CIT Dismisses CBP's $30K Penalty Against CHB for Clerical Error

The Court of International Trade has ruled against U.S. Customs and Border Protection's claim that customs broker Robert E. Landweer & Co. was liable to pay a $30,000 penalty for filing entries with incorrect dumping duty deposit rates and incorrectly identifying the supplier of the merchandise. The CIT dismissed the case as CBP did not specify the customs regulations Landweer violated and therefore failed to sufficiently exhaust administrative remedies.

CBP Said Broker Liable for $30K Penalty for Incorrect Dumping Deposit, Etc.

CBP alleged that Landweer was liable for a $30,000 penalty for violating 19 CFR 111.29 (on diligence in correspondence and paying monies) and 143.6 (on failure to maintain performance standards)¹. Specifically, CBP alleged that Landweer violated these regulations by (i) filing 21 entries of Chinese freshwater crawfish with an incorrect dumping duty deposit rate of zero percent ad valorem and (ii) incorrectly identifying the supplier of the merchandise as Yantai Haixing Aquatic Products on nine of those 21 entries.

Broker Admitted Clerical Error but Said Not Liable as CBP Didn't Exhaust Notification Procedures

Landweer acknowledged that it made a clerical error in selecting the code identifying the shipper of the merchandise for the nine entries and asserted that it did not intend to circumvent the regulations or mislead Customs. Additionally, throughout the administrative proceeding, Landweer explained that it took reasonable steps, through queries using the ABI system, to identify the applicable dumping duty deposit rate for the subject entries, but claimed that the ABI system was flawed, leading to the inclusion of the incorrect deposit rate on the 21 entries.

Landweer subsequently filed a motion to dismiss CBP's claims, arguing that the administrative proceeding was legally defective because CBP never provided "any notice, allegations, petitions, adjudication or written determination" that it violated CBP's regulations. As such, CBP failed to properly "exhaust" the statutory procedures of 19 USC 1641.

CBP Acknowledged It Didn't Specify the Violated Regs in the Admin Proceeding

CBP's complaint alleged that all notices required by 19 USC 1641 had been issued to Landweer and that nothing in that provision requires that CBP identify each and every regulation that Landweer’s conduct could be deemed to have violated. CBP did acknowledge that during the administrative proceeding, it failed to specifically allege that Landweer violated 19 CFR 111.29 and 19 CFR 143.6. Instead, CBP maintained that it alleged facts that informed Landweer of a violation of these regulations.

CIT Ruled No Such Notification "Exhaustion" Requirement for CIT Civil Actions

The CIT denied Landweer's motion to dismiss the case for lack of subject matter jurisdiction as the court was unable to discern any language in 19 USC 1641 to establish that exhaustion procedures are intended to be preconditions to invoking CIT jurisdiction. Additionally, the historical treatment of 19 USC 1641 procedures for perfecting a civil penalty does not provide a basis to conclude that there is a statutory precondition CBP must satisfy prior to commencing action in the CIT. Accordingly, the CIT has jurisdiction over CBP's amended complaint.

Dismissed Case as CBP Did Not Sufficiently Exhaust Administrative Remedies

Given the breadth of 19 USC 1641 monetary penalty procedures, the CIT stated it is difficult to conclude that Landweer was made aware that it was potentially liable for a violation of 19 CFR 111.29 and 143.6. The CIT stated that to require a potential violator, such as Landweer, to speculate as to the basis of CBP’s penalty claim would run contrary to the legislative history of 19 USC 1641, which holds that a claim in a penalty collection action be the same claim as in the underlying administrative proceeding.

In not specifically alleging that Landweer violated sections 111.29 and 143.6, the CIT concluded that CBP did not sufficiently exhaust administrative remedies against Landweer. To announce for the first time before the CIT the specific laws or regulations violated by Landweer does not comport with the statutory scheme created by Congress. Accordingly, the CIT dismissed CBP's amended complaint for failure to state a claim upon which relief can be granted.

¹CBP stated that (1) 19 CFR 111.29(a) (here) requires a customs broker to exercise due diligence in preparing and filing records involving its customs business and that (2) 19 CFR 143.6 (here) requires a broker who uses the Customs Automated Broker Interface (ABI) system to adhere to ABI performance requirements and operational standards in the transmission of data and to follow Customs directives and policies as to the proper use of the ABI system.

(Slip Op. 12-17, dated 02/08/12)