” As a result, you do not need any specific type or volume of evidence to serve as a procurement fraud whistleblower. If you have reason to believe that government contract fraud has been committed (or is in the process of being committed), this is generally all that is required.
With that said, the more evidence you have, the better—and you will want to work closely with an experienced procurement fraud whistleblower lawyer to determine whether you can meet the federal pleading requirements. If you need additional information, your lawyer can advise you regarding the information needed and how to collect it, as discussed in greater detail below.
3. You Must Be the First to Come Forward with Material Non-Public Information
Another requirement for serving as a procurement fraud whistleblower is that you must be privy to non-public information. In most cases, you also need to be the first to share this information with the federal government, though certain exceptions may apply.
With this in mind, while it is important to make an informed decision about whether to file a procurement fraud whistleblower complaint under the False Claims Act, it is also important to act promptly. A lawyer who has experience representing federal whistleblowers should understand that time is of the essence and should be able to assist you with making an informed decision as efficiently as possible.
4. While You Should Protect Any Evidence You Have, You Should Be Cautious About Collecting Additional Evidence
If you have collected or copied any evidence from your employer’s facilities or computer systems, you should protect this evidence to the best of your ability. Keep any hardcopy documents in a secure location and keep any electronic files on a secure storage device (and not in the cloud). This is important for your protection and for helping to ensure that you remain eligible to secure federal whistleblower status.
At the same time, if you are aware of additional evidence that you have not yet collected, you will need to be cautious about collecting this additional evidence. Even when you are taking steps to expose fraud, it is important to avoid violating employment policies or non-disclosure obligations–as doing so could put you at risk. While there are rules on when employers can (and can’t) enforce these types of restrictions to prevent whistleblowing, here too, you need to ensure that you are making informed decisions. An experienced procurement fraud whistleblower lawyer will be able to help.
5. If You Come Forward with Qualifying Information, the Government Will Have a Duty to Investigate Further
A key aspect of the procurement fraud whistleblower process is that the government has a duty to investigate allegations that warrant further inquiry. This is due, in part, to the nature of the qui tam procedures under the False Claims Act. The government isn’t necessarily required to pursue an enforcement action—this decision will be based on the outcome of its investigation—but it is generally required to determine if enforcement action is warranted.
With that said, not all substantiated allegations of government procurement fraud will necessarily warrant a federal investigation. If the amount at issue is small, the U.S. Department of Justice (DOJ) may be justified in deciding not to devote federal resources to a full-blown federal inquiry. A whistleblower lawyer who has significant experience in qui tam cases will be able to assess whether the DOJ is likely to determine that your allegations warrant an investigation.
6. Federal Authorities Will Expect to Be Able to Work With You During Their Procurement Fraud Investigation
If you file a procurement fraud whistleblower complaint and the government decides to open an investigation, you will be expected to work with the government during the investigative process. Whether, and to what extent, you remain involved is up to you–but it is important to understand that federal agents and prosecutors will be expecting you to assist to the extent that you can. Your lawyer can advise you here as well, and can communicate with federal authorities on your behalf if you so desire.
7. Procurement Fraud Whistleblowers Are Entitled to Protection Against Retaliation and May Be Entitled to Financial Rewards
If you qualify as a procurement fraud whistleblower under the False Claims Act, you will be entitled to protection against retaliation in your employment (if you are currently employed by the contractor or subcontractor that you are accusing of fraud). Your employer will be prohibited from taking adverse employment action against you based on your decision to blow the whistle; and, if it retaliates against you illegally, you will be entitled to clear remedies under federal law.
If the information you provide leads to a successful enforcement action, you may also be entitled to a financial reward. Subject to certain stipulations, under the False Claims Act, whistleblowers who help the government recover losses from procurement fraud are entitled to between 10% and 30% of the amount recovered.
8. Hiring an Experienced Whistleblower Lawyer is Important, and You Can Do So at No Out-of-Pocket Cost
While filing a procurement fraud whistleblower complaint is a complex process, you do not have to go through the process on your own. You can—and should—hire an experienced whistleblower lawyer to represent you at no out-of-pocket cost. An experienced lawyer will be able to advise you of your options every step of the way, answer all of your questions, and interface with the federal government on your behalf.
