Apr 10th, 2019

LAWSUIT SETTLEMENT RESULTS IN RECORD SECTION 592 PENALTY


An importer of saccharin has agreed to pay a record $62 million to settle a lawsuit demanding civil penalties under Section 592 of the Tariff Act of 1930 [19 U.S.C. §1592]. Univar, Inc. was charged with evading antidumping duties by misrepresenting saccharin from China as being the product of Taiwan. The government sought to recover some $36 million in withheld duties, as well as $84 million in penalties arising from the violation. When Univar and Customs could not reach a settlement of administrative penalty proceedings, the government brought suit to collect the monies.  

Motions to resolve the case on summary judgment were rejected last year, after the CIT held that there were triable issues of fact. Univar claimed that it has been misled by its vendor as to the origin of the saccharin. However, the government contended that there were numerous “red flags” concerning the origin of the merchandise, and that Univar had failed to exercise reasonable care in investigating the situation. The red flags included allegations that the supposed address of the factory was in a building unsuited to production, and incidents where rabbis, sent to approve the factory for Kosher production, were unable to be admitted to the facilities.

The parties thus prepared for what would have been the first jury trial in the CIT in two decades. On March 26, 2019, the CIT ruled that the questions of whether Univar was liable for a violation of Section 592, and the amount of any underpaid duties, were questions to be decided by the jury. However, the amount of penalty, if any, was to be determined by the Court. The parties settled the case 3 days later.

Section 592 of the Tariff Act prohibits the importation, or attempted importation, of merchandise by means of false and material statements or practices, or by means of material omissions. Maximum penalty amounts vary according to the amount of revenues lost as a result of the violation, as well as whether the violation resulted from negligence, gross negligence, or intentional fraud. Maximum penalties for fraudulent violations can be as much as the domestic value of the merchandise involved in the violations.

The Univar case should be a warning to importers that they need to verify their supply chains and the country of origin of the goods they are importing.