How a $12M Metal Importer Was Pulled Into a Federal Investigation
In early 2024, "Atlas Metals" - a fictional name for a real profile - was a privately held company importing coated steel and aluminum components for construction and automotive suppliers. Annual revenue hovered around $12 million, with gross margins compressed by aggressive price competition. Atlas relied on a handful of overseas suppliers and had a lean import team: one customs broker, one operations manager, and an outside trade attorney for ad hoc questions.
Atlas had one persistent operating assumption: paperwork rarely gets you into trouble if you can pay any assessed duties and fines. That view worked for routine audits and small classification disputes. It stopped working when Customs and Border Protection (CBP) began sharing import data with the Department of Justice (DOJ) for specific enforcement priorities: compliance with Section 232 tariffs, metal import fraud, and tariff quota violations. The referral process changed the stakes - civil disputes now had a clear path to criminal or high-value civil enforcement.
The Import Compliance Problem: How Small Errors Turned Into a Major Exposure
Atlas's immediate trigger issues were threefold and interrelated:
- Section 232 misreporting: A subset of steel entries were declared under tariff codes that avoided the 232 add-on, sometimes because brokers used older classifications and sometimes because suppliers marked materials with ambiguous alloy descriptions. Country-of-origin inconsistencies: Bills of lading and commercial invoices listed different countries for the same shipment. Several entries claimed "assembled in Mexico" while underlying supplier invoices listed inputs from five other countries. Tariff quota manipulation: High-volume entries were split into multiple small shipments to stay under monthly quota thresholds for duty-free treatment on certain specialty alloys.
When CBP cross-referenced manifests, entry summaries, and ACE (Automated Commercial Environment) data, patterns emerged that matched recent DOJ interest areas. CBP referred the matter for enforcement. Atlas received a data request followed by a civil subpoena. The company faced exposure for unpaid Section 232 duties, potential civil fraud penalties, and the risk that DOJ would bring criminal charges if it found intent to defraud.
An Unconventional Compliance Strategy: Voluntary Audit Plus Targeted Disclosure
Atlas chose a mixed strategy rather than an all-out fight. The leadership weighed three options:
- Immediate denial and contestation through litigation, risking more aggressive criminal pursuit. Full, immediate disclosure with apology and payment - which could reduce penalties but might not stop DOJ. A structured voluntary audit, remediation, and targeted disclosure to CBP, paired with cooperation to limit exposure.
They picked option three. The rationale: build a defensible factual record, quantify exposure, and present an organized remediation plan to CBP and DOJ. This approach aimed to lower penalties and reduce the chance of criminal referral by showing good-faith corrective action.
Implementing the Import Compliance Overhaul: A 90-Day Timeline
The implementation had clear milestones and assigned owners. Atlas executed a 90-day plan with daily, weekly, and monthly checkpoints.
Days 1-10: Stabilize and Secure Documents
- Retain outside counsel with trade enforcement experience. Issue a legal hold on all import documentation and communications with brokers and suppliers. Freeze any destruction of invoices, packing lists, or emails linked to entries under review.
Days 11-30: Rapid Forensic Audit
- Audit team reviewed 1,200 entries over 24 months with a sampling strategy weighted on at-risk SKUs. Found 18% of sampled entries had country-of-origin mismatches; 12% had Section 232 misclassification issues; 6% appeared to have been split in a way consistent with quota avoidance. Calculated preliminary duty exposure: $1.9 million in unpaid Section 232 duties, plus $400,000 in lost quota duties that would have applied if not misclaimed.
Days 31-60: Remediation and Controls
- Corrected 320 active entries through ACE reconciliations where permitted by law. Paid assessed duties for clear clerical errors: $350,000 up front. Implemented supplier declarations of origin and standardized commercial invoice templates to eliminate ambiguity. Launched a simple compliance dashboard that flagged entries when cumulative monthly volumes approached quota thresholds.
Days 61-90: Disclosure and Negotiation
- Submitted a voluntary disclosure packet to CBP that included the audit methodology, a spreadsheet of affected entries, remedial payments made, and a proposed penalty schedule tied to cooperation. Conducted five in-person meetings with CBP compliance officers and one teleconference with a DOJ paralegal assigned via the CBP referral channel. Negotiated settlement terms that kept the case civil and avoided criminal referral, contingent on continued cooperation and additional corrective payments over the next 12 months.
From $2.3M Exposure to $740K Settlement: Measurable Results in 6 Months
Outcomes were concrete and measurable:
Metric Initial Estimate / Discovery Final Resolution Unpaid Section 232 duties $1,900,000 $700,000 (paid at discovery + settlement allocation) Tariff quota adjustments $400,000 $150,000 Civil penalties proposed Potential up to 100% of value of the merchandise (statutory exposure high) $- (reduced via negotiated mitigation) $- (settlement paid) $- Total cash outflow (6 months) N/A $740,000 (duties + negotiated penalty + audit costs) Operational changes budget N/A $45,000 (compliance tech and staff training)Key financial takeaways:
- Immediate cash paid to CBP and Treasury: $450,000 within 45 days to limit interest and show good-faith correction. Negotiated settlement covering the remainder of assessed duties and a reduced civil penalty: $290,000. Audit and remediation cost: $30,000 for outside counsel and forensic reviewers; $15,000 for internal overtime and replacement staffing.