9. There Are Several Reasons to Consider Blowing the Whistle on Procurement Fraud
If you have information about government procurement fraud, there are several reasons to consider coming forward. While the prospect of a financial reward is appealing to many, blowing the whistle is also simply the right thing to do. Contractors that engage in procurement fraud deserve to be held accountable, and helping federal and state governments recover taxpayer funds—while also helping to mitigate the risk of future losses—is beneficial for everyone.
10. It Is Up to You to Decide Whether to Blow the Whistle on Procurement Fraud
Ultimately, however, whether you decide to serve as a procurement fraud whistleblower is up to you. While an experienced whistleblower lawyer will help you make sound decisions, your lawyer should not pressure you into coming forward. It is a big decision to make, and it is one that you need to make based on what you believe is the right thing to do under the circumstances at hand.
As we mentioned above, however, time can be of the essence in this scenario. With this in mind, if you believe that you may have inside information, you should not wait to report fraud to the government. Your first step is to schedule a free and confidential consultation with an experienced procurement fraud whistleblower lawyer—and this is a step that you should take as soon as possible.
Using International Arbitration to Resolve Retaliatory Tariff Disputes in Global Supply Chains
As trade tensions rise, retaliatory tariffs are disrupting global supply chains—particularly in the automotive industry and other manufacturing sectors. These unexpected costs are sparking disputes over who should bear the financial burden under cross-border contracts. International arbitration is increasingly seen as the forum of choice for resolving these conflicts.
Retaliatory Tariffs Disrupting Global Supply Chains
Retaliatory tariffs—duties imposed by one country in response to another’s tariffs—have lately become a harsh reality. These tit-for-tat measures are upending global supply chains, especially in the manufacturing sector. Companies suddenly face higher import costs, squeezed profit margins, and unpredictable regulations as countries strike back with their own duties. The automotive industry is particularly exposed, as tariffs on steel, aluminum, or automotive parts drive up production costs and disrupt just-in-time supply lines. In short, retaliatory duties are injecting uncertainty at every tier of global manufacturing.
This uncertainty is not just an economic nuisance—it’s a legal flashpoint. Contracts that once made financial sense can become unprofitable or impossible to perform when an unexpected tariff hits. Common points of contention include:
Who pays for newly imposed tariffs—supplier or buyer?
Can pricing be adjusted when costs spike?
Is non-performance excused under force majeure or hardship clauses?
We’ve already seen cases of suppliers threatening to halt deliveries or buyers refusing shipments because a new tariff tipped a deal into the red. Such scenarios often trigger formal disputes. Many companies are discovering too late that their agreements didn’t fully account for politically driven tariff shocks. In this turbulent landscape, businesses need a robust way to resolve disputes fairly and efficiently—and so they are increasingly considering international arbitration.
Why International Arbitration Works
International arbitration offers a neutral, enforceable, efficient, confidential, and competence-driven way to resolve these disputes:
Neutrality. Unlike court litigation, where you might end up suing or being sued by a foreign partner in an unfamiliar legal system, arbitration provides a neutral forum agreed upon by both parties. Companies can avoid the “home court” advantage that one side would have in its local courts. In arbitration, the dispute is heard by an independent tribunal, often with arbitrators of neutral nationalities. This level playing field is crucial when a tariff dispute pits businesses from different countries against each other.
Enforceability. Another major advantage is enforceability. An arbitration award (the final decision of the arbitrators) can be enforced almost anywhere in the world, thanks to a treaty called the New York Convention. Over 170 countries—including the U.S., EU nations, China, Mexico, and many others—are signatories to the New York Convention, which obligates their courts to recognize and enforce foreign arbitral awards. This means if a manufacturer wins an arbitration against an overseas supplier, the award can be taken to the supplier’s home country and converted into a local court judgment for payment. Such global reach is not guaranteed with a normal court judgment, which might not be enforceable abroad. For businesses facing losses from a tariff dispute, knowing that any resolution will hold up internationally can be a huge relief.
Efficiency: International arbitration is also typically faster and more flexible than litigating through court systems in multiple countries. Procedural rules can be streamlined in arbitration, which can significantly speed things along. There is only a limited right to appeal. Many arbitral institutions have expedited rules, and some allow the parties to resolve their disputes remotely via Teams or Zoom.
Expertise: The fact that parties can select arbitrators with industry experience can also help to resolve disputes more quickly than in court. An arbitrator who understands customs duties, supply chains, manufacturing timelines, the auto industry, and standard international commercial terms will grasp the issues more quickly than most judges and juries. Arbitrators with relevant expertise can expeditiously determine whether a dispute can be resolved with money damages, or whether it instead should be resolved with emergency interim relief such as a temporary restraining order or preliminary injunction, both of which arbitrators typically have the power to award.
