CIT Rules on Amount of Broker Penalties That May Be Assessed, Classification of Silicon Dioxide
Customs may pursue multiple broker penalties that in total exceed $30,000. In U.S. v. UPS Customshouse Brokerage, Inc., dba UPS Supply Chain Solutions, Inc., the Court of International Trade (CIT) gave Chevron deference to U.S. Customs and Border Protection's interpretation of the statutory phrase "a monetary penalty not to exceed $30,000 in total for a violation or violations of" in 19 USC 1641(d)(2)(A).
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As a result, the CIT upheld CBP's interpretation that it may pursue multiple broker penalties, which in total exceed $30,000, for violations of the broker statute (19 USC 1641) that occurred prior to the first pre-penalty notice, provided that no single monetary penalty exceeds $30,000.
(UPS had argued, among other things, that this statutory phrase caps the monetary penalty CBP may assess to $30,000 for all violations that occur prior to the issuance of the first pre-penalty notice.)
According to the CIT, Chevron deference is accorded as 1) the statutory phrase in 19 USC 1641(d)(2)(A) is ambiguous and 2) CBP's interpretation of it is reasonable (e.g., CBP's interpretation in 19 CFR 111.91 and its mitigation guidelines).
(The CIT adds that although 19 CFR 111.91 might be read to limit any penalties imposed to an aggregate of $30,000, CBP clarified its position in the mitigation guidelines, which state that CBP may penalize a broker "a maximum of $30,000 for any violation or violations in any one penalty notice." (While the mitigation guidelines were not subject to notice and comment, the CIT adds they are still entitled to some deference since they are a permissible construction of the statute.))
CIT Slip Op. 06-98, dated 06/28/06, available at http://www.cit.uscourts.gov/slip_op/Slip_op06/06-98.pdf
Silicon dioxide is classified in HTS Chapter 28. In Degussa Corporation vs. U.S., a test case, the CIT agreed with the importer that the nine AEROSIL products are fumed silicon dioxide with surface silanol groups that are intentionally reduced in number, and are classified as a separate chemically-defined compound under HTS 2811.22.50 (duty-free) as other silicon dixoide, rather than as a chemical compound not elsewhere specified, in HTS 3824.90.90 (5%, 1997), as argued by CBP.
Although the CIT speculated that CBP may have attempted to take the surface chemistry of the subject products into consideration, it ruled that the products are classified using General Rule of Interpretation (GRI) 1 in HTS Chapter 28 pursuant to Note 1(a), as they are not within the purview of the three exclusions to HTS Chapter 28 listed in the Explanatory Notes (for certain natural silica, colloidal suspensions of silica, or silica gel), among other reasons.
CIT Slip. Op. 06-127, dated 08/18/06, available at http://www.cit.uscourts.gov/slip_op/Slip_op06/06-127.pdf