There has been an increasing trend toward the criminalization of customs violations in the United States, with a greater number of cases being referred to the US Department of Justice for criminal prosecution.1 However, as some of these cases have reached the US appellate courts, questions are being raised about the circumstances that can lead to criminal liability.
On February 22, 2013, the US Court of Appeals for the Eleventh Circuit held in United States v. Izurieta that a criminal smuggling conviction could not be premised on a violation of 19 C.F.R. § 141.113(c)—a customs regulation that requires importers to redeliver merchandise that has been conditionally released by US Customs and Border Protection.2 The criminal statute under which the defendants had been convicted, 18 U.S.C. § 545, makes it a crime to knowingly import merchandise into the United States “contrary to law.” The defendants, Anneri and Yuri Izurieta, were convicted of failing “to redeliver, export, and destroy with FDA supervision” several shipments of adulterated goods and of failing to “hold and make available for examination” one other shipment, in violation of 19 C.F. R. § 141.113(c). The Eleventh Circuit vacated their convictions, concluding that the term “law,” in the criminal statute, does not refer to the particular regulation that the defendants were found to have violated.
In so holding, the Eleventh Circuit charted a middle course between prior decisions of the Fourth and Ninth Circuits. The Ninth Circuit had previously held, in United States v. Alghazouli,3 that the term “law” in § 545 does not refer to agency regulations unless some other statute makes a violation of a specific regulation a crime. The Eleventh Circuit quickly dismissed the Ninth Circuit’s approach as based on “unconvincing” statutory interpretation.
The Fourth Circuit, on the other hand, has concluded that any regulation with the “force and effect of law” can be the basis for a conviction under § 545.4 The Fourth Circuit applied a three-prong test to determine whether a particular regulation has the force and effect of law. First, the court considered whether the rules were “substantive” as opposed to rules of policy or procedure. Second, the court “considered whether the regulations were promulgated pursuant to delegated quasi-legislative authority.” And finally, the court reviewed the regulation for compliance with procedural requirements of the Administrative Procedures Act or other applicable statutes.
In rejecting the Fourth Circuit’s approach, the Eleventh Circuit cited the rule of lenity—a presumption that places a thumb on the scales in favor of criminal defendants in cases where the proper interpretation of the law is in doubt. Because it is ambiguous whether the word “law” in § 545 refers to regulations, the court concluded that the rule of lenity should apply “where the text or history of the regulation creates a strong perception that a violation of the regulation will give rise to civil remedies only.”
Turning to the specific regulation that the Izurietas were alleged to have violated, 19 C.F.R. § 141.113(c)(3), the court noted that the “average person” who read the text of the regulation and the comments from the rulemaking process would conclude that the only penalties for violating the regulation are “strictly civil and monetary.” The court accordingly vacated the defendants’ convictions.
A curious aspect of this case is that the Court of Appeals addressed the dispositive issue sua sponte: Neither the trial court nor the defendant had questioned whether the indictment had actually charged a crime. Moreover, the Eleventh Circuit noted, there were other statutes under which the defendants might have been convicted, but the government had simply failed to charge violations of those statutes. The defendants, therefore, caught two very lucky breaks.
Importers should not, of course, rely on luck. As the government continues to expand criminal prosecutions for customs violations, the Justice Department will certainly develop greater expertise in this complicated area of law, so going forward they will be less likely to make these kinds of mistakes. This only makes it more crucial that importers be represented by expert counsel.