United States v. Trek Leather, Inc. , 724 F.3d 1330 ( 2013 )

United States Court of Appeals
for the Federal Circuit
______________________
UNITED STATES,
Plaintiff-Appellee,
v.
TREK LEATHER, INC.,
Defendant,
AND
HARISH SHADADPURI,
Defendant-Appellant.
______________________
2011-1527
______________________
Appeal from the United States Court of International
Trade in No. 09-CV-0041, Judge Nicholas Tsoucalas.
______________________
Decided: July 30, 2013
______________________
STEPHEN C. TOSINI, Senior Trial Counsel, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for plaintiff-
appellee. With him on the brief were STUART F. DELERY,
Acting Assistant Attorney General, JEANNE E. DAVIDSON,
Director, and FRANKLIN E. WHITE, JR., Assistant Director.
Of counsel was SCOTT A. MACGRIFF, Trial Attorney.
2 US v. TREK LEATHER, INC.
JOHN J. GALVIN, Galvin & Mlawski, of New York, New
York, argued for defendant-appellant.
______________________
Before DYK, PLAGER, and O'MALLEY, Circuit Judges.
Opinion for the court filed by Circuit Judge O’MALLEY.
Dissenting opinion filed by Circuit Judge DYK.
O’MALLEY, Circuit Judge.
Mr. Harish Shadadpuri (“Shadadpuri”) appeals the
decision of the United States Court of International Trade
granting in part the United States’ (“the government”)
motion for summary judgment, finding Shadadpuri liable
for gross negligence in connection with the entry of im-
ported merchandise into the United States and imposing
penalties under 19 U.S.C. § 1592(c)(2) for that conduct.
Shadadpuri contends that corporate officers of an “im-
porter of record” are not directly liable for penalties under
§ 1592(c)(2). In the circumstances presented here, we
agree. We find that, absent piercing Trek’s corporate veil
to establish that Shadadpuri was the actual importer of
record, as defined by statute, or establishing that
Shadadpuri is liable for fraud under § 1592(a)(1)(A), or as
an aider and abettor of fraud by Trek under
§ 1592(a)(1)(B), we must reverse the penalty assessment
against Shadadpuri. 1
1 While it appears from the record that the govern-
ment would have been able to allege one or more of these
theories of liability, it chose not to do so below and has
expressly chosen not to seek an additional opportunity to
do so here on appeal. The government relies solely on its
claim that it can avoid having to make the showings
Shadadpuri contends it must make by, instead, seeking to
US v. TREK LEATHER, INC. 3
I.
The relevant facts are not in dispute. Trek Leather,
Inc. (“Trek”) was the importer of record for seventy-two
(72) entries of men’s suits between February 2, 2004, and
October 8, 2004. Mercantile Electronics, LLC (“Mercan-
tile Electronics”), which is not a party to this suit, was the
consignee of the men’s suits. Shadadpuri is the president
and sole shareholder of Trek, and is also a forty-percent
(40%) shareholder of Mercantile Electronics. There is no
evidence or even allegation that Shadadpuri is himself a
licensed customs broker.
Trek and Mercantile Electronics purchased a number
of fabric “assists” and provided them to manufacturers
outside the United States. An assist is defined by 19
U.S.C. § 1401a(h)(1)(A) as, among other things: “materi-
als, components, parts, and similar items incorporated in
the imported merchandise.” 19 U.S.C. § 1401a(h)(1)(A)(i).
The foreign manufacturers used the assists to make men’s
suits which Trek imported into the United States. In
August 2004, the United States Customs and Border
Protection (“Customs”) investigated Trek’s import activi-
ties and determined that the relevant entry documenta-
tion failed to include the cost of the fabric assists in the
price paid or payable for the men’s suits which, in turn,
lowered the amount of duty payable by Trek. In Novem-
ber 2004, Customs informed Shadadpuri that Trek had
failed to declare the value of the fabric assists when
importing the merchandise.
Shadadpuri previously failed to include assists in en-
try declarations when acting on behalf of a corporate
importer. In 2002, Customs discovered that Shadadpuri,
acting on behalf of Mercantile Wholesale Inc. (“Mercan-
tile”), failed to include in Mercantile’s entry documenta-
impose direct liability upon him for penalties under
§ 1592(c)(2).
4 US v. TREK LEATHER, INC.
tion the cost of fabric assists and trim when identifying
the price actually paid or payable for the merchandise.
The same Customs Import Specialist that conducted the
investigation currently at issue discovered the discrepan-
cies in 2002 and explained to Shadadpuri that assists
were dutiable and must be included on import documen-
tation. As a result of the 2002 investigation, Mercantile
paid $46,156.89 in unpaid duties after admitting it failed
to add the value of the assists in the price actually paid or
payable for merchandise. Customs did not take any
action against Shadadpuri personally.
