United States v. Puentes , 219 F. Supp. 3d 1352 ( 2017 )

Slip Op. 17-33
UNITED STATES COURT OF INTERNATIONAL TRADE
UNITED STATES, :
Plaintiff, :
v. : Court No. 14-00310
PAUL PUENTES, :
Defendant. :
[Granting Plaintiff’s Motion for Entry of Default Judgment]
Dated: March 29, 2017
Albert S. Iarossi, Commercial Litigation Branch, Civil Division, U.S. Department of
Justice, of Washington D.C., for Plaintiff. With him on the brief were Benjamin C. Mizer,
Principal Deputy Assistant Attorney General, Civil Division, and Jeanne E. Davidson, Director,
and Franklin E. White, Jr., Assistant Director, Commercial Litigation Branch.
OPINION
RIDGWAY, Judge:
Plaintiff, the United States, brings this action to recover a civil penalty imposed on
Defendant Paul Puentes (“Puentes”) by the Bureau of Customs and Border Protection
(“Customs”). 1 See generally Complaint; Plaintiff’s Motion for Entry of Default Judgment (“Pl.’s
Brief”). Now pending is Plaintiff’s Motion for Entry of Default Judgment, which seeks judgment
against Puentes in the amount of $30,000, as well as post-judgment interest and costs. Complaint
at 6; Pl.’s Brief at 1, 9. 2
1
The Bureau of Customs and Border Protection is part of the U.S. Department of Homeland
Security. It is commonly known as U.S. Customs and Border Protection (or simply “CBP”) and
is referred to as “Customs” herein.
2
The paragraphs of the Complaint are misnumbered. Specifically, there are no paragraphs
numbered 28 and 29. In other words, paragraph 27 is followed immediately by paragraph 30. In
Court No. 14-00310 Page 2
Jurisdiction lies under 28 U.S.C. § 1582(1) (2006). 3 For the reasons summarized below,
Plaintiff’s Motion for Entry of Default Judgment must be granted.
I. Background
At the time of the events giving rise to this action, Paul Puentes was a licensed customs
broker. Complaint ¶ 3. 4 At issue is a $30,000 penalty that Customs assessed against Puentes in
early 2011, pursuant to 19 U.S.C. § 1641(d). See generally Complaint; see also Declaration of
Delia Crawford passim (Attachment A to Pl.’s Brief) (“Crawford Declaration”); Pl.’s Brief at 3-4,
8-9. The two counts of the Government’s Complaint address four types of misconduct, which the
Government characterizes as “Merchandise Processing Fees Deception,” “Late Entry Summaries,”
“Failure To File Entry Summaries,” and “Misrepresentation Of The Importer of Record.” See
generally Pl.’s Brief at 1-3. As explained below, because Puentes failed to plead or otherwise
respond to the Complaint, the factual allegations that follow, as set forth in the Complaint, must
be taken as true. See generally infra section II.
Payment of Merchandise Processing Fees. First, between April 2008 and February 2009,
Puentes filed Customs Forms 7501s (“CF 7501s”) – also known as “entry summaries” – for 88
the interest of simplicity, the paragraphs of the Complaint are cited herein as they are
(mis)numbered in the Complaint itself.
3
All citations to statutes herein are to the 2006 edition of the United States Code. Similarly,
all citations to regulations are to the 2008 edition of the Code of Federal Regulations. The pertinent
text of all cited statutes and regulations remained the same at all times relevant herein.
4
In December 2012, Puentes’ customs broker’s license was revoked by operation of law
after he failed to file the requisite triennial status report. Notice of Revocation of Customs Broker
Licenses, 77 Fed. Reg. 72,873, 72,876 (Dec. 6, 2012); see also Crawford Declaration ¶ 12; Pl.’s
Brief at 4.
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entries of merchandise on behalf of his client Florexpo, LLC (“Florexpo”). Complaint ¶ 4. 5
However, as to 79 of the 88 entries, Puentes collected merchandise processing fees from Florexpo
in an amount that exceeded the sum that he ultimately remitted to Customs on the company’s
behalf. Id. ¶¶ 5-7. 6
Specifically, for the 79 entries in question, the CF 7501s that Puentes sent to Florexpo
reflected the true value of the imported merchandise and correctly calculated the amount that the
company owed to Customs for merchandise processing fees. Complaint ¶ 5. But, after receiving
payment from Florexpo in the full and correct amount due, Puentes submitted different CF 7501s
to Customs – i.e., CF 7501s that reflected lower declared values and correspondingly lower
merchandise processing fees. Id. ¶¶ 5-7. As a result of these actions, Puentes collected from
Florexpo approximately $6437.05 more in merchandise processing fees than he paid to Customs
on the company’s behalf. Id. ¶ 7, Ex. A (list of 79 entries where Puentes allegedly misrepresented
on CF 7501s the value of merchandise, as well as the merchandise processing fees due to Customs).
