Tariff Evasion

The international trade landscape remains largely unsettled after the implementation of Trump's 'Liberation Day' tariffs in April 2025. A trade deal between the US and China was indeed announced on 11 June 2025, and the 50% US tariff rate on EU products was suspended from 1 June 2025 to 9 July 2025. However, the general 25% tariff on steel and aluminium has been increased to 50% as of 4 June 2025, and reciprocal tariffs remain in force after a US Court of Appeal stayed a judgement from the US Court of International Trade blocking a range of the 'Liberation Day' tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Thus, as of now, most of Trump's tariffs continue to apply, despite some trade deals and temporary postponements allowing for tariff negotiations. 

Amidst these ongoing geopolitical tensions, many businesses have taken efforts to avoid or minimise the impacts of tariffs, e.g. by restructuring supply chains and ownership structures and revisiting contractual arrangements. Many such adaptations are entirely legal means of minimising tariff exposure, while other adaptations may constitute illegal circumvention. This raises the issue of 'tariff evasion' and how businesses should navigate the (sometimes fine) line between legal tariff mitigation and illegal practices.

What is Tariff Evasion?

Illegal tariff evasion typically involves deliberately misrepresenting goods to reduce or avoid duties. Examples include tampering, manipulating or falsifying certificates of origin, invoices, labelling, customs documents, applying wrong Harmonised Tariff Schedule (HTS) codes, or otherwise misclassifying or undervaluing goods. Evasion may also involve transshipment via third countries or setting up company structures in third countries to falsely or misleadingly indicate a different country of origin. The purpose is typically to conceal the true origin, nature, and/or value of the goods in order to avoid or reduce tariff exposure.

In other cases, tariff evasion may be of a less fraudulent and deliberate nature, such as attempts at changing the country of origin by modifying products during transshipments via third countries. Many adaptations are also normally entirely legal, for example restructuring supply chains, adjusting ownership structures, or revising contractual arrangements. However, as detailed further below, even commercially sound adaptions made in good faith may not always be accepted by national authorities.

Legal Boundaries for Tariff Adaptations 

No general prohibition

In most jurisdictions, there are no general prohibitions on tariff mitigation or adaptation. This differs from sanctions regulations, where explicit anti-circumvention rules exist (e.g., Article 12 of Regulation (EU) 833/2014). This is also reasonable given the different purposes of sanctions and tariffs; sanctions aim to prohibit all restricted activity, while tariffs only seek to increase the cost of certain imports, not necessarily to block well-founded business adaptations. 

Fraudulent Practices

Despite the lack of a general tariff circumvention prohibition, certain boundaries certainly exist. First, deliberate falsification or misrepresentation of documents or information is prohibited in most jurisdictions. Under Norwegian law, for example, providing incorrect or incomplete information or failing to provide information to customs authorities, or failing to cooperate with inspections, may result in additional customs duties, administrative fines, coercive fines, and/or criminal liability under Sections 12-1 to 12-6 of the Customs Duty Act. Falsification or manipulation of document may also be covered by the provision on document forgery in Section 361 of the Penal Code.

In the US, there have been several enforcement actions concerning efforts to reduce or avoid tariffs. In late 2024, the US Department of Justice took action against a US importer who misrepresented the country of origin through transshipment, and also undervalued the goods. Similarly, in March 2025, actions were taken against an importer that falsely declared the country of origin. Both cases resulted in monetary restitutions or settlements in the million-dollar range. Indeed, these cases concern US importers, and non-US exporters will generally not be subject to US jurisdiction. However, there may be exceptions to this, and non-US exporters may also be exposed to administrative or criminal liability in their own jurisdictions if they are complicit in such evasion schemes, e.g. on the basis of document forgery.