When confronted in 2004 regarding the assists at is-
sue in this case, Shadadpuri conceded he knew Trek
should have included the value of the fabric assists in its
duties. Neither Shadadpuri nor Trek paid the balance of
the duties owed in connection with the assists. The
government filed suit in the Court of International Trade,
claiming that both Trek and Shadadpuri, in his personal
capacity, were liable for a penalty of $2,392,307, for
fraudulently, knowingly, and intentionally understating
the dutiable value of the imported men’s suits. See Unit-
ed States v. Trek Leather, Inc. and Harish Shadadpuri,
Case No. 1:09-cv-00041-NT, Doc. No. 2 (“Complaint”).
The government alternatively alleged that Shadadpuri
and Trek were either: (1) grossly negligent and liable for a
civil penalty of $534,420.32, or (2) negligent and liable for
a civil penalty of $267,310.16. The government further
sought the unpaid customs duties of $45,245.39.
The statutory scheme which governs these claims and
requests for penalties contains two relevant sections.
First, § 1592(a) defines what conduct is subject to a penal-
ty. It provides:
(a) Prohibition
(1) General Rule
US v. TREK LEATHER, INC. 5
Without regard to whether the United
States is or may be deprived of all or a
portion of any lawful duty, tax, or fee
thereby, no person, by fraud, gross negli-
gence, or negligence—
(A) may enter, introduce, or at-
tempt to enter or introduce any
merchandise into the commerce of
the United States by means of—
(i) any document or elec-
tronically transmitted data
or information, written or
oral statement, or act
which is material and
false, or
(ii) any omission which is
material, or
(B) may aid or abet any other per-
son to violate subparagraph (A).
19 U.S.C. § 1592(a). Section 1592(c) then describes the
penalties which may be assessed, depending on the level
of an offender’s culpability. It provides, in relevant part:
(c) Maximum penalties
(1) Fraud
A fraudulent violation of subsection (a) of
this section is punishable by a civil penal-
ty in an amount not to exceed the domes-
tic value of the merchandise.
(2) Gross negligence
A grossly negligent violation of subsection
(a) of this section is punishable by a civil
penalty in an amount not to exceed—
6 US v. TREK LEATHER, INC.
(A) the lesser of—
(i) the domestic value of
the merchandise, or
(ii) four times the lawful
duties, taxes, and fees of
which the United States is
or may be deprived, or
(B) if the violation did not affect
the assessment of duties, 40 per-
cent of the dutiable value of the
merchandise.
(3) Negligence
A negligent violation of subsection (a) of
this section is punishable by a civil penal-
ty in an amount not to exceed—
(A) the lesser of—
(i) the domestic value of
the merchandise, or
(ii) two times the lawful
duties, taxes, and fees of
which the United States is
or may be deprived, or
(B) if the violation did not affect
the assessment of duties, 20 per-
cent of the dutiable value of the
merchandise.
19 U.S.C. § 1592(c).
The government moved for summary judgment on all
claims, and Trek and Shadadpuri cross-moved for partial
summary judgment on the fraud claim. Shadadpuri also
cross-moved for summary judgment with respect to the
negligence claims, contending that, because he was not
US v. TREK LEATHER, INC. 7
the “importer of record”—and was, instead, only a corpo-
rate officer thereof—no such cause of action could lie
against him. During oral argument before the Court of
International Trade, Trek conceded it had been grossly
negligent, but denied having committed intentional fraud;
Shadadpuri continued to deny liability on all counts.
Shadadpuri argued that, because Trek, a corporation,
was the importer of record, he could only be liable person-
ally if the government either pierced Trek’s corporate veil
or established that Shadadpuri either had committed
fraud or aided and abetted fraud by Trek, making him
liable under § 1592(a)(1)(B) (“[no person] may aid or abet
any other person to violate subparagraph (A)”). Shadad-
puri contended—relying on our decision in United States
v. Hitachi America, Ltd., 172 F.3d 1319 (Fed. Cir. 1999)
(“Hitachi”)—that, because one cannot “aid and abet”
negligent conduct, he cannot be liable for Trek’s admitted
negligence unless the government proves he was acting as
Trek’s alter ego, rather than as an officer of the corpora-
tion acting in his capacity as such.
Given Trek’s concession of gross negligence, the gov-
ernment abandoned its fraud claim against Trek and
asked for judgment on the gross negligence claim and a
penalty under § 1592(c)(2). As for Shadadpuri, the gov-
ernment declined his invitation to either pierce Trek’s
corporate veil or to prove that Shadadpuri had aided or
abetted a fraud by Trek. Instead, the government
claimed it could prevail on its negligence claims against
Shadadpuri in the absence of such proofs solely because
Shadadpuri is a “person” within the meaning of § 1592(a)
generally.
The Court of International Trade agreed with the
government on all points. As to Trek, the court granted
summary judgment in favor of the government and as-
sessed a $534,420.32 penalty under §1592(c)(2), for gross
negligence in connection with its import documentation.
8 US v. TREK LEATHER, INC.
The Court of International Trade then found Shadadpuri
jointly and severally liable for the same penalty, finding
that Shadadpuri is a member of the class of “persons”
subject to liability under § 1592(a), whether or not he is
the “importer of record,” and that the plain language of
§ 1592(a) “does not recognize an exception for negligent
corporate officers.” See United States v. Trek Leather, Inc.
and Harish Shadadpuri, Case No. 1:09-cv-00041, Slip Op.
