Tuesday, September 16, 2014

Breaking News: CAFC Finds Corporate President Liable in Trek Leather

In a closely watched decision, the Court of Appeals for the Federal Circuit has reversed itself and upheld the decision of the Court of International Trade in U.S. v. Trek Leather. The core issue here is whether an individual can be held liable for customs-related negligence when that individual is not the importer of record. According to 19 U.S.C § 1592 no "person" may "enter or introduce" merchandise into the United States by means of a material false statement or omission that is the result of fraud, gross negligence, or negligence. Here, the government claimed that the importer and its president were both separately negligent. The president argued that since he did not enter the merchandise, he could not be negligent.

Initially, the Federal Circuit agreed. It reasoned that negligence is an absence of reasonable care and that the law only puts the reasonable care obligation on the importer of record. The United States asked the full Court of Appeals to reconsider that decision, which it agreed to do.

In the decision issued today, the Court reversed course and affirmed the Court of International Trade. The Court found that the phrase "enter or introduce" expands the scope of "persons" to whom the law is applicable beyond the importer of record. Because the defendant was actively involved in directing the importation of this merchandise, and did so on the basis of false statements, he "introduced" the merchandise and can be held liable for negligence.

Compliance professionals, small business owners, and entrepreneurs who import should think about that.

I'll post a more detailed analysis as soon as possible.

1 comment:

yormicklaw said...

Im just getting through the first read of the decision and have not thought through all the initial reactions. But one question that comes to mind in reading the rationale based on Panama Hats is if "introduce" covers pre-entry filing activities, how can those support an allegation of a material false statement or omission on which to base a 592(A) penalty when the entry is not filed at that point? The court seems to expand the scope of "introduce" even further than what the facts of this case require and then goes on to state it does not have to define the reach of "introduce." This seems like a very slippery slope.