Customs Broker Seko Sues to Overturn Type 86, CTPAT Suspensions

Seko is arguing that its suspension from the Type 86 pilot and removal from the Customs-Trade Partnership Against Terrorism were done without adequate notice and opportunity to respond to alleged violations, as the agency didn't give it sufficient information about the entries CBP said were not compliant.

Seko had been filing de minimis entries under Entry Type 86 since 2019, and said it has major e-commerce clients. It also told the court how much business it handles through Type 86, but that was redacted. Seko was among several brokers suspended from the program, according to a statement released by CBP last week. Seko said the suspension was to last at least three months.

In the lawsuit, Seko said it "faces significant monetary losses" because it cannot file Type 86 entries, which offer better "filing efficiency, visibility, and speed" than de minimis entries that don't use the expanded data filing pilot. It said that it has evidence that "a substantial number of Section 321 shipments have been lost to competing customs brokers who are still eligible" to file Type 86 entries.

Seko said that CBP requested documentation in July 2023 for 10 Type 86 entries, and, after auditing them, told the company it found "significant non-compliant" filings in that sample, but didn't give specifics, nor did it respond to Seko's proposed remedial action plan.

On Jan. 22, it asked for documentation for another 10 Type 86 entries, and Seko never heard more about that sample, but on May 20, CBP told Seko it would be suspended on May 27 from the Type 86 entry pilot.

Seko alleges that CBP violated the Administrative Procedure Act’s requirements that Seko be given notice and the opportunity to respond to alleged violations, as well as be provided sufficient information regarding its alleged transgressions. It also said its Fifth Amendment rights to due process were violated.

Seko learned first of its expulsion from CTPAT, on May 17, and said CBP said that move was due to Type 86 entry filing violations, without specifying which entries were violative, and what the violations were. It asked for more details, and said it received no substantive response.

Seko said that CBP leaked an internal memo that said Seko was to be suspended from Type 86, and said that "unlawfully harmed" its reputation as a leader in handling e-commerce imports.

On May 29, Seko told CBP it would be filing with the Court of International Trade seeking injunctive relief in two days. In response, the agency answered that it would provide the company a “conditional reinstatement” so long as the company agreed to take remedial action, but “this demand was made without any indications as to the specific violations leading to the initial suspensions in the first place,” Seko said.

The lawsuit says: "Without an audit report or further information as to CBP’s specific findings, CBP withheld facts used to make a determination in the administrative proceeding which led to Seko’s suspension from the Entry Type 86 and CTPAT programs."

Seko said the removals were arbitrary, as defined in the Administrative Procedure Act, because CBP didn't provide sufficient information to Seko on how it made its decisions. It also said the same statute requires that "CBP provide advance written notice of the facts or conduct which may warrant the action as well as an opportunity to demonstrate or achieve compliance with all lawful requirements." Seko said, because it only received "generalized and terse statements" that mentioned violations, with no specifics, it did not have a second chance to demonstrate compliance (SEKO Customs Brokerage, Inc. v. U.S., CIT # 24-00097).