The Department of Justice announced on May 20, 2026, that Farjess Inc., Royal Canadian Steel Inc., and their part-owner and president Feroz Jessani have agreed to pay $19 million to settle False Claims Act allegations arising from a nearly six-year scheme to evade U.S. customs duties on imported steel by falsely declaring its country of origin. The scheme ran from May 2019 through January 2025 and allowed the defendants to import flat-rolled steel from China, Indonesia, Italy, Turkey, and Vietnam while telling U.S. Customs and Border Protection the steel originated in Canada or the United States.
The false origin declarations allowed Farjess and Royal Canadian Steel to avoid Section 232 national security tariffs and anti-dumping and countervailing duties applicable to steel from the actual source countries — duties that could substantially increase the landed cost of covered imports. A steel broker, Shamsh Dhala, filed the underlying qui tam action that triggered the government's investigation. Dhala will receive $3.61 million from the settlement proceeds as the relator, representing approximately 19 percent of the total recovery. The case was pursued under the False Claims Act on the theory that false customs declarations submitted to CBP constitute false claims against the United States government, a legal theory that federal courts have consistently upheld in customs fraud cases involving duty evasion on products destined for or used in government programs.
How the Scheme Operated
Section 232 tariffs on steel imports were implemented in 2018 under the Trade Expansion Act of 1962, which authorizes the president to restrict imports found to threaten national security. The tariffs imposed a 25 percent duty on steel imports from most countries, with carve-outs and quota arrangements for certain trading partners including Canada under the terms of the United States-Mexico-Canada Agreement. By misrepresenting Chinese, Indonesian, Italian, Turkish, and Vietnamese steel as Canadian or American in origin, Farjess and Royal Canadian Steel positioned their imports to qualify for favorable duty treatment they were not entitled to receive.
Anti-dumping and countervailing duty orders — separate from Section 232 tariffs — also applied to flat-rolled steel from several of the actual source countries identified in the government's allegations. Anti-dumping duties are assessed when foreign producers sell goods in the U.S. market below their home-market price or cost of production; countervailing duties offset government subsidies that give foreign producers an unfair pricing advantage. Together, those duties can substantially increase the landed cost of covered steel imports. Falsifying origin to evade both Section 232 tariffs and anti-dumping and countervailing duties provided the defendants a significant and illegal price advantage over competitors importing the same steel honestly and paying applicable duties in full.
The scheme ran for nearly six years, from May 2019 through January 2025, spanning two presidential administrations and a period of significant volatility in both domestic and global steel markets. The duration and scope of the conduct — and the fact that it was ultimately exposed by a steel broker with market visibility rather than through a regulatory audit — highlight structural vulnerabilities in the customs enforcement system that government contractors who buy steel must actively manage through their own supply chain compliance programs.
What It Means for Contractors
For government contractors subject to domestic sourcing requirements — including the Buy American Act, the Trade Agreements Act, and end-product clauses in defense and civilian agency contracts — the Farjess and Royal Canadian Steel settlement is a direct supply chain integrity warning. The Buy American Act and its implementing regulations require that goods acquired for the government, including steel used in construction and manufactured products, meet domestic content thresholds or qualify for applicable waivers and exceptions. A contractor whose steel supply chain includes material falsely certified as domestic or Canadian when it actually originates in China, Indonesia, Turkey, or Vietnam may be unknowingly violating the terms of its government contracts in addition to customs law.
The whistleblower dynamic in this case deserves particular attention. Shamsh Dhala, a steel broker, filed the qui tam action. The fraud was not discovered through a CBP audit, a trade enforcement referral, or a customs broker compliance review — it was discovered by a market participant with commercial visibility into how the defendants were sourcing and misrepresenting their steel. This pattern — industry insiders rather than regulators exposing supply chain fraud — is increasingly common in False Claims Act cases involving customs and trade compliance. Government contractors should assume that their supply chains, including steel mills, service centers, brokers, and distributors, are visible to competitors and other market participants who have both the knowledge and the financial incentive to file qui tam suits if they observe origin fraud or other customs violations.
The Section 232 tariff structure creates sustained economic pressure on steel importers that makes origin misrepresentation financially attractive. As long as substantial duty differentials exist between tariffed and duty-free or lower-tariff origins, bad actors have incentives to falsify documentation. For contractors managing multi-tier supply chains that include imported steel, mill certifications and certificates of origin are necessary but not sufficient documentation controls. Contractors should assess whether their supplier qualification and auditing programs include verification of actual steel origin — not just reliance on the documents suppliers provide — and should evaluate contractual representations and warranties from steel suppliers regarding tariff compliance and country of origin accuracy.
The $19 million settlement, combined with the $3.61 million whistleblower share, illustrates that customs fraud enforcement under the False Claims Act carries meaningful financial consequences even for mid-sized commercial steel companies. Larger government contractors who unknowingly purchase and use falsely certified steel in government projects face exposure not only for the underlying customs duty evasion but potentially for making false certifications in their own contract deliverables or Buy American compliance documentation. Supply chain due diligence on steel sourcing is a direct False Claims Act exposure area that warrants the same compliance investment as labor standards, cybersecurity, and quality system requirements in government contracting programs.