11-68 at 9 (Doc. No. 44) (citations omitted). The Court of
International Trade reasoned that Shadadpuri was per-
sonally responsible for examining all appropriate docu-
ments before forwarding them to a customs broker, and
that Trek could not have been grossly negligent but for
Shadadpuri’s involvement in that negligence. Id. at 9.
The court found the parties’ motions for summary judg-
ment on the fraud claim to be moot and entered an order
dismissing those claims. Id. at 10-11. Shadadpuri timely
appealed; the government has not appealed the dismissal
of the fraud claims.
On appeal, Shadadpuri argues that only “importers of
record” may be directly liable for a penalty assessed under
§ 1592(c)(2) or (c)(3), based solely on assertions of negli-
gence. Sections 1484 and 1485 of Title 19 set forth the
level of reasonable care required in conjunction with the
entry of merchandise, and, relying on Hitachi, Shadad-
puri contends that those sections are directed at requiring
“importers of record” to use reasonable care in providing
Customs with true and correct documentation regarding
the value of imported merchandise. And, because §§ 1484
and 1485 only apply to “importers of record,” parties other
than the importer of record cannot be directly liable for a
penalty under § 1592(c)(2) or (c)(3) for negligent failure to
comply with those provisions. He asserts that liability for
corporate officers of an importer of record may only arise:
(1) where those officers are liable for fraud under 19
U.S.C. §§ 1592(a)(1)(A) or (a)(1)(B), or (2) by way of the
common law principle of piercing the corporate veil so as
US v. TREK LEATHER, INC. 9
to equate the corporate officer with the importer of record.
He therefore argues that, because he was not the importer
of record (Trek was) and has not been charged with fraud,
or aiding and abetting fraud, he cannot be directly subject
to a penalty under § 1592(c)(2).
Shadadpuri further contends, citing both Hitachi and
United States v. Action Products, International, 25 CIT
139, 144 (Ct. Int’l Trade 2001), that, when an importer of
record is liable only for negligence or gross negligence (as
distinct from fraud), a third party cannot be liable for
aiding and abetting that negligence. His premise is that
someone cannot be liable for negligent aiding and abetting
because aiding and abetting requires a demonstration of
knowledge or intent. See Hitachi, 172 F.3d at 1337-38.
The government counters that the plain language of
§ 1592 mandates that “no person” shall import merchan-
dise into the United States by means of materially false
statements or omissions and that the provision is not
limited to “importers of record” or those committing fraud,
but also includes corporate officers of a corporate importer
of record. On this basis, the government contends that
the Court of International Trade properly held Shadad-
puri liable for a direct violation of § 1592(a) and properly
imposed penalties under § 1592(c)(2). We have jurisdic-
tion pursuant to 28 U.S.C. § 1295(a)(5).
II.
We review legal determinations from the Court of In-
ternational Trade without deference and review factual
questions for clear error. NEC Elecs., Inc. v. United
States, 144 F.3d 788, 790 (Fed. Cir. 1998). We agree with
the government that the word “person,” as it appears in
19 U.S.C. § 1592(a), should be read broadly. Section 1592
is not a free standing criminal sanction, however. Ac-
cordingly, the operative question is not simply whether
Shadadpuri is a “person” as defined in § 1592, but wheth-
er a corporate officer can be personally liable for a corpo-
10 US v. TREK LEATHER, INC.
rate importer of record’s negligent violation of §§ 1484
and 1485 and punished under § 1592(c)(2) therefor.
We first turn to the statutory structure of the Tariff
Act. Section 1484 of Title 19 sets forth the requirements
and timing for making entry of imported merchandise
into the United States:
(a) Requirement and time
(1) Except as provided in sections 1490, 1498,
1552, and 1553 of this title, one of the parties
qualifying as “importer of record” under para-
graph (2)(B), either in person or by an agent au-
thorized by the party in writing, shall, using
reasonable care—
(A) make entry therefor by filing with the
Bureau of Customs and Border Protection
such documentation or, pursuant to an au-
thorized electronic data interchange sys-
tem, such information as is necessary to
enable the Bureau of Customs and Border
Protection to determine whether the mer-
chandise may be released from custody of
the Bureau of Customs and Border Protec-
tion;
(B) complete the entry, or substitute 1 or
more reconfigured entries on an import
activity summary statement, by filing
with the Customs Service the declared
value, classification and rate of duty ap-
plicable to the merchandise, and such oth-
er documentation or, pursuant to an
electronic data interchange system, such
other information as is necessary to ena-
ble the Customs Service to—
(i) properly assess duties on the
merchandise,
US v. TREK LEATHER, INC. 11
(ii) collect accurate statistics with
respect to the merchandise, and
(iii) determine whether any other
applicable requirement of law
(other than a requirement relating
to release from customs custody) is
met.