5
CF 7501s (“entry summaries”) provide the information necessary for Customs to assess
duties, compile import statistics, and fulfill other functions. CF 7501s must be filed for all
merchandise that is formally entered for consumption, within 10 working days after entry. See 19
C.F.R. §§ 142.11, 142.12(b).
6
Merchandise processing fees (“MPFs”) are administrative fees charged “for the provision
of customs services” and are used to offset expenses that Customs incurs in processing
merchandise that is formally entered or released. 19 U.S.C. § 58c(a)(9); see also 19 C.F.R. §
24.23; Shell Oil Co. v. United States, 35 CIT ____, ____ n.4, 781 F. Supp. 2d 1313, 1317 n.4
(2011), aff’d, 688 F.3d 1376 (Fed. Cir. 2012). At the time of the entries at issue in this case, the
merchandise processing fee was an ad valorem fee of 0.21% of the value of the imported
merchandise. 19 C.F.R. § 24.23(b)(1)(i)(A). The amount of the merchandise processing fees
imposed on each CF 7501 (i.e., each entry summary) “shall not exceed $485” or be less than $25.
19 C.F.R. § 24.23(b)(1)(i)(B).
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On September 1, 2009, Florexpo filed a “Prior Disclosure” reporting to Customs conduct
that Puentes engaged in during the time that he served as the company’s customs broker.
Complaint ¶ 8. 7 In its Prior Disclosure, Florexpo informed Customs that the company “had paid
Mr. Puentes the MPF[s] that [were] actually owed on the entries at issue and that it had ‘believed
that the correct value information, including MPF[s], was being declared’” to the agency. Id.;
Crawford Declaration ¶ 7, Exs. C-D (Florexpo’s Prior Disclosure and Customs’ acceptance of the
Prior Disclosure). These findings outlined above are the subject of both Count I and Count II of
the Complaint. See Complaint ¶¶ 17-19 (Count I); id. ¶ 25 (Count II, re: 19 C.F.R. § 111.29); id.
¶ 31 (Count II, re: 19 C.F.R. § 111.32).
Timeliness of CF 7501s. Customs requires that a CF 7501 must be filed for any
merchandise that is formally entered for consumption, no more than 10 working days after entry.
19 C.F.R. §§ 142.11(a), 142.12(b). However, between September 2008 and February 2009,
Puentes filed CF 7501s out of time for some 250 entries, on behalf of seven separate clients.
7
The disclosure of an import law violation may provide a safe harbor for the disclosing
party if the disclosure is made “before, or without knowledge of, the commencement of a formal
investigation of the violation.” United States v. Ford Motor Co., 463 F.3d 1286, 1294-95 (Fed.
Cir. 2006) (citing 19 U.S.C. § 1592(c)(4)); see also 19 C.F.R. § 162.74 (explaining purpose and
process of filing a valid prior disclosure). Submission of a valid prior disclosure may reduce or
eliminate the penalties for which an importer might otherwise be liable due to noncompliance with
import laws and regulations. See generally Brother Int’l Corp. v. United States, 27 CIT 1744,
1744 n.2, 294 F. Supp. 2d 1373, 1374 n.2 (2003); see also U.S. Customs and Border Protection,
What Every Member of the Trade Community Should Know About: The ABC’s of Prior
Disclosure, p.7 (April 2004). Customs’ official policy is to encourage the submission of prior
disclosures. See What Every Member of the Trade Community Should Know About: The ABC’s
of Prior Disclosure, p.7.
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Complaint ¶ 9, Ex. B (listing the 250 late-filed CF 7501s and identifying the seven clients). These
findings are the subject of Count II of the Complaint. See id. ¶ 26.
