Federal Circuit Highlights Need for Importer of Record Reform

The CAFC ruled that only IORs are liable for penalties because the statutory scheme prevents the term “person” from being read in isolation.  Given this legislative context, an individual who is not the IOR can only be liable for penalties through either personal fraud or piercing the corporate veil.  The majority expressed bewilderment that the United States did not pursue such approaches to hold Mr. Shadadpuri liable, while the dissent said such steps were not necessary.

This ruling underscores the inadequacy of the current bare minimum IOR requirements.  IORs can at present be “shell” corporations that go insolvent to avoid penalties, while related individuals are not automatically liable – even if they are the sole owner and have knowledge of the import impropriety, as Mr. Shadadpuri was alleged to have done.  Fortunately, last year, Congress demonstrated awareness of this problem and proposed corrective measures as part of the Customs Trade Facilitation and Enforcement Act of 2012 (H.R. 6642).  In particular, sections 221, 222, 223, and 224 of that proposed legislation would enhance regulatory control over IORs and discourage the proliferation of “shell” corporations created to evade U.S. law.