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$10 Million Penalty Awarded for Fraudulent Imports

Monday, April 01, 2013
By Shawn McCausland
Sandler, Travis & Rosenberg Trade Report

In a March 28 ruling, the Court of International Trade imposed a nearly $10 million penalty on a British corporation for fraudulently importing a banned substance into the U.S. This company was charged with making 52 consumption entries of evening primrose oil over a four-year period during which EPO could not be sold legally in the U.S. because the Food and Drug Administration had not approved it for use as a drug or food supplement. The company was alleged to have knowingly participated in a criminal scheme involving two importers of record under which entry documentation falsely described the merchandise as containing some form of Vitamin E.

The court states that the penalty amount awarded is the statutory maximum permitted under 19 USC 1592 for a violation occurring by fraud, which cannot exceed the domestic value of the merchandise. CBP’s regulations require such value to be determined according to the price at which the subject or similar merchandise was freely offered for sale in the ordinary course of trade. In this case, however, there was no such price because sale of EPO as a dietary supplement was unlawful at the time in question. CBP therefore appraised the merchandise based on landed cost, based on the presumption that the importer would not have sold the merchandise for less than what it cost to import it, and the court upheld that appraisal as reasonable and lawful. The court added that the deliberate use of a scheme to circumvent import controls meant to protect public health and safety was an aggravating factor in its consideration of the proper penalty amount and that there are no apparent mitigating circumstances.

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