Silly lower court. Smuggling is smuggling. Bribery is bribery. Buying coat hangers from China, labeling them “Made in Mexico” and “re-importing” them under the North American Free Trade Agreement (NAFTA) to avoid import “dumping” duties is … smuggling. Duh.
That’s the essence of the Ninth Circuit’s holding, which vacated the lower court’s lengthy sentence (based on bribery) and remanded for application of the clearly applicable smuggling sentencing guideline provision.
Huizar-Velazquez made millions of dollars off of his hanger-smuggling scheme because most manufacturers in China are subject to a “PRC-Wide” anti-dumping importation duty of 187.25 percent. By buying them at a duty-free rate, swapping the labels, and re-importing them, Huizar-Velazquez managed to avoid, at least according to the government, $3.5 million in tax and interest.
Despite the existence of Sentencing Guidelines § 2T3.1, "Evading Import Duties or Restrictions (Smuggling); Receiving or Trafficking in Smuggled Property," which is obviously applicable, the court chose to apply a different, much longer named, § 2C1.1, "Offering, Giving, Soliciting, or Receiving a Bribe; Extortion Under Color of Official Right; Fraud Involving the Deprivation of the Intangible Right to Honest Services of Public Officials; Conspiracy to Defraud by Interference with Governmental Functions."
Section 2C1.1 is about bribery. Even the vague final clause, "Conspiracy to Defraud by Interference with Governmental Functions," if read in context with the advisory notes, applies to "[s]uch fraud offenses [that] typically involve an improper use of government influence that harms the operation of government in a manner similar to bribery offenses." (Think corrupt bargains, political horse-trading, or perhaps the daily acts of Congress.)
Section 2T3.1, meanwhile, talks about smuggling and evading importation duties.
Which sounds better to you? Huizar-Velazquez never bribed anyone. Common sense screams § 2T3.1. So does the oft-repeated notion that a specific statute or quasi-statute is typically more appropriate than one which requires contortionism to fit the crime. Call it Occam's Razor for the law.
The government prefers § 2C1.1 because, as you might expect, it provides for a more severe sentence, and when two guidelines are equally applicable, the more severe guideline trumps. Except, um, one guideline fits and the other doesn't.
The choice-of-guideline isn't Huizar-Velazquez's only issue. He also disputes the amount of loss calculation. The "PRC-Wide" rate is applicable to companies that are unable to demonstrate that they are separate from the Chinese government. Huizar-Velazquez offered to prove, at the time, that three of the five manufacturers were subject to a lower 55.31 percent duty. A few weeks before sentencing, those companies received even better news: their rate had been retroactively reduced to 1.71 percent.
Depending on the allocation of his purchase orders, the amount of loss could be significantly lower than the estimated $3.5 million. The Ninth Circuit took pains to remind the district court that it was their duty to determine the amount, and to not rely blindly upon the government's expert (who was apparently on notice of rate reduction, yet kept it to herself).
Grab your calculators, district court. Math is much more difficult than applying the plain text of the guidelines.
- United States v. Arturo Huizar-Velazquez (FindLaw's CaseLaw)
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- Littler Mendelson: Once, Twice, Six Times a Sanctioning? (FindLaw's U.S. Ninth Circuit Blog)