Confidentiality: Unlike litigation in court, arbitration proceedings are private and confidential by default, which helps companies manage sensitive commercial issues outside the spotlight.
Practical Steps for Companies to Protect Themselves
In the short term, you should consider adding an arbitration clause to your agreements or updating the one you already have. Alternatively, if you’re already in the midst of a dispute, and you don’t have an arbitration clause in your supply agreement, you and your counterparty can nevertheless agree to arbitrate your dispute. Ask your lawyer to help you select the arbitration rules and institution—such as the International Chamber of Commerce, International Centre for Dispute Resolution, or Singapore International Arbitration Centre, among others—that best fit your needs.
Select the governing law carefully. The governing law is the national law that will be used to interpret the contract. This is important if, for instance, you want a legal system that recognizes sudden tariffs as a valid reason to adjust obligations, or, conversely, one that enforces contracts strictly.
Select the seat of arbitration (legal place of the arbitration) carefully. The seat determines the procedural framework, and which courts have limited oversight of the arbitration. Choose a seat in a neutral, arbitration-friendly jurisdiction such as New York, London, Singapore, or Geneva.
Retaliatory tariffs are likely to remain a feature of international trade for the foreseeable future, and global manufacturers—especially in industries like automotive, where supply chains cross many borders – will continue to feel the effects. International arbitration has emerged as a critical tool for resolving the disputes that inevitably arise from these trade frictions. It offers a neutral, enforceable, and effective way to get parties back on track when a deal is derailed by retaliatory tariffs. Businesses should see international arbitration not as a last resort, but as a built-in safety valve that can give all sides confidence to continue trading despite an uncertain tariff environment.
Hatch-Waxman Litigation Expenses Are Deductible Under Internal Revenue Code § 162(a)
The US Court of Appeals for the Federal Circuit upheld a US Court of Federal Claims ruling that Hatch-Waxman Act litigation expenses are ordinary and necessary business expenses under § 162(a) of the Internal Revenue Code, entitling an abbreviated new drug application (ANDA) filer to deduct litigation expenses incurred defending against a patent infringement lawsuit. Actavis Labs. FL, Inc. v. United States, Case No. 23-1320 (Fed. Cir. Mar. 21, 2025) (Chen, Cunningham, Stark, JJ.)
Actavis filed ANDAs with the US Food and Drug Administration (FDA) seeking approval to market and sell a generic version of a drug already offered for sale in the United States. Per the Hatch-Waxman Act, filing an ANDA is an act of patent infringement where the ANDA holder seeks FDA approval prior to the expiration of the new drug application (NDA) holder’s patent. Following Actavis’s filing, the NDA holder brought a patent infringement lawsuit against Actavis.
Actavis subsequently treated litigation expenses incurred in defending the patent infringement lawsuit as ordinary and necessary expenses. Actavis deducted those litigation expenses on its tax returns for that year. However, the Internal Revenue Service (IRS) considered these expenses to be nondeductible capital expenditures since they were incurred “in pursuit of an intangible capital asset: namely, FDA approval to lawfully market a generic drug product in this country.”
Actavis eventually paid its tax liability but then sued the IRS in the Court of Federal Claims to recover what Actavis considered an overpayment of its taxes. The claims court agreed with Actavis, holding that Hatch-Waxman litigation expenses were deductible as ordinary and necessary business expenses. The IRS appealed.
The Federal Circuit affirmed. When determining whether Hatch-Waxman litigation expenses are deductible under Code § 162(a), the Federal Circuit uses two tests to settle the issue: the “origin of the claim” test and the “most significant benefit” test. However, as the Court emphasized, regardless of which test applied, Actavis prevailed.
The Federal Circuit first explained that Actavis prevailed under either test because patent infringement (not the FDA approval process) is what triggers incurring litigation expenses. Further evidence that the “origin of the claim rests in the patentholder’s decision to sue, and not in the ANDA filer’s decision to seek drug approval from the FDA, is the fact that infringement litigation cannot provide the ANDA filer what it wants – only the FDA can,” the Court stated.
