Misclassification Is Negligence, Not Fraud, Importer Argues at Trade Court

The misclassification of 543 entries of metal lids was simple negligence, not a fraudulent scheme, importer Crown Cork & Seal said in its motion to dismiss parts of an amended government complaint. The motion asks the court to dismiss counts of fraud and gross negligence, leaving only the negligence count (United States v. Crown Cork & Seal, USA, CIT #21-00361).

The government filed the case to collect unpaid duties related to the alleged misclassification "metal lids for food, beverage, household and consumer products." DOJ argued that the goods are properly classified under Harmonized Tariff Schedule of the U.S. subheading 8309.90.0000 and dutiable at 2.6%, and that Crown Cork & Seal attempted to classify its metal lids under the duty-free HTS subheading 7326.90.1000. The government conducted an investigation into the alleged criminal conduct for over a decade before bringing the case. Following an oral argument in May, Judge M. Miller Baker dismissed the first two counts, leaving only the negligence claim. The U.S. then filed an amended complaint seeking to revive the two dismissed counts.

The factual account laid out in the amended complaint plausibly alleges fraud by Crown Cork & Seal, the government said in a July 27 brief. It identifies a motive for the fraud, and supplies evidence that Crown Cork & Seal and Crown Cork & Seal, USA, knowingly submitted false statements as well as details how the fraud was carried out, the government argued. The CCS companies were "sophisticated importers operating within a billion-dollar conglomerate" that specialized in the manufacture of the lids for over 100 years, so the misclassifications were "no coincidence or mistake," DOJ said (see 2207280036).

Crown Cork & Seal asked the court to dismiss the two counts with prejudice and without leave to amend, arguing that "the Government’s Amended Complaint ... contains absolutely nothing new," and "continues to lack the requisite facts needed to support a claim of fraud or gross negligence." The company also asked the court to hear oral argument on the motion, which it said will assist the court in reaching a decision by allowing the court to question the parties in more detail about the sufficiency of the fraud and gross negligence claims.

Crown Cork & Seal said that it "fully cooperated" with the 11-year investigation, agreeing to eight separate time waivers, which it would not have done if it was attempting to conceal fraud. It said that, despite the government's portrayal, it is not a specialty producer expertly familiar with the classification of can ends. Similarly, the accusation that can ends from Canada were properly classified, while those from Europe were not, is simply the result of having separate customs brokers. "The amended complaint ... demonstrates the absence of a common sense reason for the Crown Companies or their employees to have intentionally misclassified can ends," the importer said.