Court to Review Whether to Expand Civil Penalties to Corporate Officers

Wednesday, March 26, 2014

Full Court to Review Whether to Expand Civil Penalty Liability

The Court of Appeals for the Federal Circuit (CAFC) has announced it will hear en banc (meaning all active judges may participate) the issue of whether corporate officers or shareholders qualify as “persons” under 19 U.S.C. 1592; CBP’s primary civil statute for fraud, gross negligence or negligence when importing goods.

Historically, U.S. Customs and Border Protection (CBP) has not imposed personal liability penalties on employees of a corporate importer, but it did just that in 2011 when the Court of International Trade (CIT) found Harish Shadadpuri liable for civil penalties for his actions as president of Trek Leather. Trek failed to add the cost of an assist to 72 entries which led to the underpayment of duties. The CIT ordered Trek and Shadadpuri to pay $534,420.20 each in penalties for gross negligence.

On March 5, 2014, the CAFC ordered the United States and Shadadpuri to file new briefs. The CAFC plans to review the meaning of the term “person” for purpose of Section 1592(a). If corporate officers or shareholders qualify as “persons” under the statute, they can be held personally liable for duties and penalties while acting within the course and scope of their employment on behalf of the corporation by which they are employed.

For more information please review the appeal.

CAFC Appeal