CIT Denies Penalty Case Against Out-of-Business Importer, Says Not Enough Detail

The Court of International Trade on Aug. 20 denied a motion from the government to collect penalties for negligent misclassification from an importer that appears to have gone out of business (here). Following the company’s prior disclosure that it had misclassified entries of medical scrubs, Selecta had filed a prior disclosure and paid CBP over $800,000 in unpaid duties. The government then brought a penalty action under 19 USC 1592, seeking to collect a civil penalty of $51,102. By then Selecta had disappeared, so CIT declared the company to be in “default,” meaning the court had to accept all of the government’s arguments to be true, provided they are sound. However, in its complaint, the government alleged only that Selecta had made “material false statements” that “constituted negligent violations” of Section 1592 “because Selecta failed to exercise reasonable care.” The complaint lacked “specific, well-pled facts” to convince the court that a negligent violation of Section 1592 had occurred, said CIT. As such, the court denied the government’s motion, and gave it 60 days to fix its complaint before the case is dismissed.