Filing of CF 7501s. Apart from the 250 entries where Puentes late-filed the requisite CF
7501s (discussed immediately above), there were another 58 entries between September 2008 and
January 2009 as to which Puentes failed to file any CF 7501s at all. In other words, during that
timeframe, Puentes made 58 entries as to which he filed no CF 7501 whatsoever. Complaint ¶ 10,
Ex. C (listing the 58 entries as to which no CF 7501s were filed). These findings are the subject
of Count II of the Complaint. See id. ¶ 26.
Identification of the Importer of Record. Lastly, between April 2009 and April 2010,
Puentes filed CF 7501s for 43 entries that identified WorldFresh Express Inc. (“WorldFresh”) as
the importer of record, although WorldFresh had not authorized Puentes to clear those entries on
its behalf and had no knowledge that he was doing so. Complaint ¶¶ 11-13; Crawford Declaration
¶¶ 9-10, Ex. E (Customs’ Notice of Action sent to WorldFresh and WorldFresh’s response). The
actual importer of record for the 43 entries was Puentes himself. Complaint ¶ 13. These findings
are the subject of Count II of the Complaint. See id. ¶¶ 27, 32.
Procedural History. Customs sent Puentes both a pre-penalty notice and a penalty notice.
Complaint ¶ 14; see also Crawford Declaration ¶ 11; Pl.’s Brief at 3-4, 8. The pre-penalty and
penalty notices were followed by four demand letters seeking payment of the $30,000 penalty.
Crawford Declaration ¶ 11; Pl.’s Brief at 3-4, 8. With one exception (where, in any event, he failed
Court No. 14-00310 Page 6
to follow through), Puentes failed to respond to Customs’ notices and demands, and the penalty
still remains unpaid. Complaint ¶¶ 20, 33; Crawford Declaration ¶ 11; Pl.’s Brief at 4, 8. 8
To remedy Puentes’ nonpayment, the Government commenced suit in this court, filing its
Summons and Complaint on November 25, 2014, and Proof of Service was filed on March 17,
2015. Puentes failed to respond to the Complaint, and, upon Plaintiff’s Request for Entry of
Default, the Clerk of the Court entered default on September 16, 2015. See Entry of Default (Sept.
16, 2015). The Government subsequently filed the pending Motion for Entry of Default Judgment.
Again, Puentes has failed to respond.
II. Standard of Review
A case brought pursuant to 28 U.S.C. § 1582(1) is subject to de novo review. 28 U.S.C. §
2640(a)(6) (providing that, in cases commenced under 28 U.S.C. § 1582, “[t]he Court of
International Trade shall make its determinations upon the basis of the record made before the
court”); United States v. Santos, 36 CIT ____, ____, 883 F. Supp. 2d 1322, 1326 (2012).
Specifically, in analyzing a penalty enforcement action under § 1582(1), the court must consider
both whether the penalty imposed has a sufficient basis in law and fact, and whether Customs
accorded the customs broker all the process to which he is entitled by statute and regulation.
United States v. Santos, 36 CIT at ____, 883 F. Supp. 2d at 1326 (citation omitted).
8
Following the fourth demand letter (which was sent by Customs’ Office of the Chief
Counsel), Puentes contacted Customs to discuss options for resolving his case. According to the
Government, “[a]lthough Mr. Puentes appeared ready to make 15 monthly payments of $2,000 to
resolve the penalty, he never executed the promissory note” that Customs required. Pl.’s Brief at
8.
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Section 2640(a) draws no distinction between the determination as to the validity of a
penalty claim and the determination as to the amount of the penalty. 28 U.S.C. § 2640(a); United
States v. Santos, 36 CIT at ____, 883 F. Supp. 2d at 1326. Therefore, pursuant to § 2640(a), both
the validity of a claim for a penalty and the amount of that penalty are reviewed de novo. United
States v. Santos, 36 CIT at ____, 883 F. Supp. 2d at 1326 (citation omitted).
When a defendant has been found to be in default, all well-pled facts in the complaint are
taken as true for purposes of establishing the defendant’s liability. See USCIT R. 8(c)(6); 10 James
Wm. Moore et al., Moore’s Federal Practice § 55.32[1][a], at 55-38 to 55-39 (3d ed. 2015)
(“Moore’s Federal Practice”); 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure § 2688.1, at 84-92 (4th ed. 2016) (“Wright & Miller”); Finkel v.
Romanowicz, 577 F.3d 79, 83-84 & n.6 (2d Cir. 2009) (citing, inter alia, Au Bon Pain Corp. v.
Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)).