19 U.S.C. § 1484(a).
Section 1484 provides that a party qualifying as an
“importer of record,” either in person or via an authorized
agent, must use “reasonable care” in completing and
submitting entry documentation to enable Customs to
properly assess duties on the merchandise. An “importer
of record” is defined as the owner or purchaser of the
merchandise, or a customs broker with a valid license
under 19 U.S.C. § 1641 designated by the owner, or a
purchaser or consignee of the merchandise. 19 U.S.C.
§ 1484(a)(2)(B). The importer of record is required to use
reasonable care when providing Customs documents
demonstrating the declared value and rate of duty appli-
cable to the merchandise so that Customs can, among
other things, properly assess duties on the merchandise.
19 U.S.C. § 1484(a)(1)(B). An importer of record making
entry under the provisions of § 1484 must also declare
under oath that all the statements in the entry documents
are true and correct. 19 U.S.C. § 1485(a)(3). Notably, the
obligations of §§ 1484 and 1485 are also imposed on any
agent “authorized in writing” by the importer of record to
act on its behalf with respect to its duties under those
sections.
Section 1592 provides specific penalties for failing to
make a proper entry, whether through fraud, gross negli-
gence, or even mere negligence. As the Court of Interna-
tional Trade observed in United States v. Rockwell
Automation, Inc., 462 F. Supp. 2d 1243, 1246-47 (Ct. Int’l
Trade 2006), “[i]n the event that Customs believes an
12 US v. TREK LEATHER, INC.
importer failed to meet its obligations under [the Tariff
Act of 1930], Customs may seek civil penalties under
Section 592 of [the Tariff Act of 1930].”
Section 1592(a) focuses on particular conduct: the en-
try of merchandise into the United States. Specifically,
§ 1592(a) bars “person[s]” from entering, introducing, or
attempting to enter or introduce, merchandise into the
United States by way of fraud, gross negligence, or negli-
gence. 19 U.S.C. § 1592(a). The provision focuses on such
improper entry, introduction, or attempted entry or
introduction of merchandise by means of any written or
oral statement or act that is materially false, or contains a
material omission. Id. Section 1592 does not punish all
fraud or negligence in dealings with Customs, it punishes
such acts only when they occur in connection with the
“entry” of merchandise into the United States and only
when they are of such character as to affect Customs’
decision-making when assessing duties in connection with
such entry. See United States v. Thorson Chem. Corp.,
795 F. Supp. 1190, 1197-98 (Ct. Int’l Trade 1992). In this
context, entry is defined as filing information to enable
Customs to determine whether the subject merchandise
may be released from custody and enable Customs to
assess duties on the merchandise, collect accurate statis-
tics, and determine whether any other applicable re-
quirements are met. 19 U.S.C. § 1484(a); see also 19
C.F.R. § 141.0a (defining “entry” as the documentation
required to be filed with Customs or the act of filing such
documentation.).
The penalties assessed under § 1592(c)(2) and (c)(3)
are for gross negligence or negligence in connection with
such acts of “entry.” Negligence is not defined separately
in the statute. Accordingly, we must assume it carries its
ordinary common law meaning when used in the Tariff
Act. See, e.g., Neder v. United States, 527 U.S. 1, 21
(1999) (“It is a well-established rule of construction that
where Congress uses terms that have accumulated settled
US v. TREK LEATHER, INC. 13
meaning under . . . the common law, a court must infer,
unless the statute otherwise dictates, that Congress
means to incorporate the established meaning of these
terms.”) (citations omitted); Standard Oil Co. of N.J. v.
United States, 221 U.S. 1, 59 (1911) (“[W]here words are
employed in a statute which had at the time a well-known
meaning at common law or in the law of this country, they
are presumed to have been used in that sense unless the
context compels to the contrary.”) (citations omitted).
That meaning implies a duty, the breach of that duty, and
harm causally flowing from breach of that duty. See
Huffman v. Union Pacific R.R., 675 F.3d 412, 418 (5th
Cir. 2012) (“negligence . . . requires proof of breach of a
standard of care, causation, and damages.”) (citing Con-
solidated Railroad v. Gottshall, 512 U.S. 532, 540 (1994));
Zimmerman v. Norfolk Southern Corp., 706 F.3d 170, 189
(3d Cir. 2013) (“The well-worn elements of common-law
negligence are . . . duty, breach, causation, and damag-
es.”); Tufariello v. Long Island R. Co., 458 F.3d 80, 87 (2d
Cir. 2006) (identifying “the traditional common law ele-
ments of negligence: duty, breach, foreseeability, and
causation.”). The only “duties” regarding the filing of
documents in connection with the entry of merchandise
set forth in the Tariff Act which could give rise to a negli-
gence claim are those spelled out in §§ 1484 and 1485.
Section 1592(c)(2) and (c)(3) are thus inextricably tied to
§§ 1484 and 1485.
The government recognized this interaction between
§§ 1484 and 1485 and the penalties which can be assessed
under § 1592 when filing its summary judgment motion
at the Court of International Trade. See United States v.
