Customs Update: ATTITUDE IS EVERYTHING
(Published in the Journal of Commerce on May 01, 2002)

Proving once again than appearance is at least as important as substance, flunking the "attitude" test has led to the revocation of a customs broker's license.

In Slip Opinion 0233, Judge Delissa A. Ridgway upheld the license revocation imposed on Byung Wu Lee, finding there was no basis upon which to overturn the decision of the administrative law judge (ALJ).

Lee obtained his customs broker's license in August 1987. In August 1990, Customs commenced a $1,000 penalty action for claimed irregularities with his brokerage operation. A response was filed, the petition process completed, and, as often happens with these small dollar penalties, Customs refused to mitigate. A second request for mitigation, however, was granted. Customs issued its final decision in October 1991 mitigating the penalty to $250.00.

Unfortunately for him, Lee failed to pay in a timely manner that mitigated amount. Demand letters from Customs followed. Eventually the matter was turned over to the Department of Justice for collection. A year later, in January 1993, payment was finally made.

In December 1992, Customs initiated a $30,000 penalty against Lee claiming major irregularities with his brokerage operation. The alleged problems were purportedly discovered during an audit by Customs. There was no response filed to the Pre-Penalty Notice. A Notice of Penalty followed and again no response was filed. Therefore, the decision of the agency became final. Customs sent more demand letters. Lee again chose not to respond. Eventually by letter issued in December 1993, Lee was given one last chance to respond, was warned the matter would be referred to Justice for collection and was also warned that action might be taken against his license. In the face of this obviously escalating situation, Lee nonetheless remained silent.

At about the same time Justice filed its collection action, Customs began license revocation proceedings. The basis for these proceedings was the broker's failure to pay the monies owed Customs arising from the two penalty cases. At that point, Lee finally woke up and took action. His attorney requested the revocation proceeding be stayed pending a resolution of the collection action. Customs denied that request.

The license revocation proceeding took place in September 1996 before an ALJ. He found that Lee knew he owed the $250 and failed to pay it until well beyond the 60 days provided by regulation (19 C.F.R. § 111.94) and then only after the case had been elevated to Justice for collection. Similarly, the ALJ found Lee knew he owed Customs $30,000 from the second penalty case and again chose to ignore the agency. The ALJ made a point of stating that Lee had options and simply chose to "ignor[e]" and "disregard" Customs. The Secretary of the Treasury adopted those recommendations and revoked the license in September 1997. There was then an appeal filed to the Court of International Trade.

Before the Court, the defenses raised by Lee were technical in nature, e.g., the statute of limitations expired; the monies from the one claim are covered by the other one; and that Customs could not proceed with the revocation action because the collection action was pending and both claims rely on the same set of facts.

The question before Judge Ridgway was whether the ALJ's decision was supported by substantial evidence and she found it was. What makes the decision interesting, beyond another reminder that attitude is everything in dealing with Customs, is the arguments which were apparently not raised. For example, Customs proceeded in reliance on 19 C.F.R. § 111.29 which states that the broker must exercise due diligence in the payment of "duty, tax or other debt or obligation owing to the Government for which the broker is responsible..." This regulation goes on to require the broker to account to his importer as to funds received from the importer or on the importer's behalf from the Government. The obvious question is what was the agency's intent in enacting this provision? Is this regulation limited in its application to those circumstances where the broker is the importer of record and so only applies to duties and user fees? Is it limited to circumstances where the importer paid the broker the duty and user fees due before the tenth day and so the broker is obligated to pay that amount to Customs?

In light of certain recent cases, one wonders why the legislative intent behind this regulation was not more fully explored by the parties?

More interesting is the question of why the plain language of 19 U.S.C. § 1641(d) was ignored? This statute clearly states that the Secretary of the Treasury may either impose a penalty or revoke or suspend a license. It does not allow both. § 1641(e) goes on to state that a broker may bring suit to challenge the imposition of any penalty before the Court of International Trade. Why did the court apparently overlook this language in reaching its decision?

When one reads the decision, one quickly comes to understand that all the agency, the ALJ and the court saw was a broker who ignored Customs and was going to pay a price for it. Customs relied on a statute which allows a license revocation where there is a violation of the laws enforced by Customs. In other words, the failure to pay the penalty amounts was seen by the ALJ and the court as a violation of law separate and apart from the claimed irregularities giving rise to the underlying penalty actions. The obvious question is whether it was ever intended that Customs would get "two bites of the apple?"

There is no doubt this broker was foolish to ignore Customs' escalating actions. Perhaps he believed in good faith that Customs was wrong. Perhaps he didn't have the funds to pay. Perhaps he was naive enough to think that ignorance was bliss. In any case, he waited too long to argue he didn't have the money to pay what the agency demanded. As a result, he lost his license to be a customs broker.

The message for the trade community: do not ignore Customs' efforts to get your attention, and make sure you raise all the proper defenses as early and as often as possible. Once the might of the Customs Service comes after you, it's too late!

What this case proves once again is that in the end, flunking the attitude test can get you into more trouble than the original violation of law!