Customs Tariff Fraud Whistleblower: Banned Pesticide Case

What a Banned Pesticide Smuggling Case Reveals About Customs Tariff Fraud Whistleblower Enforcement

A September 2, 2026 DOJ announcement offers a concrete example of how customs tariff fraud whistleblower enforcement is evolving: the U.S. Attorney’s Office for the Southern District of California charged Juan C. Velderrain Perez, age 43, a citizen of Mexico and resident of San Diego, with smuggling merchandise under 18 U.S.C. § 545, after Customs and Border Protection officers found 24 liters of banned Mexican-labeled pesticides concealed in his vehicle at the Otay Mesa Port of Entry. The case was brought as part of the Department of Justice’s Trade Fraud Task Force.

This case is notable not only for the conduct alleged, but for what the DOJ said alongside the charge. The press release explicitly invited whistleblowers to come forward — citing both the False Claims Act’s qui tam provisions and the Criminal Division’s Corporate Whistleblower Program. For anyone working in agricultural supply, pesticide distribution, import/export logistics, or border commerce who has observed similar conduct, that invitation is worth understanding in detail.

The Conduct Alleged: Undeclared Chemicals, a Banned Substance, and a Smuggling Fee

According to the complaint, Velderrain Perez failed to declare the chemicals at the border and asked the CBP officer not to refer him to secondary inspection because, in his own words, he knew he would get in trouble. He later admitted this was not the first time he had smuggled pesticides and that he expected to receive a smuggling fee upon delivery of the product.

The pesticides, labeled “Taktic,” contain the active ingredient amitraz at an emulsifiable concentration of 12.5 percent. According to the U.S. Environmental Protection Agency, amitraz in this form is a cancelled and unregistered pesticide that has been banned in the United States since at least 2019. The EPA has identified reproductive, developmental, and neurological risks, as well as potential long-term cancer risks from exposure to amitraz.

The charge — smuggling merchandise under 18 U.S.C. § 545 — carries a maximum penalty of twenty years in prison and a $250,000 fine. The case is being prosecuted by Assistant U.S. Attorney Emily W. Allen, with investigation by the U.S. Environmental Protection Agency and Homeland Security Investigations.

Who Is the DOJ Trade Fraud Task Force, and Why Is It Relevant to Customs Tariff Fraud Whistleblowers?

The Trade Fraud Task Force is a cross-agency law enforcement effort involving DOJ’s National Fraud Enforcement Division, the Criminal and Civil Divisions, the Energy and Natural Resources Division, the Department of Homeland Security, and U.S. Attorney’s Offices nationwide — created specifically to pursue enforcement actions against parties who seek to evade tariffs and other duties, as well as smugglers who seek to import prohibited goods into the American economy. The fact that a single-defendant, relatively small-scale case produced a federal felony charge signals that the Task Force is not limiting its attention to large commercial actors.

The press release describes the Task Force’s purpose as preventing “trade fraud that deprives the government of vital revenue, threatens critical domestic industries, undermines consumer confidence, and weakens national security.” Individuals with knowledge of recurring or commercial-scale smuggling of banned pesticides, undeclared chemicals, or other goods that evade tariffs or import restrictions may be in a position to bring information that could support a qui tam action or a referral through the Corporate Whistleblower Program.

What the DOJ’s Explicit Whistleblower Invitation Means

The DOJ press release states directly: “The Justice Department encourages whistleblowers to alert the government to credible allegations of fraud, including utilizing the qui tam provisions of the False Claims Act or through the Criminal Division’s Corporate Whistleblower Program.” This language appearing at the charging stage — before any resolution — is significant. Settlement announcements routinely include whistleblower invitations; a charging-stage press release doing so suggests the government may be actively seeking insider information about larger or more systematic networks beyond the single defendant named.

The dual reference to both the False Claims Act’s qui tam mechanism and the Criminal Division’s Corporate Whistleblower Program reflects the two distinct legal pathways available. Each has different procedural requirements, different potential outcomes, and different protections. Understanding which pathway may apply to a particular set of facts is a threshold question that an attorney experienced in these matters can help evaluate.

How the False Claims Act Applies When Smuggled Goods Evade Customs Duties

Where goods enter the United States without proper declaration or duty payment, the unpaid duties may constitute a false or fraudulent claim against the U.S. government under 31 U.S.C. § 3729, which provides for treble damages and civil penalties on a per-claim basis. The False Claims Act’s liability provisions reach any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval, or who knowingly makes or uses a false record or statement material to a false or fraudulent claim.

For those with knowledge of such conduct, the qui tam mechanism under 31 U.S.C. § 3730 provides that a person may bring a civil action for a violation of section 3729 for the person and for the United States Government. If the government intervenes, the relator may receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement. If the government declines to intervene and the relator proceeds, the relator may receive between 25 and 30 percent. For a broader discussion of how these provisions apply to import-related fraud, see our page on anti-dumping and countervailing duties fraud under the False Claims Act.

Retaliation Protections for Employees Who Report Customs Fraud

Under 31 U.S.C. § 3730(h), any employee, contractor, or agent who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done in furtherance of an action under the False Claims Act — or other efforts to stop one or more violations — is entitled to relief. That relief may include reinstatement, two times the amount of back pay, interest on back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.

This protection can be relevant for employees in logistics, freight forwarding, agricultural supply, or border commerce who become aware of systematic underdeclaration or smuggling and are concerned about retaliation if they report it. The statute’s protections apply to the act of reporting, not only to the filing of a formal complaint.

If practices like these look familiar from your own workplace, you can discuss what you have seen with a Price Armstrong attorney confidentially and at no cost. Call (888) 670-9542 or use the secure evaluation form below.

Frequently Asked Questions

What is customs tariff fraud under the False Claims Act?

Customs tariff fraud under the False Claims Act generally refers to conduct in which goods are imported into the United States without proper declaration or duty payment, causing the government to lose revenue it is owed. Under 31 U.S.C. § 3729, a person who knowingly presents a false or fraudulent claim or makes a false record material to such a claim may be liable for treble damages and per-claim civil penalties. The September 2, 2026 DOJ case involving alleged smuggling of banned pesticides at the Otay Mesa Port of Entry illustrates the type of conduct — undeclared goods, concealment, and evasion of inspection — that can give rise to such liability.

Who can be a whistleblower in a customs fraud case?

Under 31 U.S.C. § 3730, a person may bring a qui tam civil action for a violation of section 3729 for the person and for the United States Government. This could include employees, contractors, or agents working in import/export logistics, freight forwarding, agricultural supply, pesticide distribution, or border commerce who have direct knowledge of undeclared shipments, mislabeled goods, or systematic evasion of customs duties. The DOJ’s September 2, 2026 press release explicitly encouraged such individuals to come forward using the False Claims Act’s qui tam provisions.

What share of a recovery might a customs fraud whistleblower receive?

The relator share depends on whether the government intervenes. Under 31 U.S.C. § 3730(d), if the government proceeds with the action, the relator may receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending on the extent to which the person substantially contributed to the prosecution of the action. If the government declines to intervene and the relator conducts the action, the relator may receive between 25 and 30 percent. There is no assurance of any particular outcome, and the actual share in any case depends on the specific facts and circumstances.