Importer Says CIT Erred in Finding It Can't Prove Date of Discovery in Customs Fraud Case
The Court of International Trade failed to recognize that key facts in a customs fraud case are not in dispute, but if it had, the court "would likely have" come to a different conclusion over when the statute of limitations had run out for the U.S. to bring its case, defendants Greenlight Organic and Parambir Singh Aulakh argued. Filing a motion for rehearing Aug. 25, the defendants said the trade court committed an error when finding that a piece of evidence has to establish fraud for the statute of limitations to begin to run and not merely give allegations of misconduct to the government (United States v. Greenlight Organic, CIT #17-00031).
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The U.S. brought the case in 2017 to root out an alleged misclassification scheme on behalf of importer Greenlight. Fraud was committed when the importer claimed its Vietnam-origin knit garments were misclassified as woven garments, dutiable at a lower rate, and undervaluing the goods. Greenlight originally argued the suit was beyond the statute of limitations since Section 1592 cases can be brought only within five years after the date of the alleged violation. Fraud cases, though, must be brought within five years after the government discovers the fraud. In the 2018 decision, the court denied summary judgment, questioning when the government actually knew about the fraud.
Greenlight sought to use the court's discovery process to find out exactly that (see 2107260038). Having done so, the importer argued the case could be dismissed as being time-barred according to federal law. It floated three dates, each of which would see the case tossed: May 31, 2011, when Leslie Jordan, principal of a competing business gave her complaint to Immigration and Customs Enforcement; Oct. 31, 2011, when ICE opened a formal investigation; and Dec. 19, 2011, when CBP opened a formal investigation. The U.S., meanwhile, said that it discovered evidence of the fraud no earlier than Feb. 9, 2012, when the importer first handed over some of its internal business records showing the double invoicing.
The judge said that because the parties cannot agree on many facts, the fact-specific inquiry of finding the date of when a statute of limitations begins to run cannot be conducted (see 2208040056). Greenlight contested this finding in its motion for rehearing, arguing that many facts relating to the discovery of fraud aren't in dispute, and the court's finding they are "constitutes clear error." The defendants said, "We believe that the Court would likely have reached a different result and granted Defendants’ [motion for summary judgment] had it considered the undisputed facts establishing that discovery of fraud occurred in 2011."
Looking at the court's treatment of Jordan's complaint letter, the defendants said the court erred in finding the underlying undisputed facts relating to the complaint don't show that the letter alleged fraudulent intent. "The error here is that Ms. Jordan’s complaint does not have to establish fraud for the statute of limitations to begin to run, but it only has to provide allegations of misconduct to the Government which could result in fraud to be found with the exercise of due diligence," the brief said.
The defendants argued that even looking at the facts "in the most favorable light for the Government, the supporting evidence on the record establishes that these events occurred in 2011. The Government cannot deny that they occurred and they are not in dispute." The same is true of the other two dates put forth by the defendants, Greenlight said.