11th Circuit Says Criminal Charges Can't be Brought for Conditional Release Violations
The 11th Circuit Court of Appeals vacated a lower court criminal conviction of two importers for failure to redeliver shipments of dairy products to CBP that the Food and Drug Administration had found to be adulterated. Although the defendants admitted to distributing and selling the merchandise after CBP had demanded redelivery, and with knowledge that the dairy products were contaminated with bacteria, the 11th circuit found that they were only liable for civil penalties, and not subject to prison sentences. According to the court, 19 CFR 141.113(c) on redelivery of FDA-regulated merchandise is clear in providing only for liquidated damages capped at three times the value of the merchandise.
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Between 2007 and 2010, Anneri Izurieta, president of Naver Trading, and her husband Yuri, both of Miami, imported dairy products from Central America into the U.S. Rather than hold the shipments at issue, as required during the conditional release period under 19 CFR 141.113(c) and 19 USC 1499(a)(1), the Izurietas sold and distributed the dairy products. As a result, when FDA found the dairy products to be adulterated and asked CBP to order redelivery, the Izurietas failed to redeliver, export, or destroy the merchandise.
The Florida Southern District Court found the Izurietas and their company guilty of one count of conspiracy to smuggle goods into the U.S. under 18 USC 371, and six counts of smuggling goods into the U.S. under 18 USC 545 for their violations of 19 CFR 141.113(c). Anneri Izurieta was sentenced to 30 months in prison, and Yuri Izurieta was sentenced to 27 months. FDA also disbarred both of the Izurietas, Anneri for 30 years and Yuri for 20. Naver Trading was put on probation for two years.
On appeal, the 11th circuit found lower court erred in imposing criminal penalties, and vacated the judgment. According to the 11th circuit, criminal charges under 18 USC 545 cannot be brought for violations of 19 CFR 141.113(c).
Although an earlier decision by the 9th circuit said that Section 545 doesn’t apply to regulatory violations in general because it specifies violations “contrary to law,” the 11th circuit agreed with the 4th circuit that Section 545 can apply to either laws or regulations.
However, the regulation at issue, 19 CFR 141.113(c) specifies only liquidated damages, not criminal punishment, for violations of its provisions, said the court. The current form of the regulation had been published in 2007, after an active notice and comment period, and was implemented under the authority of several statutes -- none of which provide for criminal penalties for violations of conditional release provisions.
Section 141.113(c) “acts to establish the general contractual terms between Customs and the importer regarding temporary release and storage of the imported goods, along with agreed-upon liquidated damages for non-compliance,” the court said. As such, it isn’t a law for the purposes of 18 USC 545 criminal liability, but is instead a civil law reflecting contractual requirements.
As the conspiracy charge was based on smuggling goods into the U.S. in violation of Section 545, that part of the lower court’s judgment was also vacated.
Judge Jane Restani of the Court of International Trade sat by designation on the 11th circuit for this case.