- Piercing of the corporate veil to establish that the corporate officer was the actual importer of record, as defined by statute
- Establishing that he was liable for fraud under § 1592(a)(1)(A)
- Establishing that he was an aider and abettor of fraud by the corporate importer under § 1592(a)(1)(B)
The Federal Circuit majority held that only an importer of record or an agent authorized in writing—as defined by 19 U.S.C. § 1484—may be liable for negligence as a “person” under § 1592(a)(1)(A). Absent piercing of the corporate veil, corporate officers (agents of the corporation) are not liable for negligently submitting false customs forms. Thus, the trade court decision was reversed.
A dissenting opinion was filed.
Read the Federal Circuit’s decision [PDF 169 KB] in United States v. Trek Leather, Inc., 2011-1527 (Fed. Cir. July 30, 2013)
A company (Trek Leather) was the importer of record for 72 entries of men’s suits between February 2, 2004, and October 8, 2004, under a consignment agreement. An individual (the president and sole shareholder of Trek) was a 40% shareholder of the other party to the consignment agreement. The individual was not a licensed customs broker.
Foreign manufacturers used assists to make the men’s suits, which Trek then imported into the United States. In August 2004, CBP investigated Trek’s import activities and determined that the relevant entry documentation failed to include the cost of the fabric assists in the price paid or payable for the men’s suits which, in turn, lowered the amount of duty payable by Trek.
Later in 2004, CBP informed the individual that Trek had failed to declare the value of the fabric assists when importing the merchandise.
The individual had also previously failed to include assists in entry declarations when acting on behalf of a corporate importer in 2002, and was liable for penalties under § 1592.
When confronted in 2004 regarding the assists, the individual conceded he knew Trek ought to have included the value of the fabric assists in its duties. Because neither the individual nor Trek paid the balance of the duties owed in connection with the assists, the government filed suit in the U.S. Court of International Trade, claiming that both Trek and the individual (in his personal capacity) were liable for a penalty of approximately $2.4 million for fraudulently, knowingly, and intentionally understating the dutiable value of the imported men’s suits. The government also sought the unpaid customs duties of about $45,000.
Before the trade court, the government claimed that the individual was personally liable for gross negligence because he was a “person” within the meaning of § 1592(a) generally. The trade court agreed with this position.
Today, the Federal Circuit majority concluded that, absent piercing the corporate veil to establish that the individual was the actual importer of record, the penalty assessment against him must be reversed.
For more information, contact a professional with KPMG’s Trade & Customs practice:
John L. McLoughlin
Todd R. Smith
Luis A. Abad
Or your local KPMG Trade & Customs professional.