Decisions of U.S. courts have examined instances when the importers cannot prove they met the burden of exercising reasonable care in classifying merchandise due to the presentation of incorrect import documentation.
Previously, the U.S. Court of Appeals for the Federal Circuit held that an importer’s president was personally liable for violations of U.S. import laws due to the presentation of false documentation. United States v. Trek Leather, Inc., 2011-1527 (Fed. Cir. 2014). The U.S. Supreme Court in 2015 denied a petition for certiorari, thereby effectively affirming the Federal Circuit’s decision to hold the importer’s executive officer personally liable.
The U.S. Court of International Trade in a recent decision left open the issue on penalties to be imposed on the importer, due to its failure to prove that it had acted with reasonable care in consulting its customs broker on the appropriate classification of certain plywood imports entered between 2006 and 2007.
The trade court’s main concern focused on why the customs broker followed the importer’s direction to misclassify several plywood entries under a duty-free rate provision, with the court stating: “What is not clear is why the customs broker went ahead with the incorrect classifications.”
The importer rested on the fact it had used a customs broker to file the entries. However, U.S. Customs and Border Protection (CBP) countered that “involvement of a customs broker does not shield [the importer] because it has ‘not offer[ed] a shred of documentary evidence to demonstrate that it actually consulted with its broker in a good faith effort to ascertain the correct classification.’”
Moreover, the government asserted that the only evidence presented was facsimiles between the importer and its broker showing that the importer had instructed the customs broker to use an incorrect duty-free classification. The trade court found: “These facsimiles . . . raise more questions than they answer, especially about the extent of the customs broker’s involvement with the entries.”
Read text of the decision [PDF 461 KB] in United States v. Horizon Products International, Inc., Slip Op. 15-80, (CIT July 24, 2015)
In light of the court decisions, importers need to consider what would be proper evidence of reasonable care when determining the correct classification of imported products—including when consulting with a third-party credentialed licensed customs broker.
For more information, contact a professional with KPMG’s Trade & Customs practice:
Douglas Zuvich | +1 (312) 665-1022 | firstname.lastname@example.org
Andrew Siciliano | +1 (631) 425-6057 | email@example.com
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.