Trek Leather, Inc. and Harish Shadadpuri, No. 1:09-CV-
00041-NT, Doc. 30 at 11. In its motion, under the section
heading “[f]or [v]iolation [o]f 19 U.S.C. § 1592(a),” the
government first sets out §§ 1484 and 1485, and related
Customs regulations, to demonstrate the procedures and
requirements importers must follow—i.e. their “duties”
14 US v. TREK LEATHER, INC.
under the Act—and documents that must be filed at the
time of entry. Id. Only after setting forth these require-
ments does the government provide the details of § 1592
and the relevant levels of culpability and penalties which
attach when an “entry” is fraudulent or negligently false.
Id. at 11-12. When the government withdrew its fraud
claims against both Trek and Shadadpuri, moreover, it
obligated itself to prove the existence of and breach of a
definable duty under the Act. Thus, the allegations in the
government’s complaint and the complete record in this
case reveal that the government alleged that Trek and
Shadadpuri were negligent in “making entry” of the men’s
suits under §§ 1484 and 1485—i.e., failed to use reasona-
ble care in connection with its entry documentation—and
should be liable for a penalty under § 1592(c)(2) or (c)(3)
as a result.
Under the facts of this case, it is undisputed that Trek
is the importer of record because it is the owner of the
merchandise which was entered into the United States
and as to which Customs assessed duties. The govern-
ment does not contend that Shadadpuri was an “importer
of record or customs broker.” Nor does it assert that
Shadadpuri had any independent duty under §§ 1484 and
1485 with respect to Trek’s entries. It concedes that Trek
is a corporation and that, even as its sole shareholder,
Shadadpuri is not chargeable with its acts generally. The
government cannot reasonably contend otherwise given
long-standing principles of limited liability for sharehold-
ers and corporate officers when acting on behalf of a
corporation. See Anderson v. Abbott, 321 U.S. 349, 361-62
(1944) (“[n]ormally the corporation is an insulator from
liability on claims of creditors. The fact that incorpora-
tion was desired in order to obtain limited liability does
not defeat that purpose.”); Burnet v. Clark, 287 U.S. 410,
415 (1932) (“[a] corporation and its stockholders are
generally to be treated as separate entities.”). Of course,
Trek is chargeable with Shadadpuri’s actions because he
US v. TREK LEATHER, INC. 15
is a corporate officer (i.e., he is an “agent” of the corpora-
tion in the common law sense of that term); the question
posed is whether Shadadpuri, under the circumstances
here, can be personally chargeable with negligence for the
actions he took in his capacity as a corporate officer and
on behalf of the corporation. Under basic principles of
corporate law, he cannot. See O’Neal and Thompson’s
Close Corporations and LLCs: Law and Practice, § 8.22
(Rev. 3d ed.) (stating that when an officer of a corporation
acts, his action is that of the entity).
In Hitachi, for instance, we found that because
§§ 1484 and 1485 apply by their terms only to importers
of record, the corporate parent of an importer could not be
directly liable for violations thereof, even where it had
played “an active role” in the importer’s entry of mer-
chandise. Hitachi, 172 F.3d at 1337-38. We held, moreo-
ver, that the corporate parent could not be liable for
aiding and abetting the importer’s violations of §§ 1484
and 1485 because one cannot, as a matter of legal theory,
“aid and abet” the negligence of another. Id. Thus, it
would seem that, absent a showing that pierces Trek’s
corporate veil, Shadadpuri is as much a third party to
Trek’s activities as an “importer of record” as was the
corporate parent in Hitachi and, thus, cannot be directly
chargeable with penalties under § 1592(c)(2) or (3) for
Trek’s negligence. As Shadadpuri concedes, he could be
chargeable with a penalty under § 1592(a)(1)(B) for aiding
and abetting corporate fraud had the government chosen
to prove that Trek engaged in such fraud, but the gov-
ernment abandoned that claim. And, under Hitachi,
aiding and abetting liability only applies to intentional
acts, not negligent ones.
The government seeks to avoid the result that seems
compelled by the structure of the Tariff Act and our
decision in Hitachi by arguing that § 1592(a) defines
“person[s]” subject to the penalties more broadly than
§§ 1484 and 1485 define an “importer of record.” And, the
16 US v. TREK LEATHER, INC.
government argues that Hitachi only addressed the
liability of parent “exporters” under § 1592(a) and did not
mean to apply its holding to other potential “person[s]”
under § 1592(a). We are not persuaded on either score.
While the word “person” generally carries a broad
connotation, it cannot be divorced from the remainder of
the language in § 1592. The word “person” must be read
in context and “‘with a view to [its] place in the overall
statutory scheme.’” Roberts v. Sea-Land Servs., Inc., __
U.S. __, 132 S.Ct. 1350, 1357 (2012) (quoting Davis v.
