Ruling of the Week 2015.16: SCOTUS Edition

Etiketler : Compliance Court Decision Customs Law Enforcement SCOTUS
I'm falling behind on my goal of blogging a ruling a week. So, I am cheating and calling an action of the United States Supreme Court a "ruling," which it technically is.

Yesterday, the Supreme Court denied the petition for certiorari in Shadadpuri v. United States. That means that the decision of the full United States Court of Appeals in Trek Leather stands as the law of the land.

Is this a terrible result? Probably not in that particular case. It appears that Mr. Shadadpuri was a bad actor in terms of customs compliance. But, the decision is not limited to bad actors. It means that anyone who provides information to Customs that is material to its handling of an entry is potentially liable for a penalty if that information turns out to be false by reason of fraud, gross negligence, or negligence. By anyone, I mean anyone. This applies to the importer, individuals who are employees of the importer, and third parties including brokers, carriers, sureties, and domestic purchasers.

The reason this is a big deal is not that it has never happened before. It has. It is only a big deal because this is the first time (at least as far as I know) that the Federal Circuit has said this is the law.

The question is what happens now. Realistically, maybe nothing new. If your company strives for compliance and you are a conscientious professional, you have automatically limited your exposure to liability. But, we no longer have the colorable argument that only the importer can be liable for negligence. So, you need to continue to strive for compliance both on behalf of your company and personally in all your communications with Customs.

More important will be how Customs and the Department of Justice behave. Justice has stated that Trek is not a change in the law and that it is unlikely to have broad application. Justice has stated, through individuals in non-binding settings where they do not represent official Department policy, that it will continue to bring cases against individuals only where there is egregious misbehavior by individuals directly involved in the violations.

What we are left with is a new paradigm in which the Supreme Court has effectively confirmed that Customs and Justice have the power to levy penalties against individuals who are not the importer of record. The question is whether Customs and Justice will continue to exercise that power in the rare case where an individual engages in egregious violations of the customs law. I remain confident that will be the case, mainly because Justice thinks this was always the law. But, I am leery and unfortunately on the lookout for evidence to the contrary.