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CUSTOMS-NOTES


The materials contained in this document have been prepared by George R. Tuttle Law Offices for informational purposes only. The information contained is general in nature, and may not apply to particular factual or legal circumstances. In any event, the materials do not constitute legal advice or opinions and should not be relied upon as such. Reprinted with permission.

FEBRUARY 2001


COURT FINDS IMPORTER LIABLE FOR PENALTIES FOR NOT VERIFYING INFORMATION ON CUSTOMS ENTRY

Importers have a responsibility to verify information on Customs documents or face possible charges of negligence and assessment of Customs penalties, so found the Court in United States v. Golden Ship Trading Company CIT Slip Op. 2001-7, January 24, 2001.

In an action to recover civil penalties for false statements under 19 U.S.C. 1592, Customs asserted that an importer, Golden Ship Trading, had been negligent in filing entry documents when it identified the country of origin for certain imported Tee-shirts as the Dominican Republic rather than China. While not disputing that the Tee-shirts were actually from China, Golden Ship Trading claimed it was not negligent because the foreign seller had deceived it when it was told that the country of origin was the Dominican Republic. The foreign seller furnished all of the relevant information necessary for the broker to prepare the entry documents, which Golden Ship Trading signed without questioning.

In rejecting the importer's argument that it was not negligent, the court said that Golden Ship Trading had failed to exercise reasonable care because it failed to verify the information contained in the entry documents. Under the definition of reasonable care found in the Customs regulations, the court concluded that Golden Ship Trading had a responsibility to at least undertake an effort to verify the information on the entry documents. The court noted that:

[T]here is a distinct difference between legitimately attempting to verify the entry information and blindly relying on the exporter's assertions. Had Golden Ship Trading inquired as to the origin of the imported tee-shirts or, at minimum, attempted to check the credentials and business operations of the exporter, that it could have made an argument that it attempted to exercise reasonable care and competence to ensure that the statements on the entry documents were accurate.
Golden Ship Trading Company, Slip. Op. p. 6.

Reliance On A Broker Does Not Remove An Importer's Obligation To Exercise Reasonable Care

Golden Ship Trading also argued that it was not negligent because it employed a customhouse broker, and relied on the broker's expertise to properly prepare the import documents. Rejecting this argument, the Court clarified that reliance on a broker does not remove an importer's obligation to exercise reasonable care to ensure that the statements made on the entry documents are correct. Slip Op. at p. 6.

The court concluded by stating that the failure of Golden Ship Trading to even attempt to verify the entry document information shows it did not act with reasonable care and, therefore, it was liable for a civil penalty for attempting to negligently import merchandise into the United States in violation of 19 U.S.C. 1592 (a)(1)(A).

The Impact Of Golden Ship Trading

In today's fast paced business environment, it is not uncommon for importers and brokers to rely on the information provided by a foreign supplier on invoice documents. In Golden Ship Trading, the court took the opportunity to clarify that importers have an affirmative obligation to take the steps necessary to ensure that statements made on the entry are correct.

The court's decision is a clear pronouncement that importers may not blindly rely on information supplied by their suppliers, or assume that the use of a licensed broker will shield them from liability for erroneous statements made in entry documents.

While the exercise of reasonable care may not have guaranteed success, the lack of any attempt at verification will ensure that the importer will be liable for the false information.

The Importer's Obligation To Exercise Reasonable Care

Under 19 U.S.C. 1484, a statutory obligation is imposed on importers to use reasonable care when completing entry documentation so as to enable Customs to, among other things assess duties and collect accurate import statistics. Customs regulation 19 C.F.R. Pt. 171 App. B (1992) provides:

As a general rule, a violation may be determined to be negligent if it results from the offender's failure to exercise reasonable care and competence to ensure that a statement made is correct.

Information that must be accurate on entry documents includes, but is not limited to: a description of the goods, their value, tariff classification, quantity, special duty or tariff treatment, and country of origin. The failure to use reasonable care in completing the entry can result in fines of up to 2 to 4 times the loss of revenue, or 20 to 40 percent of the value of the merchandise, if the violation did not result in a loss of revenue. Intentional violations can result in fines of up to the value of the merchandise.

Importers can take a number of steps to avoid liability and ensure that they are acting with reasonable care when filing entries by:

  • Reviewing proper U.S. Customs Invoice requirements and documenting country of origin of goods or materials;
  • Establishing procedures to determine the correct classification and valuation of merchandise; and procedures for the communication of that information to their brokers for use in preparing Customs documents; and
  • Initiating a program for the review of entry documents prepared by their brokers, and for the correction of errors.

Importers may also limit liability by correcting inaccurate information submitted to Customs through the use of Supplemental Information Letters, Post Entry Amendments, Reconciliation, and Prior Disclosures.

For additional information on this subject contact: George R. Tuttle, III at:
George R. Tuttle Law Offices, One Embarcadero Center, Suite 730
San Francisco, CA 94111, Phone (415) 986-8780, Fax (415) 986-0908
E-mail: geo@tuttlelaw.com

George R. Tuttle, III, is an attorney with the Law Offices of George R. Tuttle in San Francisco. The information in this article is general in nature and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered such.

Copyright 2001-2004 by Tuttle Law Offices.

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