In a September 16, 2014 decision which has broad implications for corporate officers, import managers and other persons involved in import operations, the U.S. Court of Appeals for the Federal Circuit found the president of an importing corporation individually liable for customs penalties under the theory that he was responsible for the “introduction” into the United States of under-valued merchandise imported by the company.
The decision, US v. Trek Leather, Inc., can be accessed at http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1527.Other.9-12-2014.1.PDF.
The Customs penalty statute (19. U.S.C. 1592(a)(1)) prohibits any person by fraud, gross negligence or negligence from entering, introducing or attempting to enter or introduce merchandise into the United States by means of a materially false statement or omission. While the history of the case is somewhat long and convoluted, the issue was whether an individual can be held liable for customs-related negligence or gross negligence when that individual is not the importer of record. The president of the company argued that since he was not the importer of record and did not enter the merchandise, he could not be liable.
The Federal Circuit reversed its earlier decision and 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 president of the company was actively involved in directing the importation of this merchandise, and did so on the basis of false statements, he “introduced” the merchandise and could be held liable for gross negligence (the applicable level of culpability already conceded by the company).
The practical implication of the Trek Leather decision is that, if the facts warrant, Customs has the authority to initiate penalty cases against individuals within the company who were directly involved in the import process as well as the corporate importer of record.
For further information on the Trek Leather decision and its potential implications, please do not hesitate to contact Arthur W. Bodek (firstname.lastname@example.org) or any other members of Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP. Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP is a member of the EACCNY.