A footwear importer in the US has been ordered to pay more than US$1.5m in unpaid duties over “grossly negligent” product misclassification.
The US Court of International Trade last week ruled in favour of the US government, finding that Sterling Footwear Inc incorrectly classified 337 of 363 entries of footwear between 2007 and 2009.
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The ruling came after US Customs and Border Protection officers launched an effort to recover unpaid duties and a penalty for footwear “incorrectly” classified as rubber tennis shoes. Customs and Border Protection officials alleged the shoes had upper portions made of other materials.
The courts agreed the importer is liable for gross negligence because it knew the composition of the footwear yet “repeatedly misdescribed” it and instructed its customs brokers to enter the footwear using a tariff provision it knew was incorrect, even after being advised by CBP to change the description.
In its defence, Sterling argued it had relied on its general manager to “hire experienced employees and competent customs brokers to determine classifications.” The court, however, said the importer bore the ultimate responsibility for correct classification and there was overwhelming evidence to suggest it had provided classification information to its brokers rather than the other way around.
The CIT has ordered the importer to pay $1.57m in unpaid duties, plus interest. The court said that CBP is also eligible to recover a civil penalty up to the statutory maximum of $20.8m but that it will defer a decision on the final amount of that penalty until all liable parties have been identified.
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By GlobalDataThe court also adds more information is needed to determine whether the importer’s president and CEO is personally liable for the misclassification and therefore a share of those duties.
Recently, US customs agents have vowed to clamp down on import customs fraud. Last week, New York-based garment wholesaler Notations Inc agreed to pay US$1m in damages after it was found to have ignored warning signs its Chinese business partner was underpaying on customs duties.
US garment wholesaler fined $1m for evading import duties