Michigan Dept. of Treasury, 489 U.S. 803 (1989)); United
States v. Morton, 467 U.S. 822, 828 (1984) (“[w]e do not,
however, construe statutory phrases in isolation; we read
statutes as a whole.”). As noted above, § 1592(a) does not
simply prohibit persons from lying to customs—though
there may be other civil or criminal provisions which
address that activity—it only bars persons from making
misstatements to Customs in connection with the entry of
merchandise into the United States, and only from doing
so in a way that might tend to affect Customs’ assessment
of duties on that merchandise. See Thorson Chem. Corp.,
795 F. Supp. at 1197-98. And, penalties under
§ 1592(c)(2) and (c)(3) for negligent conduct can only be
assessed against those with definable “duties” under the
Tariff Act relating to such entries. The word “person” in
this context must be read to encompass those who are
authorized to enter merchandise into the United States
and who have duties imposed upon them which are con-
comitant with such entry. We do not read “person” as a
disembodied term untethered to the conduct for which
Congress deemed a penalty to be appropriate. Nor do we
read into it an unstated purpose of Congress to repeal the
common law principle of corporate-shareholder immuni-
US v. TREK LEATHER, INC. 17
ty. 2 We also decline to parse Hitachi as finely as the
government asks that we do.
In Hitachi, we rejected the government’s argument
that § 1592(c)(2) and (c)(3) should be read broadly to
encompass entities or individuals who, though not im-
porters of record, are actively involved with the funding
and control of the entry of merchandise by that importer
of record. Hitachi, 172 F.3d at 1336-38. The position the
government takes here, though phrased differently, is to
the same effect; if we accept it, we would simultaneously
overrule the result in Hitachi. We may not do that, nor do
we wish to. We did not limit either our discussion or
holding in Hitachi to exporters; our focus was on the fact
that, as a corporate parent, Hitachi Japan was not the
importer of record and had no duties as such, despite
findings by the Court of International Trade that it was
actively involved with and even directed the activity. As
here, what we did in Hitachi was both respect the corpo-
rate form and recognize that a claim of negligence must
be predicated upon a defensible legal duty; the govern-
ment’s effort to characterize our focus differently is un-
persuasive.
The government had at least two separate avenues to
hold Shadadpuri personally liable for penalties under
§ 1592 in connection with the duties owed for Trek’s 2004
entries. It could have proven that Trek committed fraud
and that Shadadpuri aided and abetted that fraud. Or, it
could have pierced Trek’s corporate veil and charged
2 We agree that the term “person” in § 1592(a) is
broader than the term “importer of record.” Indeed, there
is no doubt that a variety of “persons,” including corporate
officers, may be liable for aiding and abetting fraud by an
importer of record, even though they are not themselves
the designated importer, or may be liable for their own
direct acts of fraud.
18 US v. TREK LEATHER, INC.
Shadadpuri with Trek’s admitted negligence as Trek’s
alter ego. It is possible, moreover, that the government
could have proven that Shadadpuri personally committed
fraud and is liable for that conduct under § 1592(a). 3
While all of these routes seem viable—indeed readily
available—on the record before us, the government has
steadfastly eschewed them all.
Instead, the government has asked us to adopt a
broad legal principle that would expose all corporate
officers and shareholders to personal liability for negligent
acts they undertake on behalf of their corporation. Absent
an explicit statutory basis for doing so, we decline to
believe Congress intended to supplant the common law so
completely. 4 And, we decline to reverse or dilute our
holding in Hitachi.
3 The dissent makes a factual argument that may
well support a finding that Shadadpuri either committed
a personal act of fraud or aided and abetted fraud by
Trek. Dissent at 5–6. While we do not disagree with the
facts described, they support legal theories the govern-
ment expressly has chosen not to pursue. The govern-
ment never sought to establish that either Shadadpuri or
Trek committed fraud. While Shadadpuri’s conduct was
reprehensible, we cannot endorse creating legal shortcuts
for the government to impose a penalty in this case
because that would free the government to employ that
same shortcut in all other cases. We do not want to fall
into the trap of letting bad facts make bad law, and, thus,
decline the invitation to do so.
4 When Congress intends to impose personal liabil-
ity on corporate officers for conduct taken in their capaci-
ty as such, it says so expressly. See, e.g., 18 U.S.C. § 1350(fraud provisions of Sarbanes-Oxley Act). The dissent
argues that corporate officers should be liable personally
for the cost of penalties assessed under § 1592, even when
US v. TREK LEATHER, INC. 19
Thus, while we may not fully understand the strategy
choices the government made here, we hold it to them and
reverse the judgment of the Court of International Trade
to the extent it imposed penalties under § 1592(c)(2) upon
Shadadpuri while acting in his capacity as a corporate
officer of Trek, a corporate “importer of record.” 5
acting in their capacity as officers, and even when their
conduct was merely negligent. In support of this proposi-
tion, it cites to United States v. Islip, 18 F. Supp. 2d 1047,
1061 (Ct. Int’l Trade 1998), which, in turn, relies on
United States v. Appendagez, Inc., 560 F. Supp. 50 (Ct.
Int’l Trade 1983), which relies on Herm v. Stafford, 466 F.
Supp. 439 (W.D. Ky. 1979) and United States v. Wise, 370
U.S. 405 (1962). Those two cases do not address the
circumstances at issue here, however. Those inapt cases
have nothing to do with the liability of corporate officers
accused of negligently filling out entry papers required of
their corporation by §§ 1484 and 1485. Nothing in them
supports the conclusion that Congress intended to put the
personal assets of such corporate officers at risk based on
negligent conduct that falls short of affirmative acts of
fraud or the aiding and abetting of fraud. Herm is a
securities fraud case from Kentucky that discusses a
corporate officer’s culpability when knowingly participat-
ing in a corporation’s fraudulent acts. Wise is a case
interpreting the criminal provisions of the Sherman Act;
its holding rests on a careful assessment of the scope of
that provision and the class of entities and individuals
historically within its reach, including corporate officers
who knowingly engage in the illegal acts proscribed.
