Wednesday, February 15, 2012

Where Administrative Law Meets Pleading

The Court of International Trade has also dismissed a case in which U.S. Customs and Border Protection attempted to impose a penalty on a customs broker. The underlying issue had to do with the failure of the broker to properly deposit antidumping duties and to properly identify the producer of freshwater crawfish from China.

This is another in the now long series of decisions from the Court of International Trade that turn on pleading rather than the merits. There is nothing wrong with that. Obviously, plaintiffs need to properly plead their cases to proceed. But, these cases are usually not as interesting as a decision on the merits.

This case is somewhat interesting because it seems to plug the holes left by two earlier cases. The first is based on United States v. UPS Customhouse Brokerage. In UPS, the Court of Appeals for the Federal Circuit held that Customs and Border Protection had not properly pursued a penalty against a broker because it failed to consider all 10 factors listed in the relevant regulation. In this case, Customs apparently failed to specify what regulations the broker allegedly violated. Based on this, the defendant asserted that Customs failed to properly exhaust the administrative process. As all student of administrative law know, exhaustion is usually an important step in getting into Court.

In this case, however, the Court of International Trade thoroughly reviewed the statutory requirements for imposing a broker penalty under 19 U.S.C. 1641 and collecting it under 28 U.S.C. 1582. The Court found there to be no statutory requirement for exhaustion for the subject matter jurisdiction of the court to attach. Thus, according to the Court, it has the discretion to decide whether exhaustion is a jurisdictional requirement. This resolves any lingering doubt about whether UPS was a jurisdictional decision. According to the CIT, it was not and exhaustion is not required under these circumstances.

The second hole to be filled comes from United States v. Optrex America in which the Court of International Trade held that the United States cannot amend a complaint to assert gross negligence or fraud that was not asserted at the administrative level. Again, the Court of International Trade held that Optrex is not a jurisdictional decision. Rather, it can reasonably be read an dismissing the government's enhanced claims on the basis that it failed to satisfy the required administrative procedures in much the same way that Customs failed to consider the 10 factors in UPS.

So, the Court found that it does indeed have subject matter jurisdiction over the claim against the defendant customs broker. But, the United States failed to provide the required notice to the defendant during the administrative process. As a result, it cannot state a claim against the defendant. Case dismissed.

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