United States v. Trek Leather, Inc.
2014 U.S. App. LEXIS 17746
| Fed. Cir. | 2014Background
- Harish Shadadpuri (president/sole shareholder of Trek Leather) caused 72 in‑transit suit shipments to be transferred to Trek as importer of record and provided broker Vandegrift with manufacturer invoices that omitted the value of fabric "assists."
- Fabric assists were supplied free or at reduced cost by Shadadpuri’s companies and thus statutorily required to be included in the dutiable value; omission understated duties by $133,605.08, leaving $45,245.39 unpaid after partial payments.
- Shadadpuri and his aides faxed invoices to the customs broker for use in preparing CBP entry summaries (Form 7501); most invoices did not disclose assists until CBP’s investigation prompted corrected invoices and filings.
- The Government sued under 19 U.S.C. § 1592(a)(1) alleging fraud, gross negligence, and negligence; the Court of International Trade granted summary judgment for gross negligence and entered penalties and unpaid duties.
- On appeal the government defended liability under § 1592(a)(1)(A) only; Shadadpuri argued § 1592(a)(1)(A) applies only to importers of record absent fraud. The en banc Federal Circuit affirmed, holding Shadadpuri personally liable under the statute’s “introduce” prong.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1592(a)(1)(A) applies to any "person" or only the importer of record | §1592 applies broadly to any "person" who introduces merchandise by material false statement or omission | Shadadpuri: subparagraph (A) liability is limited to importers of record (absent fraud) | Any "person" is covered; Shadadpuri is a "person" under §1592(a)(1) and may be liable |
| Whether Shadadpuri’s conduct "enter[ed] or introduce[d]" merchandise into U.S. commerce | Government: directing transfer in transit and supplying invoices to the broker for entry filings "introduced" the goods | Shadadpuri: only an importer (or authorized filer) can "enter" or be held under (A) absent fraud | The court relied on the statutory term "introduce" (distinct from "enter") and held his acts fell within "introduce," so he violated §1592(a)(1)(A) |
| Whether liability requires piercing the corporate veil or proving aiding/abetting | Government: Shadadpuri personally committed acts that satisfy subparagraph (A) | Shadadpuri: corporate separation or narrower reading should bar personal liability for non‑importer | Court held personal acts suffice; no veil piercing or aiding/abetting theory needed |
| Whether prior precedent (e.g., Hitachi) forecloses non‑importer liability under (A) | Government: Panama Hats and precedents support broad "introduce" reach | Shadadpuri: Hitachi implies limits to non‑importer liability under §1592 | Court distinguished Hitachi (which addressed subparagraph (B)) and held Panama Hats controls the "introduce" interpretation |
Key Cases Cited
- United States v. Mescall, 215 U.S. 26 (1909) (rejects narrowing "person" by ejusdem generis; broad statutory reach)
- United States v. 25 Packages of Panama Hats, 231 U.S. 358 (1913) (interprets "introduce" to reach pre‑entry acts by consignors and those who move goods into CBP custody)
- United States v. Hitachi Am., Ltd., 172 F.3d 1319 (Fed. Cir. 1999) (interprets knowledge requirement for aiding/abetting under §1592(B))
- United States v. Trek Leather, Inc., 724 F.3d 1330 (Fed. Cir. 2013) (panel decision discussed and vacated on rehearing en banc)
- Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90 (1991) (court may identify and apply proper construction of governing law when issue is before it)