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Corporate Import Violations May Lead to Personal Liability for Compliance Officers – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Corporate Import Violations May Lead to Personal Liability for Compliance Officers

Corporate Import Violations May Lead to Personal Liability for Compliance OfficersOn May 26, 2015, the U.S. Supreme Court declined to review the September 2014 en banc opinion by the U.S. Court of Appeals for the Federal Circuit in U.S. v. Trek Leather Inc., leaving in place a landmark decision opening corporate and compliance officers to personal liability for import violations.

The Trek Leather decision held that the company’s president could be held personally liable for gross negligence under 19 USC § 1592(a)(1)(A), which states that “no person, by fraud, gross negligence or negligence…may enter, introduce, or attempt to enter or introduce any merchandise into the commerce of the United States” by means of a false document, statement or material omission.

The question before the court was whether the company’s president and sole shareholder, Harish Shadadpuri, could be held personally liable for misrepresenting the value of 72 imported men’s suits. According to the suit, Shadadpuri provided invoices that undervalued the suits to a customs broker, which the broker then used to submit the necessary entry documentation.

Prior to Trek Leather, the only individuals held responsible for import documentation errors were importers of record and certain other entities that had direct responsibility for the preparation and submission of import documentation. The Trek Leather ruling by the Federal Circuit broadened the scope of personal liability to include corporate and compliance officers who are negligent in misrepresenting the value of imported goods.

The court found that Shadadpuri had personally violated § 1592(a)(1)(A) through his activities that allegedly “introduced” the goods to the U.S., but did not go so far as to define “introduce,” instead leaving it to interpretation that could open exposure to liability for corporate and compliance officers.

In light of the Trek Leather decision, executives with compliance responsibilities should ensure there is a clear, written import protocol and appropriate training for those involved in this important business function. In case a violation does occur, documented compliance efforts can help mitigate any penalties.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

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