No CBP Redo for Penalty Notice, CIT Says in Dismissal of Parts of Importer Negligence Case
The Court of International Trade on June 20 dismissed parts of a government penalty case against an importer (here), finding the government can’t seek penalties for negligence and gross negligence because CBP’s pre-penalty and penalty notices alleged only fraud. Although the government asked that the court allow it to amend its 2010 penalty notices to reflect the charges of negligence and gross negligence, CIT denied the government’s request as improper in a government-initiated penalty case.
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The ruling follows precedent set by the U.S. Court of Appeals for the Federal Circuit in a 2015 decision involving Nitek Electronics (see 1512030019), in which parts of a penalty case were similarly dismissed for failure to address negligence penalties administratively. The present case revolved around government allegations that Leslie Toth and LBS Marketing misclassified crawfish meat they imported from China as “langostine,” avoiding payment of antidumping duties. As in Nitek, CIT dismissed all penalty claims against Toth and LBS not included in the pre-penalty and penalty notices, ending the government’s negligence and gross negligence cases.
Acknowledging that the Nitek ruling prevents it from bringing penalty cases at levels of guilt not alleged at the administrative level, the government asked the court allow it a “voluntary remand” to add the negligence and gross negligence charges to the penalty notices. The government argued that, given CBP’s understanding pre-Nitek was that “lesser-included culpability levels were included within a penalty notice,” meaning fraud charges automatically include negligence and gross negligence, the court should allow CBP to amend its penalty notice to reflect the agency’s new understanding.
However, voluntary remands of this type are generally given when a government policy is challenged and the government wants to consider the challenged decision. Having been asked to dismiss a government claim, the court can only consider whether the claim has merit or doesn’t, CIT said. “The Government exhibits great chutzpah to propose this third option,” CIT said. “And the reason is clear. Nitek mandates that the Government has no claims for gross negligence or negligence before this court, because those claims exist only if CBP developed them through the penalty claim pursued in this court. Given that the Government has no claims under Nitek, and there is no relevant underlying agency proceeding or record, there is nothing to remand.”
(U.S. v. Toth, Slip Op. 16-61, CIT # 15-00206, dated 06/20/16, Judge Goldberg)
(Attorneys: Stephen Tosini for plaintiff U.S. government, Lewis Leibowitz for defendant Leslie Toth)