Customs Broker Removed From Type 86 Program Pushes Back Against Motion to Dismiss Case

After its bid for a preliminary injunction was denied by Court of International Trade Judge Claire Kelly (see 2407260045), a customs broker fought Aug. 5 against a motion to dismiss its case, saying its complaint was ripe for litigation because CBP had already made the decision to deny its reinstatement to the agency's Entry Type 86 pilot (Seko Customs Brokerage v. United States, CIT # 24-00097).

CBP removed customs broker Seko Customs Brokerage from the Entry Type 86 pilot and the Customs-Trade Partnership Against Terrorism programs in May (see 2405310054), saying the broker, as an importer of record, had allowed illicit merchandise into the United States. The agency requested, and received, a remedial plan from Seko, which it denied.

But Seko argued that CBP hadn’t provided enough information about the broker’s violations to allow Seko to know how to combat them in the future, despite repeated requests for more detail. The only violations the agency did tag were caused by a third party, not Seko, the broker said.

“SEKO was neither the owner, consignee, shipper, receiver, or purchaser of the merchandise and did not otherwise have knowledge of or control over the contents of the merchandise,” it said.

The U.S. seeks to have Seko’s case dismissed because CBP granted Seko conditional reinstatement to both programs, reliant on the broker’s submission of another remedial plan. As a result, Seko has gotten what it wants, the government said: reinstatement to the program. Any further litigation isn’t ripe until and unless Seko is again denied reinstatement, it said.

But the situation hasn’t changed any; CBP still hasn’t told Seko what it did wrong, Seko alleged.

“The requirement to provide a remedial action plan presupposes that SEKO is in fact responsible for those violations and if it cannot address them to CBP’s satisfaction, it will remain suspended from the T86 program,” it said.

CBP “has already completed its decision-making process” in this case, it argued. Should the court find otherwise, “CBP will be allowed to assert violations and require unwarranted remedial actions unchecked,” it claimed.

Further, Seko isn’t challenging CBP’s decision not to reinstate it to the programs, but, rather, its choice to make such reinstatement conditional upon submission of a remedial action plan. Determining whether an agency action is “final” requires a two-step analysis of said action: First, it must not be “of a merely tentative or interlocutory nature,” and, second, it must be one “from which legal consequences will flow.”

And despite what the government says, this is a “final action” that can be independently challenged in court, Seko said.

“CBP has taken ‘final action’ when it decided to hold SEKO accountable for third-party fraud and require a remedial action plan,” it said. “The demand for a remedial action plan is a definitive position taken by the agency which has direct legal consequences to SEKO affecting its rights and obligations.”

The government called the conditional reinstatement a “temporary” decision, but CBP’s requirement that Seko take remedial action “for CBP’s unverified legal conclusions” is itself a “final action” with legal consequences, the broker claimed.

It is also “fundamentally unfair” and a violation of the Fifth Amendment’s Due Process Clause, Seko said.

The broker also pushed back against the government’s argument that it had failed to exhaust its administrative remedies before coming to court. The relevant regulations, it said, don’t outline any specific administrative remedies.

Further, “if the violations that led to SEKO’s suspension are erroneous or not violations that SEKO carries liability for, how would the current alleged administrative process allow a hearing on that matter?” it asked. “Indeed, CBP has already sped past that point arguing this Court should not review the basis for that action because it is discussing it with SEKO.”

And the U.S. finally argued that postponing litigation until a decision is made on Seko’s conditional reinstatement wouldn't impose an undue burden on the broker, the standard for stalling cases in court. But Seko’s removal from CTPAT and T86 imposes an undue burden on it because they have become a “business necessity,” as each “program’s benefits have evolved into clients’ expected minimal level of service,” Seko said.

It also claimed an undue burden has also been imposed on Seko by a CBP requirement that it develop a remedial plan “that prevents third-party fraud by unrelated parties of which Plaintiff has no knowledge and no control over.”

With its removal of Seko from the programs, CBP actually seeks to move liability for the Type 86 violations onto Seko, rather than holding “the shipper, consignee, or e-commerce retailer accountable,” because Seko is the importer of record, the broker said. But the requirement that an importer of record be listed for Type 86 entries was only “artificially inserted by CBP … solely for accomplishing an automated entry transmission.” Normally, Seko said, de minimis shipments don’t require importers of record at all.

“It would be unlawful for CBP to hold a T86 broker acting as an importer of record to the same standard as a traditional importer of record when the T86 broker is not the owner, purchaser, shipper, or consignee in this case; nor are they even acting on their behalf to file the entry,” Seko said.

If CBP had intended to do so, it should have “indicated as much in the implementing and modifying Federal Register notices for this program,” the broker said.