Importer’s failure to exercise “reasonable care” on classification

Importer’s failure to exercise “reasonable care”

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.

Related content

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.

Trade court, recent decision

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)

KPMG observation

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 | dzuvich@kpmg.com

Andrew Siciliano | +1 (631) 425-6057 | asiciliano@kpmg.com

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