United States: US Appellate Courts Begin Dissecting Criminal Customs Violations

Keywords: US appellate courts, criminal customs, violations

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.

Originally published March 14, 2013

Footnotes

1 See Mayer Brown's Legal Updates: " The 'Wolff' at Importers' Doors: Criminal Statute Is New Tool in Trade Enforcement Cases," " Imports and Consignees Increasingly Facing Criminal Prosecutions in Trade Remedy and Customs Enforcement Cases," " The US Criminalization of Import Violations Continues Unabated" and " The Continuing US Trend to Criminalize Customs Violations."

2 United States v. Izurieta, 11-13585, 2013 WL 718325 (11th Cir. Feb. 22, 2013).

3 517 F.3d 1179, 1187 (9th Cir. 2008).

4 See United States v. Mitchell, 39 F.3d 465, 470 (4th Cir. 1994).

Learn more about our International Trade, Government, White Collar Defense & Compliance and Supreme Court & Appellate practices.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2013. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.