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Update on Personal Liability for Incorrect Customs Declarations

Any individual directly involved in the import process may have personal liability for incorrect Customs declarations, according to the Court of Appeals for the Federal Circuit.

The Court of Appeals for the Federal Circuit on September 16, 2014 reversed its earlier decision in the case of  U.S. v. Trek Leather Inc. and Harish Shadadpuri and found that the phrase “enter or introduce” expands the scope of “persons” beyond the “importer of record.”  The Court found Mr. Shadadpuri personally liable for introducing undervalued merchandise into US Commerce in violation of 19 USC 1592(a)(1).

This decision by the Federal Circuit exposes individual business owners, compliance officers, import managers, financial officers and any individual directly involved in the import process to personal liability for customs duty and penalties on entries of merchandise into the United States, even if that individual is not the importer of record.

The facts of the case are that Trek Leather failed to include the cost of fabric assists into the price paid or payable for 72 entries of men’s suits.  As a result of this omission, the men’s suits entered into the United States using false statements or omissions that understated the customs duty value of the imported merchandise, resulting in an underpayment of over $133,000 in customs duties.  The Court of International Trade (CIT) originally held that the individual, by his actions, had “introduced” the merchandise into U.S. commerce as undervalued, as defined pursuant to 19 U.S.C. § 1592(a) (1)(A), and that he was personally liable for the customs duties and related penalties.  The Federal Circuit originally overruled the CIT, holding that only importers of record had the responsibility of making entry.   But in its en banc decision, the Federal Circuit ruled that Mr. Shadadpuri was not liable for the Section 592 violation because he had “entered” the merchandise – the goods had been entered by a corporation, Trek Leather – but rather Mr. Shadadpuri was personally liable because he caused the “introduction” of the merchandise, by providing false statements (i.e., invoices with incorrect values) to Trek’s Customs Broker.

For additional information please contact the MIQ Global Trade Management Team.