There are neither criminal nor fraud claims asserted
against Shadadpuri in this action. And, the Tariff Act is
fundamentally different from and shares no common
history with the Sherman Act.
5To the extent the dissent is concerned with mak-
ing sure that corporate officers be held “liable for false
20 US v. TREK LEATHER, INC.
REVERSED
COSTS
No costs.
statements made by a corporation if the officer knowingly
participated in the deception or failed to correct the false
statements upon learning of them” Dissent at 4, quoting
Islip, 18 F. Supp. 2d at 1061, there is no doubt they can
be. Section 1592(a)(1)(B) makes clear that is so; all the
government must do is prove that the importer of record
committed fraud through those officers and that the
corporate officer “knowingly participated in that decep-
tion” or covered it up, i.e., aided and abetted it. It is
possible, alternatively, that the government could prove
direct acts of fraud and attempt to assess a penalty under
§ 1592(c)(1) therefore. What the government may not do
is shortcut its burden of proof in a way that ignores both
the statutory scheme of the Tariff Act and an importer of
record’s corporate form.
United States Court of Appeals
for the Federal Circuit
______________________
UNITED STATES,
Plaintiff-Appellee,
v.
TREK LEATHER, INC.,
Defendant,
AND
HARISH SHADADPURI,
Defendant-Appellant.
______________________
2011-1527
______________________
Appeal from the United States Court of International
Trade in No. 09-CV-0041, Judge Nicholas Tsoucalas.
______________________
DYK, Circuit Judge, dissenting.
The majority holds that only an importer of record or
agent authorized in writing—as defined by 19
U.S.C. § 1484 of the customs statutes—may be liable for
negligence as a “person” under § 1592(a)(1)(A). Absent
piercing of the corporate veil, it holds that corporate
officers (agents of the corporation) like Shadadpuri are
not liable for negligently submitting false customs forms.
2 US v. TREK LEATHER, INC.
In my view, the majority’s interpretation is incon-
sistent with the plain language of the statute and its
legislative history. I respectfully dissent.
I
The majority suggests that § 1592 is designed solely
to impose penalties for violations of §§ 1484 and 1485,
arguing that “[t]he only ‘duties’ regarding . . . entry . . .
are those spelled out in §§ 1484 and 1485,” and that
“Section 1592(c)(2) and (c)(3) are thus inextricably tied to
§§ 1484 and 1485.” Maj. Op. at 13. It argues that, since
§ 1484 only imposes duties on “importers of record” and
“agents authorized by the [importer of record] in writing,”
those are the only persons who can be liable for penalties
under § 1592. But § 1592 contains no reference to § 1484
and broadly sanctions any “person . . . [who] by fraud,
gross negligence, or negligence . . . enter[s], introduce[s],
or attempt[s] to enter or introduce any merchandise . . .
by means of . . . any document . . . which is material and
false, or . . . any omission which is material.” 19 U.S.C.
§ 1592(a).
Alternatively, the majority urges that importers of
record and written agents are the only persons who could
make an “entry” within the meaning of § 1592. But this
cannot be correct. Any importer of record typically acts
through agents. The statutory scheme requires that an
“entry” of merchandise is made by filing specific docu-
ments with the customs service. See 19 U.S.C. §§ 1484,
1485. Those who submit those documents have a duty to
ensure that they are accurate. Section 1592(a)(1)(A) is
designed to impose liability on agents of importers of
record who breach this duty in submitting the required
documents for entries on behalf of the importer of record.
This is clear from the history of § 1592(a)(1)—not dis-
cussed or even acknowledged by the majority. The current
language of the statute, which refers to a “person,” was
adopted in 1978. See Customs Procedural Reform and
US v. TREK LEATHER, INC. 3
Simplification Act of 1978, Pub. L. No. 95-410, § 110, 92
Stat. 888, 893-94. The Supreme Court has made clear
that “‘person’ often has a broad[] meaning in the law.” See
Clinton v. City of New York, 524 U.S. 417, 428 n.13 (1998)
(citing 1 U.S.C. § 1). The history of § 1592(a) shows that
the term “person” has such a broad meaning in that
statute. The precursor to § 1592(a)(1)(A) imposed liability
for false statements to Customs on a wide range of indi-
viduals, including corporate representatives like Shadad-
puri. Specifically, the prior version of the statute
conferred liability on
any consignor, seller, owner, importer, consignee,
agent, or other person or persons [who] enters or
introduces, or attempts to enter or introduce . . .
any imported merchandise by means of any
fraudulent or false invoice, declaration, affidavit,
letter, paper, or by means of any false statement,
written or verbal . . . .
