CIT Rules Against Penalties for Express Consignment CHB (10 Factors and Responsible Supervision, Control)
In its remand decision, U.S. v. UPS Customhouse Brokerage, Inc., the Court of International Trade ruled it would enter judgment in favor of UPS and deny the government's request for a rehearing to recover monetary penalties of $75,000 imposed by Customs due to UPS' alleged failure to exercise responsible supervision and control over its customs brokerage business, in violation of 19 USC 1641(b)(4).
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The CIT also denied UPS' request that the CIT remand the issue to U.S. Customs and Border Protection for further administrative proceedings, to be conducted in accordance with the CAFC's 2009 opinion.
(In 2009, the Court of Appeal for the Federal Circuit's affirmed the decision of the CIT that UPS had repeatedly misclassified certain electronic merchandise under HTS 8473.30.90 (a basket provision for parts and accessories of automated data processing machines that contain a cathode-ray tube), but the CAFC invalidated the CIT's holding concerning Customs' determination that UPS was subject to monetary penalties for not exercising responsible supervision and control, as required by 19 USC 1641(b)(4). The CAFC ruled that before making such a decision, Customs must consider the 10 mandatory factors listed in 19 CFR 111.11,2. The CAFC remanded the case to the CIT for further proceedings.)
In its remand decision, the CIT stated that the government had not established grounds for a rehearing (in part because it did not create an evidentiary record at trial), and thus would not be given another chance to prove what it failed to prove at trial - that Customs considered the 19 CFR 111.1 factors and was entitled to impose monetary penalties on UPS. The CIT also stated that the government had not offered to present additional evidence that could establish the 10 factors were considered.
With respect to the remand request of UPS, the CIT ruled that the issues to be decided do not require remand to CBP, and that it would also be inappropriate to exercise the Court's discretionaryremand power, for reasons which, in part, mirror its concerns regarding the government's rehearing request.
In its decision, the CIT also determined that the decision maker responsible for considering the 10 mandatory factors was the FP&F Officer (Fines, Penalties and Forfeitures), as he was the person that considered the allegations against UPS, UPS' responses, and issued the written statements, notices, etc.
1Responsible supervision and control means that degree of supervision and control necessary to ensure the proper transaction of the customs business of a broker, including actions necessary to ensure that an employee of a broker provides substantially the same quality of service in handling customs transactions that the broker is required to provide.
While the determination of what is necessary to perform and maintain responsible supervision and control will vary depending upon the circumstances in each instance, factors which CBP will consider include, but are not limited to:
(1) the training required of employees of the broker; (2) the issuance of written instructions and guidelines to employees of the broker; (3) the volume and type of business of the broker; (4) the reject rate for the various customs transactions; (5) the maintenance of current editions of CBP Regulations, the Harmonized Tariff Schedule of the United States, and CBP issuances; (6) the availability of an individually licensed broker for necessary consultation with employees of the broker; (7) the frequency of supervisory visits of an individually licensed broker to another office of the broker that does not have a resident individually licensed broker; (8) the frequency of audits and reviews by an individually licensed broker of the customs transactions handled by employees of the broker; (9) the extent to which the individually licensed broker who qualifies the district permit is involved in the operation of the brokerage; and (10) any circumstance which indicates that an individually licensed broker has a real interest in the operations of a broker.
2The CAFC had also stated that Customs may use its discretion in how it weights each of the 10 factors, and if a particular factor does not apply, may simply state the reason it is not being considered. The CAFC had also stated that Customs may consider other factors as well. The CAFC then remanded this issue to the CIT for further proceedings.
(See ITT's Online Archives or 08/13/09 news, 09081315, for CAFC decision that invalidated the CIT's ruling that express consignment CHB failed to exercise responsible supervision, control.
See ITT's Online Archives or 05/30/08 news, 08053000, for CIT's initial ruling that express consignment CHB failed to exercise responsible supervision, control.)
CIT Slip Op. 10-11, dated 01/28/10, available at http://www.cit.uscourts.gov/slip_op/Slip_op10/Slip%20Op%2010-11.pdf.