On September 16, the Court of Appeals for the Federal Circuit issued its long-awaited en banc decision, Trek leather, confirming that corporate officers can be found individually liable for customs negligence and gross negligence.

The opinion arises out of a 2009 suit by the U.S. Government to collect duties and penalties in relation to the undervaluation of entries of men’s wearing apparel. The Government sued both a corporate importer and its president, Harish Shadadpuri pursuant to 19 U.S.C. 1592, alleging fraud, gross negligence, and negligence in the importations.

The Court of International Trade found both Trek Leather and Mr. Shadadpuri jointly liable for gross negligence; on appeal, a divided three-judge panel overturned the finding as to Mr. Shadadpuri, finding that because he was not the importer of record listed on the Customs entry documents, he could not be held personally liable for negligence or gross negligence in import declarations.

In last month’s en banc opinion, the full Court found otherwise. The Cour framed the issue before it as “whether Mr. Shadadpuri is a “person’ covered by section 1592(a)(1)(A) and whether his actions come within the ‘enter, introduce, or attempt to enter or introduce’ language of that provision.” The Court found that Mr. Shadadpuri was “indisputably” a “person,” and then found that regardless of whether Mr. Shadadpuri made entry or attempted to make entry, he “introduce{d}” goods into the country. Relying primarily on United States v. 25 Packages of Panama Hats, 231 U.S. 358 (1913), the Court found that the statutory term “introduce” is a “flexible and broad term” that “ensure{s} that the statute {i}s not restricted to the ‘technical’ process of ‘entering’ goods.”

Applying this understanding to Mr. Shadadpuri, the Court found that his importation of men’s suits through Trek Leather was sufficient to engender liability under 1592(a)(1)(A). This finding did not rest on piercing the corporate veil; instead, Mr. Shadadpuri’s own acts, separate and apart from whatever actions Trek Leather may have taken, gave rise to independent liability.

The decision is sure to cause alarm in the importing community, as it appears to give Customs the right not only to sue corporate importers of record for inaccuracies in information presented to Customs, but their officers and employees as well. However, it is too soon to tell whether this fear is well-grounded.

The facts underpinning Trek Leather were fairly extreme – Mr. Shadadpuri was Trek Leather’s sole owner, he “directed its business,” and appears to have had specific responsibility over the inaccuracies at issue in the case.

Further, it may not make sense for Customs to sue officers/employees separately from their corporations in most cases – in section 1592 actions, Customs’ aim is to recover lost duties and civil penalties, and it is corporations, not individuals, who will generally have the resources to pay. However, the case may well give Customs a new way to go after money in in cases involving small “alter-ego” corporations.