Non-fraudulent Adaptations Concerning the Country of Origin and Customs Valuation

In addition to the rather obvious illegalities and fraudulent practices detailed above, there may also be restrictions on adaptations that are commercially well-founded and made in good faith. In the EU, Article 60(2), cf. Article 59, of the Union Customs Code (Regulation (EU) 952/2013) sets out rules on the non-preferential origin of goods when the production involves several countries. In such cases, origin is determined by where the product underwent its "last, substantial, economically-justified processing or working […] resulting in the manufacture of a new product or representing an important stage of manufacture", consistent with general country of origin rules under WTO law. Further, Article 33 of Regulation (EU) 2015/2446 states that processing or working operations in another country should not be considered "economically justified" if the purpose was to "avoid" the application of tariffs under Article 59 of the Union Customs Code. In these situations, the country of origin is generally deemed to be the country where the majority of the materials originated, see Article 33(3) of Regulation (EU) 2015/2446. 

Against this background, processing or working operations in third countries are not justifiable under Article 33 of Regulation (EU) 2015/2446 if their sole purpose is to avoid tariffs. This does not make such processing shifts legally prohibited, unlike the more fraudulent practices described above, but the result is that the country of origin should instead be determined based on the origin of the majority of the materials, not the processing country. This is illustrated by Case 297/23 P, where the Court of Justice of the EU held that Harley-Davidson's relocation of motorcycle production from the US to Thailand was unjustified under Article 33, because the primary aim of the relocation was to evade customs duties imposed by the EU on US-origin motorcycles during Trump's last presidency. This showcases that efforts to bypass tariffs might not always be accepted by national authorities. Comparable situations could also arise in other jurisdictions, including the US. 

From a Norwegian perspective, it should be noted that Norway is not part of the EU Customs Union. Thus, regulations such as the Union Customs Code and Regulation (EU) 2015/2446 do not apply in Norway. Additionally, there are no corresponding provisions in the Norwegian Customs Duty Act or the Norwegian Customs Duty Regulations, as opposed to the circumvention prohibitions in Section 13-2 of the Norwegian Taxation Act and Section 12-1 of the Norwegian VAT Act. However, there are still limits to the adaptations private entities can make to reduce tariffs beyond the fraudulent practices described above. For example, minor product changes or simple assembling operations during transshipment via third countries are generally not sufficient to change the country of origin from where the majority of the materials originated.

It should also be noted that most jurisdictions have detailed rules on customs valuation. For example, under Chapter 6 of the Norwegian Movement of Goods Act, the customs value shall generally be based on the transaction value, i.e. the price actually paid or payable for the goods. If the transaction value cannot be used, a hierarchical set of alternative methods applies. Transfer pricing documentation prepared for tax purposes (see Section 13-1 of the Norwegian Taxation Act) can sometimes, but not always, be relevant to customs valuation, as discussed in our previous Tariff and Trade Alert. Importers must therefore be able to demonstrate that efforts to reduce tariff exposure are in line with such customs valuation rules. This may, for instance, be relevant where an intra-group transaction is priced unreasonably low to reduce the customs value. 

How Should Businesses Adapt?

Based on the above, businesses should clearly avoid obvious illegal and fraudulent practices that could result in administrative or criminal liability. However, the above has shown that even commercially well-founded adaptations made in good faith are not always accepted by national authorities. To navigate this (sometimes fine) line legal tariff mitigation and illegal practices, seasoned advisors should be consulted to tackle legal challenges and provide strategic advice. 

It should also be reminded that there are many legal measures available to reduce tariff exposure, and these should be utilised where appropriate. Such measures can include restructuring supply chains, adjusting ownership structures, or making contractual adaptations - depending on the business and industry. Free trade agreements (FTAs) may also be utilised to mitigate tariff exposure. For example, the FTA between the EFTA states and India grants zero tariffs for, inter alia, most industrial goods and seafood. However, as detailed in a previous Tariff and Trade Alert, mitigating tariff exposure through emerging markets may increase compliance risks. Seasoned advisors are therefore not only crucial to navigate the line between legal tariff mitigation and illegal practices, but also to manage compliance-related challenges arising from tariff adaptations. Proper due diligence procedures should also be implemented to avoid becoming involved in illegal tariff adaptations or other violations of applicable laws and regulations.