Relying on the Third Circuit’s 2023 decision in Mylan v. Comm’r of Internal Revenue, the Federal Circuit delved into the fairness aspect of allowing Hatch-Waxman litigation expenses to be deductible. Citing Mylan, the Court explained that generic manufacturers defending against patent infringement suits “obtain no rights from a successful outcome. They acquire neither the intangible asset of a patent nor an FDA approval.” The Court also noted that brand-name drug companies in Hatch-Waxman lawsuits may deduct litigation expenses incurred while enforcing their patent rights. “[I]mposing very different tax treatment on the warring sides in an ANDA dispute, as the Commissioner advocates, is at odds with the careful statutory balance [embodied in the Hatch-Waxman Act] of improving access to lower-cost generic drugs while respecting intellectual property rights,” the Court stated.
Lastly, the Federal Circuit discussed the practical issues involved in treating Hatch-Waxman litigation expenses as nondeductible capital expenditures. The Court stated that obviously “[t]he ANDA filer would prefer not to be sued and then to obtain final FDA approval that becomes effective upon the FDA’s completion of its regulatory review, without a 30-month stay and risk of losing the litigation and needing to wait until the expiration of all pertinent patents.” Hence, defending a lawsuit should not be considered a “facilitating step in the FDA regulatory approval process,” which necessarily means that Hatch-Waxman litigation expenses did not “‘facilitate’ Actavis’ pursuit of the intangible asset of effective FDA approval of its ANDA,” the Court explained. As a result, the Court concluded that Hatch-Waxman litigation expenses should not be treated as nondeductible capital expenditures.
Matthew J. Blaney also contributed to this article.
President Trump Announces “Reciprocal” Tariffs Beginning 5 April 2025
On 2 April 2025, President Trump announced a series of “reciprocal” tariffs on US imports from all countries. The tariffs apply at different rates by country, starting at a baseline of 10% and reaching as high as 50%.
The tariffs, which are being implemented under the authority of the International Emergency Economic Powers Act (IEEPA), will go into effect at a rate of 10% on 12:01 am ET on 5 April 2025. For some countries (see the complete list at the end of this alert), the 10% tariff baseline will increase to a higher per-country rate effective 12:01 am ET on 9 April 2025.
The latest tariffs are intended to address the customs duties and related VAT and non-tariff barriers imposed by each covered trading partner on US exports, as summarized in the National Trade Estimate Report issued by the Office of the US Trade Representative on 31 March 2025.
The reciprocal tariffs announced on 2 April 2025 will not apply to:
Certain news publications and other similar media;
Goods that are already subject to c Section 232 tariffs on steel, aluminum, and autos/auto parts;
Certain metals and minerals, pharmaceuticals, semiconductors, lumber, electronics, energy, and other products identified in Annex II to the president’s Executive Order;
Imports from countries such as North Korea and Cuba subject to “Column 2” customs duty rates; and
Any goods that later become subject to tariffs pursuant to future Section 232 trade actions.
Additionally, for goods that incorporate US content, the reciprocal tariffs will apply only to the non-US content – provided at least 20% of the value of the good is US content (defined as produced or substantially transformed in the United States). Thus, for example, a good that incorporates 15% US content will be dutiable at its entire value, whereas a good incorporating 25% US content will be dutiable at 75% of its value.
Goods from Canada and Mexico that qualify for tariff-free treatment under USMCA will not face additional tariffs. Any goods from Canada or Mexico that do not qualify for USMCA will continue to be subject to the tariffs of 10% (for certain energy and mineral products) or 25% (all other products) that were announced in February 2025. In the event the President decides to terminate these 10-25% tariffs, goods from Canada or Mexico that do not qualify for USMCA treatment will be subject to a 12% reciprocal tariff.
In addition to the latest reciprocal tariffs, goods from China and Hong Kong will continue to be subject to the 20% tariffs implemented in February and March pursuant to the President’s IEEPA authority as well as (for most products from China) existing Section 301 tariffs of 25%. Further, starting 2 May 2025 at 12:01 a.m. ET, US tariffs will apply to products from China and Hong Kong that are imported through the Section 321 “de minimis” exception for low value shipments to a single US recipient on a single day.
According to President Trump, the United States will consider removing the latest reciprocal tariffs if US trading partners lower their tariff rates on US exports and take other steps to open their markets to US products. Countries that retaliate against the latest US tariffs may face even higher tariff rates.
Companies importing goods from the covered countries should carefully evaluate the list of covered imports and consider appropriate measures to determine their tariff exposure and potentially mitigate risks arising from the tariffs.
