Details of CIT Ruling That Denied CBP's Request to Reconsider Express Consignment CHB Ruling

On June 17, 2010, the Court of International Trade denied U.S. Customs and Border Protection’s request to reconsider¹ its January 2010 remand decision, which ruled that broker penalties² could not be imposed against UPS Customhouse Brokerage, Inc., as CBP had failed to prove at trial that it had considered all ten 19 CFR 111.1 factors when evaluating whether UPS had maintained responsible supervision and control.

(See ITT’s Online Archives or 06/18/10 news, 10061846, for initial BP summary of this CIT denial.)

CBP Argued That CAFC Decision on 111.1 Was a New Standard, But CIT Says It is Not

CBP argued that the CIT made three errors in its January 2010 remand decision, the first of which involved the Court of Appeals for the Federal Circuit’s “new” legal standard regarding the correct interpretation of 19 CFR 111.1. CBP stated that the CIT erred by not providing CBP with the chance to satisfy that new legal standard by either taking further trial evidence from CBP, or by remanding to CBP for administrative proceedings consistent with the new standard.

However, the CIT stated that this argument simply reiterates arguments already elaborated in prior briefs to the court and rejected in the January 2010 decision. As UPS points out, the CAFC decision is consistent with Customs Headquarters rulings issued long before the trial, undercutting CBP’s claim that it could not have anticipated the CAFC’s interpretation of 111.1. In addition, CBP knew well in advance of the trial that the success of its case could depend on establishing evidence to satisfy either of the two potential outcomes on the applicability of the 111.1 factors (i.e., whether or not demonstrating each factor was mandatory).

CBP Concerned That CAFC Decision Could Apply to Other Regs, But CIT Says It Does Not

CIT also stated that CBP conjured an overblown nightmare scenario to support its insistence that it was entitled to rely upon the interpretation of 111.1 that was rejected by the CAFC’s decision. CBP had contended that the CIT’s decision meant that it must adduce proof to satisfy all possible interpretations of the agency’ own regulations, no matter how unreasonable those interpretations may be. But the CAFC had only ruled that CBP’s preferred interpretation of “will consider” in 111.1 --that it should not be read as mandatory -- was an unreasonable interpretation, stating more than once that the CAFC’s decision was limited to this case.

(CBP also argued that the CIT erred by exceeding its proper role when it interpreted various Customs regulations without the benefit of agency interpretation or briefing, and that the CIT erred in holding Custom’s prior misinterpretation of 111.1 to be a procedural irregularity that nullified the agency’s penalty action against UPS Customhouse Brokerage, Inc.)

(See ITT's Online Archives or 02/01/10 news, 10020105, for BP summary of CIT's January 2010 remand decision. See ITT's Online Archives or 05/30/08 news, 08053000, for BP summary of CIT's initial ruling that UPS failed to exercise responsible supervision and control.)

¹A motion for reconsideration is a mechanism to correct a significant legal flaw in the original judgment, but it is not a mechanism to allow a losing party the chance to repeat arguments or to relitigate issues previously before the court.

²at issue was $75,000 in penalties due to UPS' alleged failure to excercise responsible supervision and control over its customs brokerage business, in violation of 19 USC 1641(b)(4).

(U.S. vs. UPS Customhouse Brokerage, Inc., dated 06/17/10, Slip Op. 10-70)