Customs Fraud Case Should Be Dismissed Since Statute of Limitations Ran Out, Importer Says

A Court of International Trade case over importer Greenlight Organic's alleged fraud in misclassifying its knit garments should be dropped since the statute of limitations ran out, Greenlight said in an Aug. 3 brief. After the court ruled in 2018 that the statute of limitations had some lingering questions, Greenlight said it has procured enough evidence for the court to now rule in its favor and that the U.S.'s fraud case is effectively time barred (United States v. Greenlight Organic, Inc. et al., CIT #17-00031).

The U.S. brought the case in 2017 to root out what it believed to be a misclassification scheme on behalf of Greenlight. Fraud was committed when the importer claimed its Vietnam-origin knit garments were misclassified as woven garments, dutiable at a lower rate, and undervaluing the goods, the U.S. said. Greenlight originally argued that the suit was beyond the statute of limitations since Section 1592 cases can only be brought within five years after the date of the alleged violation. Fraud cases, though, must be brought within five years after the government discovers the fraud. In the 2018 decision, the court denied summary judgment, questioning when the government actually knew about the fraud.

So, Greenlight sought to use the court's discovery process to find out exactly that (see 2107260038). Having now done so, the importer feels strongly that the case can now be tossed as being time barred according to federal law.

The importer cites three different "sets of authorities" to establish that the date the government learned about the fraud was greater than five years before it launched the case in 2017. The first is relevant case law that establishes the U.S. knew about the fraud when it looked over "detailed information from a credible informant" in late May or early June 2011. The second is the testimony of two former Immigration and Customs Enforcement agents who say the date of knowledge about the fraud runs from when Leslie Jordan filed her complaint to ICE Agent Scott Smith.

The final one points to government publications that declare the date of discovery starts in a customs fraud case when a formal investigation is opened by ICE or CBP, Greenlight said. The ICE and CBP investigations into Greenlight were opened in October 2011 and December 2011, respectively. "When the undisputed facts are applied to the law, there is no doubt that this case should be dismissed," Greenlight said. "If the Court were to hold otherwise, there would not be any case where the statute of limitations can be said to have run."

Greenlight also discussed how relevant case law bolsters their claim that the case is time barred. For instance, in the Supreme Court of the U.S. ruling Merck & Co. v. Reynolds, the court ruled that "Given the history and precedent surrounding the use of the word 'discovery' in the limitations context generally as well as in this provision in particular, … we … hold that 'discovery' as used in this statute encompasses not only those facts the plaintiff actually knew, but also those facts a reasonably diligent plaintiff would have known." Thus, the date of discovery includes the date the facts are known and the date the facts would've been known with due diligence.