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Full Court of Appeals to Review Whether to Expand Customs Civil Penalty Liability to Corporate Officers and Employees

In a potentially ground-breaking case, the Court of Appeals for the Federal Circuit (CAFC) announced that it will hear en banc the issue of whether corporate officers or shareholders can be held personally liable for duties and penalties imposed under 19 U.S.C. § 1592.  If the CAFC broadly interprets the statute, its decision could expand liability for negligence and gross negligence under the Customs laws to individual employees of importers.


Historically, U.S. Customs and Border Protection (CBP) has not imposed personal liability for civil penalties on employees of a corporate importer for negligent or grossly negligent acts involved in importing goods.  Instead, it has limited the assessment of civil penalties to the company that acted as importer of record.  The only exception was for officers or employees that aided or abetted wrongful acts; even then, the courts historically have allowed “aiding and abetting” liability only with regard to fraudulent conduct only.

Trek Leather

CBP’s primary civil penalty statute, 19 U.S.C. § 1592, provides that “no person,” by “fraud, gross negligence, or negligence” may “enter, introduce, or attempt to enter or introduce” merchandise into the United States by means of any affirmative submission of a document or data that is “material and false,” or through any “omission” that is “material.”  The statute provides civil penalties for a “person” who violates this provision, or who may “aid or abet any other person” to violate this provision.

In a July 2013 opinion, a divided three-judge CAFC panel reversed a CBP assessment that attempted to hold the president and owner of a corporation that served as importer of record to be “jointly and severally liable” for customs penalties.  The CAFC panel reasoned that where the importer of record was a corporation, the president/owner of the corporation could not be held personally liable unless: (1) the government either “pierced the veil” of the corporation; or (2) the president/owner personally aided and abetted fraud by the corporation.  The concept of “piercing the corporate veil” is a basic principle of state corporate law, which in most jurisdictions requires the plaintiff asserting personal liability against a corporate owner, officer or employee to show that the individual was acting as the “alter ego” of the corporation, rather than merely as an ordinary agent of the corporation.

On March 5, 2014, the CAFC vacated the July 2013 panel opinion and ordered the parties to file new briefs to the CAFC en banc(meaning all active CAFC judges may participate).  The CAFC plans to review the meaning of the term “person” for purposes of Section 1592(a) liability and, if corporate officers or shareholders qualify as “persons” under the statute, they can be held personally liable for duties and penalties under Section 1592(a) when acting within the course and scope of their employment.  The order also asks that the briefs address the scope of “gross negligence” and “negligence” in Section 1592(a), and what is the relevant duty.

How This Affects You

If the CAFC rules in favor of the government, it would mean that CBP could hold individuals liable for the penalties assessed against a corporate importer.  This would be a major shift in liability for employees of a company acting as importer of record.

Due to the ground-breaking nature of the issue, the CAFC has invited interested parties to submit amicus curiae briefs.  Please contact any of the lawyers listed above if you would like further information regarding this issue.

© 2022 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume IV, Number 78

About this Author

Kathleen Murphy, International trade Lawyer, Drinker Biddle

Kathleen M. Murphy counsels clients on maximizing trade benefits, making informed global procurement decisions and developing domestic and international trade compliance programs. She represents clients in duty-recovery initiatives and customs challenges concerning tariff classification, valuation, Free Trade Agreements and country of origin determinations, among other areas. She guides clients through compliance audits and validations, as well as penalty investigations conducted by U.S. or foreign customs authorities. She also represents clients in...

William Rucker, Drinker Biddle Law Firm, International Trade and Customs Specialist

William R. “Randy” Rucker assists clients with all aspects of U.S. Customs law, including the classification and valuation of merchandise, country of origin and marking determinations, quantitative import restraints, duty-preference and savings programs, understanding and receiving the benefits of free trade agreements, compliance audits, enforcement actions and other trade-related matters.

In order to assist clients with their compliance efforts and satisfy "reasonable care" requirements, Randy frequently performs reviews of companies' internal...

Douglass Heffner, International trade lawyer, Drinker Biddle

Douglas J. Heffner litigates customs and international trade matters including antidumping duty, countervailing duty and safeguard cases. He represents foreign companies in Canada, Europe, Japan and Mexico, as well as domestic producers in industries that range from high-tech to heavy industry, to consumer and industrial goods. He also represents trade associations, government agencies and embassies in a broad range of matters.

Richard P Ferrin, International Trade Lawyer, Drinker Biddle

Richard P. Ferrin advises clients about international trade regulations, particularly antidumping and countervailing duty proceedings at both the administrative and appellate levels. He advocates for his client in global “safeguards” proceedings and on customs matters involving classification issues and country-of-origin determinations. Richard has represented foreign manufacturers, foreign exporters, and U.S. importers in antidumping and countervailing duty proceedings before the U.S. International Trade Commission, and in judicial review of...