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Court Says Inadvertent Origin Declaration Constitutes Negligence, Awards $40,000 Penalty

Tuesday, December 06, 2011
Sandler, Travis & Rosenberg Trade Report

In a Dec. 2 decision in U.S. v. Inner Beauty Int’l (USA) Ltd., the Court of International Trade imposed a $39,549 penalty for incorrect country of origin declarations that the court deemed to have been negligent. The plaintiff stated on documentation filed with U.S. Customs and Border Protection that the country of origin of apparel subject to an import quota at the time of entry was Hong Kong when in fact it was actually China.

CBP argued that this misstatement qualified as gross negligence and demanded a penalty of nearly $160,000, which at 40% of the dutiable value of the apparel at issue is the maximum allowed by law for such violations. The court agreed that Inner Beauty’s incorrect declaration of origin was a false statement and that it was “material.” However, despite Inner Beauty’s failure to defend itself in this case, the court finds no facts or circumstances that would lead to the conclusion that the company acted willfully, wantonly or with reckless disregard in its role as importer of record. For example, the entry documentation provided both the incorrect and correct countries of origin, and “no well-pled facts inform the court that Inner Beauty was aware of the mistaken origin reference at any of the eight times at which the merchandise was entered” or that the incorrect references “were anything but inadvertent errors.”

The CIT further determined that a penalty below the statutory maximum for negligence ($79,098 in this case), which is what CBP requested, is warranted due to the presence of a mitigating factor. Specifically, immediately upon being put on notice of the violations Inner Beauty instructed its factory and brokers to pay particular attention to ensuring that country of origin is correctly declared on future entries. The court also took into consideration the absence of well-pled facts from which it could find an aggravating circumstance.

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