Countries Subject to “Reciprocal” Tariffs Higher than 10% (Effective 9 April 2025)
Countries and Territories
Reciprocal Tariff Rate
Algeria
30%
Angola
32%
Bangladesh
37%
Bosnia and Herzegovina
36%
Botswana
38%
Brunei
24%
Cambodia
49%
Cameroon
12%
Chad
13%
China
34%
Côte d`Ivoire
21%
Democratic Republic of the Congo
11%
Equatorial Guinea
13%
European Union
20%
Falkland Islands
42%
Fiji
32%
Guyana
38%
India
27%
Indonesia
32%
Iraq
39%
Israel
17%
Japan
24%
Jordan
20%
Kazakhstan
27%
Laos
48%
Lesotho
50%
Libya
31%
Liechtenstein
37%
Madagascar
47%
Malawi
18%
Malaysia
24%
Mauritius
40%
Moldova
31%
Mozambique
16%
Myanmar (Burma)
45%
Namibia
21%
Nauru
30%
Nicaragua
19%
Nigeria
14%
North Macedonia
33%
Norway
16%
Pakistan
30%
Philippines
18%
Serbia
38%
South Africa
31%
South Korea
26%
Sri Lanka
44%
Switzerland
32%
Syria
41%
Taiwan
32%
Thailand
37%
Tunisia
28%
Vanuatu
23%
Venezuela
15%
Vietnam
46%
Zambia
17%
Zimbabwe
18%
Karla M. Cure, Myeong S. Park, Ted Saint, and Brian J. Hopkins also contributed to this article.
US Treasury Extends Recordkeeping Requirement for Economic Sanctions Compliance to 10 Years
On March 20, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published a final rule (Final Rule) extending the recordkeeping requirement for compliance with U.S. economic sanctions regulations from five to 10 years. This change aligns with the April 2024 legislation (Pub. L. 118-50) that increased the statute of limitations for economic sanctions violations under the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1705, and the Trading with the Enemy Act (TWEA), 50 U.S.C. § 4315 to 10 years. The Final Rule took effect March 21, 2025.
10-Year Recordkeeping Requirement for Sanctions Compliance
The April 2024 legislation doubled the statute of limitations for civil and criminal violations of IEEPA and TWEA. Subsequently, OFAC issued an interim final rule (89 Fed. Reg. 74832) in September 2024 to amend its recordkeeping requirements, consistent with the revised statute of limitations. After reviewing public comments, OFAC finalized the rule, officially codifying the 10-year recordkeeping requirement at 31 C.F.R. 501.601 and requiring that:
[E]very person engaging in any transaction subject to [U.S. sanctions regulations] shall keep a full and accurate record of each such transaction engaged in, regardless of whether such transaction is effected pursuant to license or otherwise, and such record shall be available for examination for at least 10 years after the date of such transaction.
Additionally, individuals or entities holding blocked property must keep a full and accurate record of that property for at least 10 years after the date of unblocking.
Implications for Financial Institutions
Financial institutions – including banks, casinos, and money services businesses – subject to the Bank Secrecy Act (BSA) must implement risk-based measures to address compliance risks related to money laundering and terrorist financing.
Previously, the BSA’s recordkeeping requirements aligned with OFAC’s five-year retention period. With the Final Rule’s extension, financial institutions must reassess their record retention policies and update internal frameworks to comply with the new 10-year requirement. Regulatory agencies will expect institutions to revise policies, procedures, and controls to reflect this change.
Key Takeaways
The extended recordkeeping requirement applies only to sanctions compliance and does not affect the five-year retention requirements for the International Traffic in Arms Regulations (ITAR) or the Export Administration Regulations (EAR).
Companies should review their existing recordkeeping and record retention policies to determine updates or adjustments to be made to align with the new 10-year OFAC period, as well as evaluate potential conflicts with other regulatory record retention periods to be reconciled. Companies should also evaluate from an operational standpoint whether their systems, resources, and technologies can support the longer retention period, including assessing potential impacts on data management, storage costs, access controls, and cybersecurity.
Compliance measures should include updating record-retention policies, enhancing automated systems, and conducting organization-wide training to ensure adherence to the new rules.
This change carries significant operational and compliance implications, particularly for financial institutions, which must ensure readiness to meet the extended requirements while maintaining secure and accessible records for regulatory purposes.
Kentucky Legislature Ends Judicial Deference To State Agencies
In a realignment of judicial review standards, the Kentucky General Assembly overrode Governor Andy Beshear’s (D-KY) veto of Senate Bill (SB) 84, effectively abolishing judicial deference to all agency interpretations of statutes and regulations. This development marks a shift in administrative law in the Commonwealth.
