CIT Rules Principal Owes $3.6 Million for Fraudulent Customs Transactions of Broker Who was "Importer of Record"
In 2005, the Court of International Trade (CIT) ruled in U.S. v. Pan Pacific Textile Group et al. (Pan Pacific), that the principal is responsible for unpaid duties under 19 CFR 1592(d) stemming from fraudulent customs violations by his agent, who was the "importer of record" for certain tracksuits imported from China.
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The principal's agent was a freight forwarder who acted as the principal's unlicensed customs broker, and was the "importer of record" for the shipments.
(According to the CIT, the fraud at issue occurred as part of a flat fee scheme, where the agent charged the principal a flat fee for each shipping container, which included freight forwarding charges and customs duties. The agent then misdescribed the tracksuits as plastic bags and wooden patio furniture to attain lower duty rates and avoid quota restrictions. See ITT's Online Archives or 11/16/05 news, 05111610, for BP summary of the CIT's 2005 and further description of the fraudulent activities.)
CIT Upholds CBP's Calculation of Principal's Liability
In 2006, in subsequent Pan Pacific litigation, the CIT has upheld U.S. Customs and Border Protection (CBP's) calculation of Pan Pacific's liability in this case for unpaid duties at $1,844,284.78 and its liability for associated interest at $1,791,115.37, both as of September 26, 2005.
(Pan Pacific had argued, among other things, that CBP should have calculated duties based on factory direct cost rather than the invoice price for end customers, which could have resulted in a lower duty rate. However, the CIT stated that Pan Pacific provided no evidence that documentation to this effect was furnished to CBP prior to liquidation or during the protest period. Absent such a showing, CBP appropriately calculated dutiable value by referencing the prices reflected on Pan Pacific's invoices to customers.)
In conclusion, the CIT finds that Pan Pacific failed to raise a genuine dispute concerning CBP's duty calculation. Therefore, the CIT accepts CBP's calculation and fixes Pan Pacific's liability for unpaid duties, plus interest as provided by law, at $3,635,400.15. The CIT notes that a separate order will be issued accordingly.
CIT decision (Slip. Op. 06-18, dated 01/31/06) available at http://www.cit.uscourts.gov/slip_op/Slip_op06/06-18.pdf