In one of the most important recent decisions, the U.S. Court of International Trade dismissed a case filed against the CEO of his importing company that had made false statements to U.S. Customs and Border Protection in the entry documents. This Court decision has significant implications for every owner, officer, and manager of any company involved in importing merchandise into the United States.
The chronology of the case is somewhat familiar. In 2002, Tip Top Pants, Inc., imported from Mexico 954 dozen men’s pants, and claimed NAFTA duty free treatment. Customs issued a Request for Information (CBP form 28), and then a Notice of Action (CBP Form 29) denying the NAFTA claim. Customs then issued a Pre-Penalty Notice against both Tip Top Pants and its CEO, Mr. Nigri, alleging negligence, and assessing a penalty of $55,000. Tip Top filed a response to the Pre-Penalty Notice. Customs then issued a final Penalty Notice. Tip Top Pants filed with Customs another petition seeking cancellation or mitigation of the penalty. Customs never responded to that Petition filed by Tip Top Pant’s attorney.
Even though the disputed customs duties were subsequently paid by Tip Top Pants, Customs sued both Tip Top Pants, Inc. and its Chairman and CEO, Mr. Saad Nigri, for violating 19 U.S.C. 1592, by allegedly making material false statements or acts, or material omissions, in connection with the entry of the men’s pants from Mexico.
The Court took the unusual action of dismissing Mr. Nigri as a defendant in the case for two reasons. The first reason is that Customs failed to respond to Tip Top Pant’s Petition, as required by 19 U.S.C. 1592(b)(2). The second reason is that the Complaint filed with the Court by Customs did not specifically allege that Mr. Nigri personally committed any act or omission in violation of 19 U.S.C. 1592. As the Court stated, “[T]he complaint does not allege that Nigri did, or failed to do, anything whatsoever.” So, even if Tip Top Pants was negligent, its negligence could not be imputed to Mr. Nigri just because he was CEO of the company when the negligence occurred.
In a sentence that is certain to be cited by customs attorneys in petitions and court briefs, Judge Stanceu stated:
The [Priority Products] case does not hold that a party’s serving as an officer of a corporation at the time the corporation imports merchandise is, by itself, sufficient to establish that officer’s liability for acts committed by the corporation that are found to be in violation of Section 592.
The Court then issued an Order dismissing all claims by Customs against Mr. Nigri, personally.
A future blog post will let you know what happened with the negligence penalty case against Tip Top Pants, Inc.