The U.S. Court of Appeals for the Federal Circuit just issued an important decision that will help all customs brokers who are facing a broker penalty action pursuant to 19 U.S.C. 1641 and 19 CFR Part 111. The Court held that U.S. Customs and Border Protection (CBP) must consider all ten factors specifically identified at 19 CFR 111.1 when determining whether or not to mitigate a penalty issued by CBP against a customs broker for failing to excercise "responsible supervision and control." CBP had argued to the Court that it only needed to consider those factors it thought were relevant. The Court disagreed with CBP, and reversed the decision of the U.S. Court of International Trade. The Court stated:
"Because Customs did not consider all ten factors listed in 19 CFR 111.1, its determination that UPS violated 19 U.S.C. 1641 was improper. Accordingly, we vacate that portion of he Court of International Trade’s judgment and remand for further proceedings."
So, even though the Court determined that UPS was wrong in its tariff classification of imported merchandise, and even though UPS paid CBP $15,000 in penalties for failing to exercise responsible supervision and control, it remains to be seen whether CBP will assess another $75,000 in penalties against UPS. My guess is that CBP will pursue the remaining penalties against UPS which were also for alleged misclassification of the same merchandise on different entries. The Court required CBP to at least consider all ten factors, but also explicitly stated that CBP has the discretion to weigh each of the factors as it deems appropriate in determining whether to mitigate a penalty against a customs broker.
If CBP does pursue the penalties, no doubt UPS will challenge them, especially because another remaining legal question will be whether the CBP regulation at 19 CFR 111.91 which limits penalties to a maximum of $30,000 will apply. That is another issue of importance to all licensed customs brokers. If interested, please read the complete Federal Circuit decision.
If a broker becomes C-TPAT certified does it help in the mitigation of the penalty? In our procedures regarding procedural compliance and broker self audits we identify what should be covered when reviewing entries. This should be viewed a broker supervision of its employees. Any thoughts anyone?