When the FBI Comes Calling…®
IMPORT / EXPORT CRIMES (Continued)
18 U.S.C. § 542 (2007).
The Crime
Under section 542, it is an offense for a person to do the following:
- enter or introduce, or attempt to enter or introduce, into the commerce of the United States any imported merchandise
- by means of any fraudulent or false invoice, declaration, affidavit, letter, paper, or
- by means of any false statement, written or verbal, or
- by means of any false or fraudulent practice or appliance, or
- make any false statement in any declaration without reasonable cause to believe the truth of such statement, or
- procure the making of any such false statement as to any matter material thereto without reasonable cause to believe the truth of such statement,
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whether or not the United States shall or may be deprived of any lawful duties; or
- embraced or referred to in such invoice, declaration, affidavit, letter, paper, or statement, or
- affected by such act or omission. 18 U.S.C. § 542.
The Punishment
The punishment for a violation of section 542 is:
Furthermore, the imported merchandise may be subject to forfeiture under other provisions of law. 18 U.S.C. § 542.
Definition
"Commerce of the United States", as used in this section, shall not include commerce with the Virgin Islands, American Samoa, Wake Island, Midway Islands, Kingman Reef, Johnston Island, or Guam. 18 U.S.C. § 542.
Case Law Interpreting Section 542
United States v. An Antique Platter of Gold, 184 F.3d 131 (2d Cir. 1999).
An Antique Platter of Gold involved an importer who had negotiated the sale of a gold platter of Sicilian origin. The price paid by the buyer was $1.2 million. An Antique Platter of Gold at 133. The transfer of the platter from seller to the buyer's agent "was confirmed by a commercial invoice issued by [the seller], describing the object as 'ONE GOLD BOWL-CLASSICAL … DATE-C. 450 B.C. … VALUE U.S. $250,000.'" Id. Furthermore, the buyer's agent's Entry/Immediate Delivery form listed the platter's country of origin as Switzerland. Id. After three years of possession, the Italian government requested the United States' assistance in investigating the circumstances of the platter's exportation, and requested that the United States confiscate it so that it could be returned to Italy. Id. at 134. The United States claimed that forfeiture was appropriate and the buyer entered the proceeding as a claimant. Id.
The government claimed, on appeal, that the importation of the platter was illegal because it violated 18 U.S.C. § 542, "which prohibits the making of false statements in the course of importing merchandise into the United States." Id. at 134-35. The buyer, however, claimed that an element of a section 542 violation is that the false statement must be material and that the government failed to show materiality in the instant case, at least for purposes of summary judgment. Id. at 135. The appeals court noted that "[t]here can be no dispute that the designation of Switzerland as the [platter's] country of origin and the listing of its value of $25,000 were false." Id. Furthermore, the court stated that section 542 does indeed include a materiality requirement, as shown by a previous case, United States v. Avelino, 967 F.2d 815, 817 (2d Cir. 1992) ("False statements under [s]ection 542 are necessarily material because the importation must be 'by means of [the] false statement.'") An Antique Platter of Gold at 135.
What this particular appeal hinged on was "the proper test for materiality." Id. The buyer wanted a "but for" test, "i.e., a false statement is material only if a truthful answer on a customs form would have actually prevented the item from entering the United States." Id. The district court, however, used a "natural tendency" test, "asking whether the false statement would have a natural tendency to influence customs officials." Id. The appeals court states that there is a circuit split about which test to use: the Fifth and Ninth Circuits have adopted a "but for" test, while the First Circuit has employed the "natural tendency test." Id. The court decided to adopt the natural tendency test. Id. It does so, first, because "the ordinary meaning for the statutory language requires only that the false statements be an integral part of the importation process." Id. at 136. Second, the court used the Supreme Court's formulation of materiality: "that a concealment or misrepresentation is material if it 'has a natural tendency to influence or was capable of influencing the decision of' the decisionmaking body to which it was addressed." Id. (quoting Kungys v. United States, 485 U.S. 759, 770 (1988)). Finally, the court decided to use the natural tendency test for practical reasons. "Under a but for test, lying would be more productive because the government would beat the difficult burden of proving what would have happened if a truthful statement had been made." Id.
United States v. Yip, 930 F.2d 142 (2d Cir. 1991).
Yip is an excellent case for interpreting what it is that section 542 actually proscribes since it is such a dense statute. In Yip, the defendant was convicted of 14 counts of mail fraud and 59 counts of depriving the United States of lawful duty payments in violation of 18 U.S.C. § 542. Yip at 143. He argued, pertaining to section 542, "that the importation of goods using non-fraudulent invoices, followed by the failure to pay customs duties owed on those goods, is not a criminal act within the meaning of § 542." Id. at 143. The court goes to great lengths to untangle section 542 and determine to what it applies.
The court first notes that the statute punishes two distinct offenses. Id. at 147. "The first offense proscribes the introduction of imported merchandise through means of any 'false or fraudulent practice' regardless of whether the United States is deprived of duties." Id. In other words, "[a]nyone seeking to import goods[,] who, in the course of that importation, makes a false statement (written or oral), is guilty of a criminal act." Id. at 148. The second offense, under which the defendant was charged, "is directed at the loss of duties and makes 'any willful act or omission' a crime, without explicitly requiring that the act or omission be done with intent to defraud the United States." Id. at 147. The court has more difficulty with the second paragraph. "The first prong refers back to the false statement provision of the first [paragraph]. … The use of the word 'such' clearly refers back to the 'invoice,' etc. listed in the first paragraph." Id. at 148. Therefore, the first part of the second paragraph "makes criminal those acts and omissions that deprive the United States of duties on the merchandise specifically related to the false statements." Id. The second part of the second paragraph is more confounding. "'[S]uch act or omission' can refer to nothing other than the beginning of the second paragraph, for that is the only other place the phrase is to be found. The beginning phrase 'Whoever is guilty of any willful act or omission' is the first mention of 'act or omission' in the statute." Id. at 148-49. The court determines that that part of the second paragraph "would make criminal the omission to file any forms on goods brought into the United States and any acts undertaken in bringing such undeclared goods into the United States. … [I]t makes sense that Congress would want to make criminal not just false statements made to secure importation of goods … but also willful attempts to avoid making statements and paying duties altogether…i.e., smuggling." Id. at 149.
The court further determined that section 542 began life as a civil statute, rather than a penal statute, and the language must be interpreted narrowly. Id. at 153. The court felt that "Congress must have planned that, in order to constitute criminal conduct, the willfulness of a person's acts must not only extend to their voluntariness and the person's competency, but also to the defendant's ability to foresee the act's effect on the government's loss of customs duties." Id. In other words, "the government must prove that the link between the act and the deprivation was so direct that a defendant knew or should have known his actions would deprive the government of lawful duties." Id.