Sunday, December 30, 2012

Broker Penalty by Default

I am barely back from a brief vacation. I note that in the ramp up to being a way from the office and while I was gone, the U.S. Court of International Trade did not stop pushing out decisions. So, this is the first in what should be a small group of catching-up posts.

United States v. Alejandro Santos is an action to recover a civil penalty from a licensed customhouse broker. That, in and of itself is relatively unusual. In the ordinary circumstance, the importer bears the brunt of the penalty. If you see a broker penalty case, you can usually assume there is some interesting story in the background. In this case, we don't get much in the way of background because the defendant failed to respond to the complaint. Thus, the only question here is whether the uncontested facts as asserted by the government are sufficient to establish its right to recovery.

The bottom line is that the government was able to plead facts sufficient to satisfy the Court that it was entitled to a default judgment against the broker. What is instructive here is the nature of the violations. Brokers should be aware of the complaints made against this defendant and take a moment to consider their own compliance process to ensure that similar errors do not arise.

Count One involved the broker billing entries to a freight forwarder without notifying the importer of record or ultimate consignee. If you don't know why that was a violation, see 19 CFR 111.36(a). That cost the broker $5,000.

Count Two involved the failure to produce a power of attorney from the importer of record on an entry. When the broker did produce a corresponding POA, it was dated subsequent to the date of entry and did not properly identify the broker as the attorney-in-fact. A valid POA is required under 19 CFR 141.46. This cost an additional $5,000.

Count Three involved the misclassification of corn husks as "vegetable hair" under subheading 1409.90.10 rather than 1404.90.90. Apparently, the entries involved in this count were made after Customs and Border Protection gave the broker advice concerning this classification. That was a $4,000 penalty.

The last count involved an entry of alleged U.S. goods returned, which were not entirely U.S. goods. The broker apparently acknowledged the error, but never corrected the 7501 entry document. As a consequence, Customs alleged both a misclassification and a failure to exercise due diligence. That was a $5,000 penalty.

Given the asserted facts and the lack of a challenge from the broker, the Court of International Trade held that the amount of the penalty (a total of $19,000) was reasonable.

One down . . . .

1 comment:

Ray said...

I would be curious to know more details, since by themselves, none of the counts were really so serious to warrant penalties, unless the broker showed no attempt to correct the infractions, or maybe had history of similar infractions. Even the classification issue only involved a statistical error, without any change in duty. It sounds more like carelessness on the part of the broker, or maybe some past issue with their local broker management…………