19 U.S.C. § 1592 (1976) (emphasis added). Shadadpuri
would clearly be liable under this earlier statute. As the
majority concedes, Shadadpuri qualifies as an agent of
Trek. See Maj. Op. at 15 (conceding that Shadadpuri “is
an ‘agent’ of the corporation in the common law sense of
that term”). And Shadadpuri clearly provided false
information to Customs that omitted the value of certain
fabric assists.
The question is whether the change in the statute’s
language—using the word “person” in the current version
of § 1592(a) to replace the list of covered persons in the
predecessor statute—changed the meaning of the statute.
It is quite clear that the substitution of the word “person”
for the list appearing in the predecessor statute was not
designed to make a substantive change. The legislative
history stated explicitly that “[t]he persons covered . . .
[we]re intended to remain the same as they [we]re under
[the previous] law,” and “emphasize[d] that . . . the com-
4 US v. TREK LEATHER, INC.
mittee d[id] not change the scope of [the existing law]
with respect to the persons potentially liable” under the
provision. S. Rep. No. 95-778, at 18, 20 (1978); see also
H.R. Rep. No. 95-1517, at 10 (1978) (Conf. Rep.) (noting
that “the persons covered . . . [we]re intended to remain
the same”).
Shortly after the current version of § 1592(a) was
adopted, the Court of International Trade (“Trade Court”),
explained that, in changing the language of the statute,
the new version placed “[n]o limitation . . . on whether
such persons were corporations or natural persons,” and it
concluded that
there is nothing in the Act []or its legislative his-
tory to indicate that the Congress intended to re-
strict the applicability of the penalties [in § 1592]
to corporations and to exclude from the applicabil-
ity of the penalties officers of corporations merely
because of a claim that they were acting in their
corporate capacities.
United States v. Appendagez, Inc., 560 F. Supp. 50, 55 (Ct.
Int’l Trade 1983). More recently, the Trade Court has
stated that “[a] corporate officer may be liable for false
statements made by a corporation if the officer knowingly
participated in the deception or failed to correct the false
statements upon learning of them.” United States v. Islip,
18 F. Supp. 2d 1047, 1061 (Ct. Int’l Trade 1998) (altera-
tion in original) (quotation marks omitted). Unsurprising-
ly, then, the Trade Court has noted that “[t]he language of
section 1592 leaves room for those other than the import-
er of record to be held accountable for violations,” and
that it has “consistently allowed corporate officers to be
held [jointly and severally] liable for violations that were
committed in the capacity of their employment,” as was
the case for Shadadpuri below. United States v. Matthews,
533 F. Supp. 2d 1307, 1313-14 (Ct. Int’l Trade 2007).
US v. TREK LEATHER, INC. 5
II
The majority seems to distinguish these Trade Court
cases as involving fraud rather than negligence. See Maj.
Op. at 18 n.4, 19 n.5. But the same language in § 1592(a)
(referring to liability of “persons”) applies to both fraud
and negligence. See 19 U.S.C. § 1592(c) (defining liability
under § 1592(a) for fraud, gross negligence, and negli-
gence). There is nothing in the statutory text that would
distinguish between an agent’s direct liability for fraudu-
lent entries and negligent ones. The majority’s effort to
suggest that the statutory text might cover fraud and not
negligence is misguided. See Clark v. Martinez, 543 U.S.
371, 386 (2005) (rejecting “the dangerous principle that
judges can give the same statutory text different mean-
ings in different cases”). 1
The construction of § 1592 mandated by the legisla-
tive history is not contrary to our decision in Hitachi,
which did not address the question of whether a “person”
other than an importer of record could be liable for mate-
rial false statements or omissions under § 1592(a)(1)(A),
which is at issue here. It merely held that Hitachi Japan,
which was not the importer of record in that case, could
not be liable for aiding and abetting negligent false
statements made to Customs by the importer of record
under 19 U.S.C. § 1592(a)(1)(B). 172 F.3d at 1336. The
government did not argue and the case did not decide
whether an agent or other individual could be a “person”
liable for negligence.
III
Here, the record clearly showed that Shadadpuri
signed the required entry documentation on Trek’s behalf,
1 To be sure under United States v. Hitachi Ameri-
ca, Ltd., 172 F.3d 1319 (Fed. Cir. 1999), an individual
could aid and abet a fraud, but not a negligent act.
6 US v. TREK LEATHER, INC.
Supp. J.A. 31-32, 79-88, and Shadadpuri conceded at oral
argument in the Trade Court that he “had the responsibil-
ity and obligation to examine all appropriate documents
including all assists within the [required] entry documen-
tation.” United States v. Trek Leather, No. 09-00041, slip
op. at 9 (Ct. Int’l Trade June 15, 2011). But the documen-
tation Shadadpuri authorized had material omissions and
therefore contained false representations. Because
Shadadpuri had been responsible for the submission of
similarly false entries in the past, the Trade Court rea-
sonably deemed Shadadpuri’s actions negligent, rendering
him individually liable for his actions. This holding was
consistent with the statute.
The Trade Court’s interpretation of the statute is cor-
rect. The majority’s interpretation is demonstrably incor-
rect. I respectfully dissent.