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.

Comments

Anonymous 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.
Sep 17, 2014, 9:55:00 AM
Post a Comment

Popular posts from this blog

Ruling of the Week 2015.8: Old Jersey and Pitcairn Island

Image
For today's ROTW, I set out looking for a ruling dealing with some far off and preferably warm location. Turns out that, with the exception of coastwise transit issues, there are no Customs and Border Protection rulings involving Pitcairn Island or any of several Pacific Ocean microstates including Tuvalu , Niue , and Kiribati . Pitcairn Island What I did find is an interesting question about the country of origin marking for products of the Bailiwick of Jersey Island, Channel Islands. The ruling is HQ 561938 (Mar. 18, 2002). For those of you who may not know, Jersey is an island off the coast of Normandy, France. It is an independent international actor and not part of the U.K. although the U.K. is responsible for its defense and external relations. Also, the Queen is the Head of State in her capacity as "the Crown in Right of Jersey." It is, according to the U.S. Department of State, a " Crown Dependency " along with the Isle of Man and the Bailiwick o...
Read more

CAFC Decision in Double Invoicing Case

The Federal Circuit has issued a decision on the merits in United States v. Inn Foods, Inc.  There had been a previous decision on jurisdiction, which was followed by a trial at the Court of International Trade and then this appeal on the substance. The initial issue is whether Inn Foods' invoicing practice amounts to fraud.  Inn Foods had been receiving an invoice from growers in Mexico that had a relatively low sales prices on it.  Subsequent to entry, Inn Foods created a second invoice at something more similar to market value, retaining the original invoice number, and paid at that higher amount.   Superficially, this looks like a standard-issue double-invoicing scheme.  But, in the age of reconciliation, is it really more like a provisional pricing mechanism?  It might have been possible to make that argument had Inn Foods adjusted its entries accordingly.  It didn't and the loss of revenue was approximately $624,000.  Based on testimony and evidence indicating both knowl...
Read more

Ninestar and UFLPA Exhaustion

Image
Exhaustion is a key doctrine in administrative law. When applicable, it requires that a party unhappy with an agency’s determination complete the administrative appeal process before turning to the courts for judicial review. Requiring exhaustion typically promotes judicial efficiency by ensuring that disputes are resolved at the agency and, if they are not, that there is a complete record of the agency process. Exhaustion also ensures that the judiciary respects the executive agencies and their expertise.  There are, on the other hand, times when the courts will find that exhaustion is not necessary or appropriate. Such is the case in  Ninestar Corporation et al. v. United States  et al., a decision of the U.S. Court of International Trade.  Ninestar is also interesting because it is one of the first cases in the CIT involving the Uyghur Forced Labor Prevention Act, known as UFLPA. In my hiatus from active blogging, I missed the rise of UFLPA as a major compliance t...
Read more