Customs Law Advisory - US Court of International Trade Decisions (1) Emphasize Importers’ Responsibility to Supervise Broker/Agent and (2) Reject Case on Illegal Child Labor on Imports of Cocoa

US  Court of International Trade Decisions (1) Emphasize Importers’ Responsibility to Supervise Broker/Agent and (2) Reject Case on Illegal Child Labor on Imports of Cocoa
CIT Finds That Importers May Be Liable Even For Unauthorized Action By Brokers.  In United States v. Pan Pacific Textile Group, the US Court of International Trade (“CIT”) considered a case involving several shipments of track suits from China .  The owners of the track suits hired Stephen Yu Juang to act as customs broker.  Juang did not have a US Customs broker’s license.  Juang acted as the importer of record and charged the owners a flat fee to cover all duties and customs clearance.  Juang misdeclared the track suits as plastic bags and patio furniture to avoid duties and apparel quotas, and also falsely lowered the declared value to further reduce the duty owing.  US Customs and Border Protection (“Customs”) discovered the scheme and assessed both unpaid duties as well as civil penalties against the owners of the merchandise.  A separate criminal action was also pursued against Juang.  For the duties and civil penalties at issue, the CIT found that Juang was the owners’ agent at all times, acting on their behalf, even though Juang became the importer of record.  The CIT identified the rule in US law that actions of an agent can create liability for the principal when that agent is acting within the scope of assigned duties.  The Court specifically noted that it is irrelevant whether the principal authorizes the unlawful act or even whether the agent acts contrary to specific instructions.  The CIT further found that Juang’s action created liability for the importer because the importer benefited from the scheme by paying lower overall amounts than would have applied.   Finally, the Court found that imposing liability on the owners for the actions of the agent would further the important public policy objective of encouraging importers to use care in selecting an import agent.  Of course, this situation presents an extreme case in which an agent who was not even licensed as a customs broker, fraudulently misled both his client and Customs.  Most licensed customs brokers are professional and a critical part of the import process.  Nonetheless, US law clearly makes the importer, not the broker, liable for errors or omissions in declarations to Customs.  Accordingly, importers should be actively involved in making declarations to US Customs, working with their broker and supervising the choices made and the information reported.

CIT Dismisses Attempt To Force Investigation Of Child Labor In Cocoa  Industry
In International Labor Rights Fund, et al. v. United States , the CIT dismissed a case filed by three international human rights organizations under Section 307 of the Tariff Act, regarding imports of cocoa from Cote d’Ivoire .  Section 307 prohibits the importation of goods produced using forced or indentured child labor, when certain market evidence is presented to US Customs.  Section 307 also states that its prohibition on imports does not apply when production in the United States is insufficient to meet US demand.  In 2002, human rights organizations submitted a petition to US Customs regarding the use of child labor in the cocoa industry of Cote d’Ivoire , but did not include any information regarding production of cocoa in the United States .  When US Customs failed to act on the petition, the organization filed suit to force Customs to Act.  Before the CIT, all parties agreed that there is only miniscule production of cocoa in the United States.

The organizations argued to the CIT that Customs’ inaction adversely affected their reporting and monitoring requirements, as well as their interests in proposing legislation and policy initiatives.  They also claimed that Customs’ failure to open an investigation caused them to expend their own resources to investigate, as required by their organizational mandates.  The organizations also argued that certain amendments to Section 307 supported their position, but the CIT found that none of the amendments changed the domestic production provision.  Because the Court cannot require Customs to investigate and prohibit an act explicitly exempted from the import restriction, the CIT dismissed the case.  The Court described several affirmative steps taken by Customs to educate the business community and to warn against importation of merchandise produced using forced child labor.  The CIT also noted broad agreement among all parties on the importance of eliminating abusive child labor and, accordingly, the Court attempted to broker a settlement in the case.  The CIT stated that, “Regrettably, the government defendants were unwilling to consider any suggestions toward settlement, representing to the Court at the conference held in chambers on August 1, 2005 that agency priorities had changed after September, 11, 2001.”

As of this writing, the time for appeal to the US Court of Appeals for the Federal Circuit had not yet expired for either of the above decisions. If you have any questions regarding US Customs declarations or import compliance, please contact Greg  McCue at (202) 429-6421.