Two Canada-based steel companies and their part-owner have agreed to pay $19 million to resolve allegations that they dodged duties on foreign steel by lying to U.S. Customs and Border Protection about where the metal was made, the Justice Department announced on May 20, 2026. Farjess Inc., Royal Canadian Steel Inc. and Feroz Jessani, a part-owner and the companies' president, settled civil False Claims Act allegations that they knowingly and improperly failed to pay duties owed on flat-rolled steel manufactured in Europe and Asia.

How the Duty-Evasion Scheme Worked

According to the Justice Department, the conduct ran from May 2019 through January 2025. Over that period, the defendants misrepresented to Customs and Border Protection that the country of origin of the imported steel was Canada or the United States. In reality, the government alleges, the flat-rolled steel originated in China, Indonesia, Italy, Turkey or Vietnam.

That misrepresentation matters because the true country of origin determines what duties an importer owes. By falsely identifying the steel as North American, the defendants allegedly sidestepped three separate categories of duties: antidumping duties, countervailing duties and Section 232 duties. Antidumping and countervailing duties are imposed to offset unfairly priced or subsidized foreign goods, while Section 232 tariffs apply to steel imports on national-security grounds. Together, those duties can add substantially to the landed cost of imported metal, giving importers a financial incentive to misstate origin.

The five countries named in the settlement, China, Indonesia, Italy, Turkey and Vietnam, are all jurisdictions whose steel exports have drawn duty orders or tariff scrutiny, which is precisely why the origin representation carried financial weight. Steel that would have been dutiable as Chinese, Indonesian, Italian, Turkish or Vietnamese product entered the country, on the government's account, declared as duty-favored Canadian or U.S. material. The roughly five-and-a-half-year span of the conduct, from May 2019 into January 2025, indicates the alleged scheme was not a one-off entry but a sustained pattern across many import transactions.

The case proceeded on a reverse-false-claims theory under the civil False Claims Act. Unlike a typical False Claims Act case, in which a defendant submits a false claim to obtain government money, a reverse-false-claims case targets conduct that conceals or avoids an obligation to pay money owed to the government, such as customs duties. The evaded-duties theory has become a recurring basis for trade-fraud recoveries.

A Whistleblower Broker and a $3.6 Million Award

The case began as a qui tam, or whistleblower, lawsuit. It was filed by relator Shamsh Dhala, a broker who worked with Farjess Inc., under the False Claims Act's whistleblower provisions. Those provisions allow private parties with knowledge of fraud against the government to sue on the government's behalf and to share in any recovery.

Dhala will receive roughly $3,610,000, about 19 percent of the recovery, for bringing the conduct forward. The matter is captioned United States ex rel. Dhala v. Royal Canadian Steel Inc. et al., No. 2:23-cv-12097, and was filed in the U.S. District Court for the Eastern District of Michigan.

The settlement reflects a coordinated federal effort. The Justice Department's Civil Division and the U.S. Attorney's Office for the Eastern District of Michigan handled the matter, with investigative support from Customs and Border Protection's Base Metals Center of Excellence and Homeland Security Investigations in Detroit. The resolution was coordinated through the Justice Department's Trade Fraud Task Force, a body created to pursue importers who evade tariffs and duties. Assistant Attorney General Brett A. Shumate said the department "will zealously pursue anyone who fraudulently evades the duties owed on steel products imported into this country."

What It Means for Contractors

It is important to be precise about who these defendants are. Farjess and Royal Canadian Steel are importers, not federal prime contractors, and the $19 million settlement resolves duty evasion at the border, not fraud on a government contract. As with the earlier Perfectus Aluminum matter, the direct exposure here falls on the parties making the customs representations.

That said, customs and trade enforcement under the False Claims Act is a fast-growing area, and it carries real implications for federal contractors whose supply chains include imported metals or components. The reverse-false-claims theory used here reaches false statements about country of origin and unpaid duties anywhere in the import chain. A contractor that buys steel, aluminum or fabricated components from a distributor inherits risk if an upstream supplier has misrepresented origin or underpaid duties, particularly where the contractor itself makes domestic-preference or origin certifications to the government.

Federal contracts frequently require certifications under domestic-sourcing regimes such as the Buy American Act and the Trade Agreements Act, and those certifications turn on the same country-of-origin facts that drive customs duties. A contractor that passes along a supplier's false origin claim, or that ignores warning signs that imported material was mislabeled, can find itself exposed to its own False Claims Act liability even if it never touched a customs entry. The whistleblower mechanism amplifies that risk: as this case shows, an insider such as a broker can trigger a multimillion-dollar recovery and collect a substantial share.

The practical takeaway for contractors is supply-chain diligence. Companies sourcing imported metals should confirm that suppliers can document the true country of origin, retain mill certificates and entry records, and reconcile origin representations across customs filings and contract certifications. Where a supplier's pricing is conspicuously below market, that can be a signal that duties were never paid, and a buyer that looks past it may struggle to claim it acted in good faith. With the Trade Fraud Task Force coordinating recoveries and whistleblowers incentivized to come forward, the cost of weak origin controls is rising for everyone who touches imported material, importers and contractors alike.

The structure of this resolution underscores how trade-fraud enforcement now blends civil recovery, customs expertise and criminal-style investigation. Bringing together the Civil Division, a U.S. Attorney's Office, Customs and Border Protection's Base Metals Center of Excellence and Homeland Security Investigations gives the government both the technical capacity to trace steel origin and the litigation reach to pursue duty evasion as fraud. For contractors, that convergence is the signal worth heeding: the same facts that customs officials examine at the border can resurface in a False Claims Act case touching anyone downstream who certified or relied on those origin claims.

Sources

U.S. Department of Justice, Office of Public Affairs (May 20, 2026)
McGuireWoods via JD Supra (May 29, 2026)