CAFC Invalidates CIT Ruling That Express Consignment CHB Failed to Exercise Responsible Supervision, Control
In UPS Customhouse Brokerage, Inc., v. U.S., the Court of Appeals for the Federal Circuit affirmed the decision of the Court of International Trade that UPS had misclassified certain merchandise under HTS 8473.30.90, but the CAFC invalidated the CIT's holding concerning Customs' determination that UPS did not exercise responsible supervision and control under 19 USC 1641.
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The CIT had ruled that UPS had repeatedly misclassified certain electronic merchandise under HTS 8473.30.9000 (a basket provision for parts and accessories of automated data processing machines that contain a cathode-ray tube).
The CIT had also ruled that UPS's multiple misclassifications of the subject merchandise constituted a failure by UPS to exercise responsible supervision and control as required by 19 USC 1641, and that the fines imposed by Customs as a result of these misclassifications were fair and reasonable.
On the first issue, the CAFC affirmed the CIT's holding that UPS had misclassified certain merchandise under HTS 8473.30.9000.
The second issue presented to the CAFC related to 19 USC 1641(b)(4), which states that a customs broker shall exercise responsible supervision and control over the customs business that it conducts, and 19 CFR 111.1, which lists 10 factors which Customs willconsider to determine if a broker is providing the proper degree of supervision and control.
The CAFC stated that will is a mandatory term without any discretion. As a result, Customs has an obligation to consider all 10 listed factors.
However, Customs may use its discretion in how it weights each of the 10 factors, and if a particular factor does not apply, may simply state the reason it is not being considered. Customs may also consider other factors.
The CAFC ruled that Customs had not considered all 10 factors listed in 19 CFR 111.1, and that its determination that UPS violated 19 USC 1641 was improper. The CIT's judgment in this regard was invalidated, and the issue was remanded to the CIT for further proceedings.
(See ITT's Online Archives or 05/30/08 news, 08053000, for BP summary of CIT decision that UPS failed to exercise responsible supervision and control.)
CAFC decision 08-1409 (dated 08/11/09) available athttp://www.cafc.uscourts.gov/opinions/08-1409.pdf
BP Note on the 10 Factors
"Responsible supervision and control" means that degree of supervision and control necessary to ensure the proper transaction of the customs business of a broker, including actions necessary to ensure that an employee of a broker provides substantially the same quality of service in handling customs transactions that the broker is required to provide.
While the determination of what is necessary to perform and maintain responsible supervision and control will vary depending upon the circumstances in each instance, factors which CBP [Customs & Border Protection] will consider include, but are not limited to:
(1) the training required of employees of the broker; (2) the issuance of written instructions and guidelines to employees of the broker; (3) the volume and type of business of the broker; (4) the reject rate for the various customs transactions; (5) the maintenance of current editions of CBP Regulations, the Harmonized Tariff Schedule of the United States, and CBP issuances; (6) the availability of an individually licensed broker for necessary consultation with employees of the broker; (7) the frequency of supervisory visits of an individually licensed broker to another office of the broker that does not have a resident individually licensed broker; (8) the frequency of audits and reviews by an individually licensed broker of the customs transactions handled by employees of the broker; (9) the extent to which the individually licensed broker who qualifies the district permit is involved in the operation of the brokerage; and (10) any circumstance which indicates that an individually licensed broker has a real interest in the operations of a broker.