CIT Accepts Gov't Complaint on Third Try in AFI Penalty Case on Materiality of Country of Origin Misstatements
The Court of International Trade granted the government’s motion to amend its complaint on the third try in an action seeking penalties from Active Frontier International for false country of origin statements on entry documentation. CIT denied the penalty action without prejudice in August, because the government didn’t prove that all of AFI’s misstatements were material, as required by 19 USC 1592 for imposition of a penalty. The government’s first motion to amend was denied in early October because it didn’t include the actual amended complaint, and its second motion to amend the complaint was withdrawn later that month.
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In its August denial of the penalty motion, the court found fault with the government’s request for penalties on all of the entered merchandise, even though the misstated country of origin was only material for some of the entered merchandise. The government argued that the misstated country of origin was material for all of the merchandise because it affected trade statistics upon which CBP bases policy decisions. The court, however, said such a broad interpretation of Section 1592 would expose even inconsequential mistakes on entry documentation to penalties. Instead, the court said, AFI's misstatements were only material in that they affected quota determinations, and the government’s complaint wasn’t specific enough to show the appropriate amount of penalties for the merchandise subject to quota.
CIT nearly rejected this third amended complaint as well. The government simply rehashed many of its arguments for a broader definition of “material,” the court said. The amended complaint also argued that materiality of misstatements related to some merchandise in an entry makes all of the merchandise in the entry subject to penalties. The court didn’t find this argument persuasive, either. However, two sentences in the amended complaint specified that some of the merchandise was entered under a Harmonized Tariff Schedule subheading for which some articles are subject to quota, convincing the court that the amended complaint was worth further consideration.
(See ITT’s Online Archives 12083103 for summary of CIT’s denial of the government’s penalty motion, and 12100429 for summary of the court’s denial of the government’s first motion to amend its complaint.)
(United States v. Active Frontier Int'l, Inc., Slip Op. 13-08, dated 01/16/12, Judge Stanceu)
(Attorneys: Carrie Dunsmore for plaintiff U.S. government, defendant AFI in default)