Customs Litigation: Federal Circuit Decision In United States v. Trek Leather Broadens Personal Liability For Penalties Under 19 U.S.C. §1592


Customs Litigation: Federal Circuit Decision In United States v. Trek Leather Broadens Personal Liability For Penalties Under 19 U.S.C. §1592

On September 16, 2014, the U.S. Court of Appeals for the Federal Circuit issued its en banc decision in United States v. Trek Leather, Inc. No. 2011-1527, 2014 U.S. App. LEXIS 17746 (Fed. Cir. Sept. 16, 2014). The decision is noteworthy for confirming that individuals who help introduce imported merchandise into the commerce of the United States personally may be liable for customs penalties even when those individuals are not the “importer of record” and even when there has not been any showing of fraud.

The en banc decision vacates the Federal Circuit panel decision, which previously had held that corporate officers of an “importer of record” are not personally liable for penalties under § 1592(a), absent a demonstration that the corporate veil should be pierced in situations where the corporate officer was the actual importer of record or an agent of the importer as designated by a writing. See United States v. Trek Leather, Inc., 724 F.3d 1330 (Fed. Cir. 2013) (vacated as discussed herein by United States v. Trek Leather, Inc., No. 2011-1527).

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September 22, 2014

Customs Litigation: Federal Circuit Decision In United
States v. Trek Leather Broadens Personal Liability For
Penalties Under 19 U.S.C. §1592
On September 16, 2014, the U.S. Court of Appeals for the Federal Circuit
issued its en banc decision in United States v. Trek Leather, Inc. No. 2011-
1527, 2014 U.S. App. LEXIS 17746 (Fed. Cir. Sept. 16, 2014). The
decision is noteworthy for confirming that individuals who help introduce
imported merchandise into the commerce of the United States personally
may be liable for customs penalties even when those individuals are not the
“importer of record” and even when there has not been any showing of
fraud.
The en banc decision vacates the Federal Circuit panel decision, which
previously had held that corporate officers of an “importer of record” are
not personally liable for penalties under § 1592(a), absent a demonstration
that the corporate veil should be pierced in situations where the corporate
officer was the actual importer of record or an agent of the importer as
designated by a writing. See United States v. Trek Leather, Inc., 724 F.3d
1330 (Fed. Cir. 2013) (vacated as discussed herein by United States v. Trek
Leather, Inc., No. 2011-1527).
In its en banc decision, the Federal Circuit concluded that under the facts
presented, an individual (separate and apart from the corporate importer of
record) is personally liable for duties and penalties arising from the grossly
negligent reporting of incorrect entered values. The en banc court’s
analysis turned on the wording of the customs civil penalty statute, which
provides that “no person, by fraud, gross negligence, or negligence may
enter, introduce, or attempt to enter or introduce any merchandise into
the commerce of the United States by means of” any material and false
statement. 19 U.S.C. §1592(1) (emphasis added).
The Federal Circuit did not decide whether the corporate officer attempted
to “enter” the merchandise at issue. Instead, the en banc Court analyzed
the “introduce” language of 19 U.S.C. §1592 and concluded that Congress
had amended the statute to add the term “introduce” for the purpose of
closing loopholes and “broadening the statute’s coverage.” Id. at *17.
Relying on Supreme Court precedent, the en banc Federal Circuit held that
“whatever the full scope of ‘enter’ may be, ‘introduce’ in section
1592(a)(1)(A) means that the statute is broad enough to reach acts beyond
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J. Michael Taylor
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Stephen A. Jones
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P. Lee Smith
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lsmith@kslaw.com
King & Spalding
Washington, D.C.
1700 Pennsylvania Avenue, NW
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the act of filing with customs officials papers that ‘enter’ goods into United States commerce. [Supreme Court
precedent] establishes that ‘introduce’ is a flexible and broad term added to ensure that the statute was not restricted
to the ‘technical’ process of ‘entering’ goods.” Id. at *18 (quoting United States v. 25 Packages of Panama Hats,
231 U.S. 358 (1913)).
This decision is noteworthy from an importers’ perspective, because it recognizes that personal liability can extend
to a person involved with introducing merchandise into commerce using a material and false misstatement even if
(1) that person is not the actual importer, (2) that person is not an officer of the importer, and (3) the activity does
not involve fraud. Thus, U.S. Customs properly may conclude that personal liability exists without analyzing
whether the person aided and abetted a violation of the customs law, so long as that person (himself or herself) is
found to have introduced merchandise into commerce using a material and false statement. In the case at issue, the
person found liable was considered to have introduced merchandise into U.S. commerce, because he “did
everything short of the final step of preparing the CBP Form 7501s and submitting them and other required papers
to make formal entry.” Id. at *19.
* * *
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This alert provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice. In some
jurisdictions, this may be considered “Attorney Advertising.”
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