Put another way: the company's proactive audit and controlled disclosure converted an initial full-exposure estimate exceeding $2.3 million and potential criminal risk into a contained civil settlement of $740,000 plus a commitment to improve controls. That represented an immediate balance-sheet hit equal to roughly 6% of annual revenue - painful but survivable - compared with the alternative of criminal referral, extended litigation, and far larger penalties that could have threatened the business.
4 Critical Import Compliance Lessons Every Importer Must Learn
From this case, several practical lessons stand out for companies that import metal products:
1. Data patterns matter more than one-off mistakes
CBP and DOJ focus on patterns. A single misclassification is often fixable. Repeated or systematic inconsistencies - especially around Section 232, quotas, and country of origin - trigger enforcement. If your entries show repeatable rules that reduce duties, expect scrutiny.
2. Voluntary action can change the outcome, but timing is crucial
Voluntary disclosure after a subpoena may still be credited, but the earlier you act the better. Waiting until a grand jury target is named removes negotiating leverage. Prompt audits, payments for clear errors, and documented remedial steps improve your standing.
3. Controls that cost a little prevent costs that cripple
Spending $45,000 to upgrade documentation processes and add a part-time compliance lead prevents six-figure settlements. Simple controls - mandatory supplier origin declarations, snapshot checks for quota thresholds, and a routine entry reconciliation - reduce systemic risk.
4. Cooperation does not guarantee immunity
Cooperation helps, but it is not a shield. DOJ can decide to prosecute regardless. Treat cooperation as a tool to reduce penalties and present facts, not as insurance against enforcement. Always coordinate cooperative moves through counsel.
How Your Import Operation Can Use This Playbook
If you import metals or products that include metal components, you can replicate the Atlas playbook at a smaller scale. Here are concrete steps you can implement in 90 days.
Secure your documents. Place a legal hold on import records. Identify the last two years of entry summaries for at-risk SKUs. Run a targeted audit. Sample 10-20% of entries weighted toward the highest-value or highest-volume SKUs. Look specifically for discrepancies in tariff classification, country of origin data, and invoice unit values. Quantify exposure. Calculate unpaid duties, interest, and likely statutory penalties under CBP rules. Use conservative assumptions to avoid surprises. Fix obvious clerical errors quickly. Where entries are obviously mistaken, file proper corrections or liquidations through ACE and pay assessed duties before interest accrues significantly. Design fixes that are operational. Supplier declarations, standardized invoice formats, and SKU-level rules for classifying alloys reduce ambiguity at the source. Consider voluntary disclosure only after consulting counsel. Prepare your factual record before submitting anything. A measured disclosure with remediation steps will be viewed more favorably than a raw apology letter. Invest in simple technology. A rule-based engine that flags country-of-origin mismatches and tracks monthly quota volumes is inexpensive and effective.Contrarian viewpoints worth weighing
Some trade professionals argue that aggressive compliance programs impose undue cost burdens on small importers and that the level of paperwork and scrutiny is not worth the marginal reduction in risk. That view misses the shift in enforcement posture when civil data sharing with DOJ is on the table. Here are two counterpoints to the contrarian view:
- Cost vs risk: The incremental annual cost of modest controls is typically a fraction of one percent of revenue. The downside risk of noncompliance - enforced duties, civil penalties, and criminal exposure - can be catastrophic. Operational competitiveness: Compliance need not be a burden on speed. Better documentation and clear rules reduce hold-ups at port of entry and smooth logistics over time.
That said, there is nuance: some low-risk, low-value importers can adopt targeted sampling rather than full-scale audits. The key is to make decisions based on a risk assessment rather than blanket rules.
Final Practical Checklist Before You Get a Subpoena
- Map your top 50 SKUs and their tariff codes. Verify each code against current Section 232 lists and quota regulations. Require supplier origin declarations on company letterhead with each shipment. Set up an automated flag for cumulative monthly volumes near quota thresholds. Establish a 72-hour protocol to assemble docs if CBP requests information: who is responsible, what to pull, and how to preserve chain-of-custody. Retain an experienced trade attorney on call; do not rely on general counsel unfamiliar with CBP-DOJ interactions.
In summary: CBP's data sharing with DOJ has made import compliance a higher-stakes activity for companies that trade in metals and quota-sensitive goods. A realistic strategy blends quick remediation for clear errors, msn a forensic audit to quantify exposure, and structured cooperation that protects negotiating leverage. For mid-sized importers, modest investment in controls and documentation often buys far more protection than chasing every minor cost savings on the tariff line.