border.bot
Esc
  • Loading…
↑ ↓ to move↵ to openEsc to close
Docs menu
DevelopersGuides

HS codes

Origin and trade agreements

Commercial invoice fraud and how sellers avoid it

What happens when an invoice understates value, calls a sale a gift, misdescribes goods or names the wrong origin: US 19 USC 1592 penalties, EU and UK rules.

Updated · 13 official sources

An invoice that understates the price, calls a sale a gift, describes the goods vaguely or wrongly, or names the wrong country of origin is a false customs declaration. In the US it can bring a civil penalty of up to the goods' domestic value under 19 USC 1592, and the unpaid duty is collected on top.

Rules as of 30 October 2026.

What counts as commercial invoice fraud?#

Commercial invoice fraud is any material false statement or omission on an invoice that customs rely on to value, classify or admit goods. US law covers false documents, data and omissions made by fraud, gross negligence or negligence, whether or not duty was lost (19 USC 1592(a)). Four patterns cause most trouble.

Pattern What it looks like Why it's false
Undervaluation A $180 order declared at $18 Customs value starts from the price actually paid (19 CFR 152.103; Union Customs Code, Article 70)
Gift marking on a sale "Gift" ticked on a paid order A US gift excludes anything bought or "given" with a purchase (19 CFR 10.153(a)); EU gift relief covers only unpaid goods between private individuals (Regulation 1186/2009, Article 25)
Misdescription "Parts", or a lower-duty product's description Classification depends on it; CBP rejects generic terms such as "general cargo" (19 CFR 122.48a)
False origin The shipping country instead of where the item was made Origin sets the duty rate, and imports must be marked with their true origin (19 USC 1304)

Real gifts have their own limits: $100 in the US (19 CFR 10.152), £39 before UK VAT applies, and €45 between private individuals in the EU (Regulation 1186/2009, Article 26). A parcel from a business to its customer is ordinarily not a gift (19 CFR 10.153(c)).

What are the US penalties for a false invoice?#

US penalties for a false invoice come from 19 USC 1592 and scale with culpability: up to the goods' domestic value for fraud, up to four times the lost duty for gross negligence and up to twice the lost duty for negligence. CBP also collects the lost duties, taxes and fees, whether or not it imposes a penalty (1592(d)).

Culpability Maximum civil penalty If no duty was lost
Fraud The domestic value of the goods The domestic value
Gross negligence The lesser of the domestic value or 4 times the lost duties, taxes and fees 40% of the dutiable value
Negligence The lesser of the domestic value or 2 times the lost duties, taxes and fees 20% of the dutiable value

A worked example: a US customer pays $250 for a jacket and the invoice says $50. At a 10% duty rate (an example rate), $25 was owed and $5 paid, a loss of $20. Negligence can cost up to $40, gross negligence up to $80 and fraud up to the jacket's domestic value, and the $20 is collected in every case.

What happens in the EU and the UK?#

In the EU and the UK, a false invoice leads to recovery of the duty and VAT that should have been paid, plus national penalties. EU law makes each member state set penalties that are effective, proportionate and dissuasive (Union Customs Code, Article 42), so amounts vary, while UK penalties are written into statute.

  • In the EU, whoever lodges a declaration answers for its accuracy (Article 15), and penalties can be a fine, a settlement or the loss of an authorization (Article 42(2)).
  • In the UK, dishonest evasion of duty or VAT carries a civil penalty equal to the amount evaded (Finance Act 2003, section 25), and breaking a customs rule up to £2,500 (section 26). A knowingly or recklessly untrue declaration is an offence with up to two years in prison, and the goods can be forfeited (Customs and Excise Management Act 1979, section 167).

Who is liable for a false invoice?#

The person who declares the goods carries the first liability, but a seller who writes a false invoice isn't protected because someone else filed it. US penalties reach anyone who aids or abets a false entry (19 USC 1592(a)(1)(B)), and a seller shipping DDP usually stands behind the declaration through its carrier or broker.

How do sellers avoid being caught up in it?#

Sellers stay clear of invoice fraud by declaring what actually happened: the price paid, what the item is, where it was made and why it's moving. The same habits keep honest mistakes from looking like fraud, which matters because US law excuses clerical errors only when they aren't a pattern of negligence (1592(a)(2)).

  • Take every value from the order and show discounts as discounts (discounts on commercial invoices).
  • Never mark a paid order as a gift, even when the customer asks.
  • Describe each item specifically and classify it with the HS code classifier.
  • Record where each product was made (country of origin finder, country of origin rules).
  • Keep orders, invoices and payment records for five years, as US rules require (19 CFR 163.4).
  • Correct errors when you find them. A US prior disclosure made before a formal investigation, with the unpaid duty paid, limits a negligent violation to interest and a fraudulent one to 100% of the lost duty (1592(c)(4); 19 CFR 162.74).

Common questions#

Can I mark an order as a gift so my customer pays less duty?#

No. A paid order isn't a gift in the US, the EU or the UK, and marking it as one is a false declaration (19 CFR 10.153(a)).

What if the wrong value was an honest mistake?#

Clerical errors and mistakes of fact aren't violations unless they form a pattern of negligence (19 USC 1592(a)(2)). Correct them quickly with a prior disclosure.

Sources#