A RESPONSE TO CHEVRON AND TO KENTUCKY COURTS
SB 84 invokes the Supreme Court of the United States’ 2024 decision in Loper Bright Enterprises v. Raimondo, which overturned the Chevron doctrine and ended judicial deference to federal agency interpretations of statutes. The bill’s preamble provides:
In Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), the United States Supreme Court ruled that the federal judiciary’s deference to the interpretation of statutes by federal agencies as articulated in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and its progeny was unlawful.
However, SB 84 does more than align Kentucky with the new federal standard. It also repudiates the approach taken by Kentucky’s own courts. The bill notes that decisions such as Metzinger v. Kentucky Retirement Systems, 299 S.W.3d 541 (Ky. 2009), and Kentucky Occupational Safety and Health Review Commission v. Estill County Fiscal Court, 503 S.W.3d 924 (Ky. 2016), which embraced Chevron-like deference at the state level, is a practice that the legislature now declares inconsistent with the separation of powers under the Kentucky Constitution.
KEY PROVISIONS: DE NOVO REVIEW MANDATED
The operative language of SB 84 creates two new sections of the Kentucky Revised Statutes (KRS) and amends an existing provision by establishing a de novo standard of review for agency, including the Kentucky Department of Revenue, interpretations:
An administrative body shall not interpret a statute or administrative regulation with the expectation that the interpretation of the administrative body is entitled to deference from a reviewing court. (New Section of KRS Chapter 13A.)
The interpretation of a statute or administrative regulation by an administrative body shall not be entitled to deference from a reviewing court. (New Section of KRS Chapter 13A.)
A court reviewing an administrative body’s action… shall apply de novo review to the administrative body’s interpretation of statutes, administrative regulations, and other questions of law. (New Section of KRS Chapter 446.)
The court shall apply de novo review of the agency’s final order on questions of law. An agency’s interpretation of a statute or administrative regulation shall not be entitled to deference from a reviewing court. (Amended KRS 13B.150.)
This means Kentucky courts must now independently review all legal interpretations made by agencies, including in tax cases before the Kentucky Board of Tax Appeals, without any presumption of correctness.
A CONSTITUTIONAL FLASHPOINT
Governor Beshear vetoed the bill, arguing in his veto message that it violates the separation of powers by dictating to the judiciary how it should interpret laws. Governor Beshear’s message provides that:
Senate Bill 84 is unconstitutional by telling the judiciary what standard of review it must apply to legal cases…It prohibits courts from deferring to a state agency’s interpretation of any statute, administrative regulation, or order. It also requires courts to resolve ambiguous questions against a finding of increased agency authority. The judicial branch is the only branch with the power and duty to decide these questions.
Republican lawmakers countered that SB 84 strengthens the judiciary’s independence. Senate leadership said in a statement that:
SB 84 aligns Kentucky with a national legal shift that reaffirms the judiciary’s role in interpreting statutes. The bill does not weaken governance—it strengthens separation of powers by removing undue deference to regulatory agencies and restoring courts’ neutrality in legal interpretation.
The governor’s constitutional objections should not apply to cases before the state’s Office of Claims and Appeals (which includes the Board of Tax Appeals), which the legislature itself created.
CONSIDERATIONS FOR TAX PRACTITIONERS
For tax practitioners, SB 84 could reshape tax litigation strategy in Kentucky. Courts reviewing Department of Revenue guidance or interpretations – whether in audits, refund claims, or administrative appeals – are no longer bound by any deference. The Department of Revenue’s legal position is now just that – a position, not a presumption. Whether Kentucky courts fully embrace this legislative mandate or chart their own course remains to be seen.
Either way, this is a welcome development for taxpayers and practitioners who have long argued that state agencies should not have the last word on the meaning of tax statutes. By mandating de novo review, Kentucky reinforces a neutral playing field, one where legal questions are resolved by courts without institutional bias in favor of the agency.
Other states should take note and follow suit. Just last year, Idaho, Indiana, and Nebraska passed similar amendments restoring judicial independence from executive branch interpretations of state laws. SB 84 offers a legislative blueprint for restoring judicial independence and curbing agency overreach in the tax context. As more states grapple with the implications of Loper Bright, Kentucky’s approach provides a model for how legislatures can proactively realign administrative law with core separation of powers principles.