On January 13, 2010, the CIT issued its decision in United States v. Tip-Top Pants, Inc. and Saad Nigri on a motion for summary judgment by the US Government under 19 USC § 1592 to recover penalties and duties for the alleged material false statements or acts, or material omissions, made in connection with a single entry of apparel from Mexico. At the time of entry, Defendant Tip-Top Pants, Inc. (Tip-Top) claimed duty-free treatment under HTSUS subheading 9802.00.9000, which provides duty-free treatment for apparel goods assembled in Mexico from fabric components wholly formed and cut in the United States. CBP eventually issued a penalty claim stating that Tip-Top “entered or caused to be entered merchandise...by means of material false statements, acts and/or omissions” by making a false 9802.00.9000 claim. Tip-Top filed a petition pursuant to 19 USC § 1618 in response to the penalty claim seeking cancellation or mitigation of the penalty. CBP did not issue a decision on the petition, but rather, issued an amended penalty notice.
The CIT ultimately denied the US Government’s motion for summary judgment, and sua sponte dismissed Mr. Nigri as a defendant. With respect to the summary judgment motion, the CIT reasoned that the US Government failed to demonstrate that it complied with the requirements to recover a penalty under section 592(e). Among those statutory requirements is that a person to whom a written penalty claim is issued “shall have a reasonable opportunity under 19 USC § 1618 to make representations, both oral and written, seeking remission or mitigation of the monetary penalty.” The CIT explained that this statutory requirement was not met where a decision under 19 USC § 1618 (i.e., on Tip-Top’s petition) was never issued. The CIT clarified that the statute specifies the decision must be separate from, and subsequent to, the penalty claim or notice.
With respect to Mr. Nigri’s dismissal as a defendant, the CIT held that the US Government failed to state a valid claim against Mr. Nigri. The CIT reasoned that the complaint failed to plead a basis on which Mr. Nigri, in his personal capacity, would have incurred liability allegedly incurred by Tip-Top, where it did not allege Mr. Nigri “did, or failed to do, anything whatsoever.” The CIT further explained that the fact that Mr. Nigri was the Chairman and Chief Executive Officer of Tip-Top at the time of importation was insufficient, by itself, to establish Mr. Nigri’s liability for acts committed by Tip-Top found to be in violation of section 592.