19 USC 1592 (a)(1) prohibits any person from fraudulently or negligently entering, introducing or attempting to enter or introduce merchandise into US commerce by means of (a)any document or electronically transmitted data or information, written or oral statement, or act that is material and false or (b) any material omission.
In the recent case of U.S. Trek Leather, Inc. and Harish Shadadpuri, 724 F.3d 1330 (Fed. Cir. Jul. 30 2013) the court was faced with the question whether or not this applied to a person who was acting in his or her capacity as a corporate officer of the “importer of record”.
In 2011, USCBP filed suit against the importer and its president and sole shareholder seeking $45,245.39 in unpaid customs duties and damages of $2,392,307.00 for allegedly fraudulently, knowingly, and intentionally understating dutiable value of imported men’s suits by omitting value of fabric assists. CBP alternatively sought civil penalty in the amount of $534,430.32 for gross negligence.
On September 16, 2014, an appeals court issued a decision wherein they distinguished from persons who “enter” goods (e.g. the importer of record” and persons who “introduce goods into U.S. commerce creating a board definition for those who “introduce” goods and thereby creating a new category of persons subject to penalties for violation of 19 USC 1592(a). In its En Banc decision the Court ruled that there was no basis for limiting the meaning to the term when it clearly was largely encompassing and obviously covered human beings.
It was found that Shadadpuri was grossly negligent in introducing goods into US commerce as he transferred the ownership of the goods while they were in transit to the U.S. because he elected to be the importer of record for this company and also because he provided the commercial invoices that materially understated the value of the merchandise to the broker for use in completing and submitting the required entry documents.
The Federal Circuit court of appeals found the ruling to be valid whether or not Shadadpuri entered the goods relying on a 1913 Supreme Court decision where it was confirmed the term “introduce” in 19 USC 1592 (a)(1) means that liability for fraudulent or negligent actions under that particular provision went beyond the act of filing papers with customs that “enter” the goods into US commerce. The court further clarified that the decision did not go so far as to “pierce the corporate veil” stating that Shadadpuri was not being held personally liable because of his status as officer or owner but instead because he himself personally violated the statute and there was a “core principle” in the law that “a person who personally commits a wrongful act is not relieved of liability because the person was acting for another”