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Court Upholds Carrier Liability for Duties on Missing Transshipped Goods

Monday, August 04, 2014
Sandler, Travis & Rosenberg Trade Report

The Court of Appeals for the Federal Circuit ruled July 28 that a bonded carrier owes duties, taxes and fees for three entries of wearing apparel from China that entered the U.S. as transportation and exportation entries destined for Mexico but were never exported. The CAFC upheld the Court of International Trade’s conclusion that these items are missing and that under U.S. Customs and Border Protection regulations the carrier is responsible for the associated charges.

The apparel at issue was to have been transported from Los Angeles to Laredo for ultimate delivery to Mexico. A licensed U.S. customs broker in Laredo documented his receipt of the proper T&E documents (CBP form 7512) from the carrier but did not see the cargo, transport it to the CBP export lot in Laredo or record any date of exportation. In addition, neither the broker nor CBP inspected or took possession of the merchandise. During a subsequent CBP audit the carrier submitted three documents that purported to be Mexican import documents (pedimentos) but that Mexican authorities later confirmed to be false. The carrier ultimately paid $57,212 in liquidated damages but refused a demand for $106,407 in duties, taxes and fees, leading CBP to file this case.

According to the CAFC, the carrier objected to the CIT’s determination that the items in question are missing and that the carrier is therefore liable for liquidated damages as well as associated duties, taxes and fees. Instead, the carrier argued that a bonded carrier transporting merchandise under a T&E entry is only responsible for delivering the merchandise at the port of exportation and not any losses occurring after that. The CAFC agreed but added that the stamped T&E entry forms on which the carrier relied do not themselves constitute conclusive evidence that the goods were properly delivered, that CBP has the authority to require additional evidence and that such evidence may include documents showing that the bonded merchandise was exported. The CIT properly determined that a preponderance of such evidence in this case shows that the goods are missing, the CAFC states, and thus properly found the carrier liable for duties, taxes and fees.

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