Federal Circuit Says Government Can't Seek Customs Penalties at Different Level Than CBP Penalty Notice
The government cannot seek Section 1592 customs penalties in court at a different level of culpability than alleged by CBP in a penalty notice, said the U.S. Court of Appeals for the Federal Circuit on Dec. 1 (here). Affirming a Court of International Trade decision from 2012 (see 12041647), the appeals court held a government penalty claim for negligence is barred because the pre-penalty and penalty notices CBP issued to Nitek Electronics alleged only gross negligence.
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Under 19 USC 1592, CBP is required to state the level of culpability – negligence, gross negligence or fraud – of an importer’s alleged violation in the pre-penalty notice. It must tell the importer if that level of culpability changes at any point in time, including in its penalty notice. Given that, at the administrative level, CBP had only alleged gross negligence, and in court sought to recover penalties for negligence, CIT had dismissed the penalty claims because the government did not exhaust its administrative remedies by taking all required steps at the agency level before filing suit.
On appeal, the government argued that allegations at any given level of culpability by default include all lesser levels of capability, so by alleging gross negligence in its penalty notices, CBP was also alleging negligence. CAFC ruled that the express requirement in 19 USC 1592 that CBP notify the importer of any changes to the level of culpability alleged “strongly suggest that the importer is not put on notice of lesser included offenses.” And although courts may waive the requirement to exhaust administrative remedies, doing so in this case would run contrary to the intent of the importer notification requirements of Section 1592, “which is to provide fair administrative opportunities for resolution of penalties,” said the appeals court. “Also, it would leave the importer guessing at what level of culpability he was accused of in court and thus would not properly put him on notice of the penalty claim.”
(U.S. v. Nitek Electronics, CAFC No. 2015-1166, dated 12/01/15, Judges Newman, Clevenger and O’Malley)
(Attorneys: Stephen Tosini for appellant U.S. government; Robert Burns of Bryan Cave for appellee Nitek Electronics, Inc.)