That said, however, a default does not admit legal claims. See Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (reasoning, in context of motion to dismiss for failure to state a claim, that when
a court accepts factual allegations as true, it does not also accept legal conclusions as true). Thus,
an entry of default alone does not suffice to entitle a plaintiff to any relief. Even after an entry of
default, “it remains for the court to consider whether the unchallenged facts constitute a legitimate
cause of action, since a party in default does not admit conclusions of law.” See 10A Wright &
Miller § 2688.1, at 91; see also 10 Moore’s Federal Practice § 55.32[1][b], at 55-40.
Further, even if it is determined that the unchallenged facts constitute a legitimate cause of
action, “a default does not concede the amount demanded.” See 10A Wright & Miller § 2688, at
80; see also 10 Moore’s Federal Practice § 55.32[1][c], at 55-41 (explaining that defaulting party
Court No. 14-00310 Page 8
“does not admit the allegations in the claim as to the amount of damages”). The plaintiff bears the
burden of proving the extent of the relief to which it is entitled. See 10 Moore’s Federal Practice
§ 55.32[1][c], at 55-41. The court is obligated to ensure that there is an adequate evidentiary basis
for any relief awarded. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109
F.3d 105, 111 (2d Cir. 1997) (quoting Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40
(2d Cir. 1989)).
In addition, in the case of a motion for default judgment, the court may look beyond the
complaint if necessary to “establish the truth of an allegation by evidence,” to “determine the
amount of damages or other relief,” or to “investigate any other matter.” See USCIT R. 55(b);
United States v. Santos, 36 CIT at ____, 883 F. Supp. 2d at 1327 (citation omitted).
III. Analysis
As explained above, Puentes’ default means that all well-pled facts set forth in the
Government’s Complaint are taken as true for purposes of establishing liability – but the legal
conclusions are not. Accordingly, the threshold issue presented is whether the well-pled facts set
forth in the Complaint establish Puentes’ liability. The issue of liability is analyzed separately as
to each of the two counts of the Complaint below. See infra section III.A & III.B.
Further, even if the Government has established that Puentes is liable, that is not the end
of the matter. The inquiry then turns to the amount of the penalty imposed by Customs, which is
similarly reviewed de novo. See infra section III.C.
Court No. 14-00310 Page 9
A. Liability Under Count I – 19 U.S.C. § 1641(d)(1)(F)
Count I of the Government’s Complaint is predicated on 19 U.S.C. § 1641(d)(1)(F), which
authorizes Customs to impose a monetary penalty on any customs broker who, “in the course of
its customs business, with intent to defraud, in any matter willfully and knowingly deceived,
misled or threatened any client.” 19 U.S.C. § 1641(d)(1)(F); Complaint ¶ 16. The Government
alleges that Puentes “deceived” and “misled” his client Florexpo as to 79 entries, by collecting
merchandise processing fees from the company in excess of what he ultimately paid to Customs
on the company’s behalf, and then pocketing the difference, all without Florexpo’s knowledge.
Complaint ¶¶ 17-19, Ex. A; Pl.’s Brief at 6; see also Complaint ¶¶ 4-8; Crawford Declaration ¶¶
5-8, Exs. C-D; Pl.’s Brief at 1-2. 9 The Government further alleges that the “willful” and
“knowing” nature of Puentes’ conduct is evidenced by the fact that he prepared two entirely
different sets of CF 7501s – one set of CF 7501s that he submitted to Florexpo (reflecting the true
value of the imported merchandise and accurately stating the associated merchandise processing
fees), and a second set of CF 7501s that he filed with Customs (which specified declared values
and merchandise processing fees that were lower than those stated in the CF 7501s provided to
Florexpo). Complaint ¶ 19, Ex. A; see also id. ¶¶ 4-8; Crawford Declaration ¶¶ 5-8, Exs. C-D;
Pl.’s Brief at 1-2, 6.
Taking these alleged facts as true, the Government has established Puentes’ liability under
19 U.S.C. § 1641(d)(1)(F), because, “with intent to defraud,” he “willfully and knowingly
9
The Government points to Florexpo’s Prior Disclosure as further evidence of Puentes’
deception. See Pl.’s Brief at 6 (citing Complaint ¶¶ 8, 25); Crawford Declaration ¶ 7, Exs. C-D.
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deceived[] [and] misled” his client Florexpo through his merchandise processing fees scheme,
personally profiting by more than $6400. 10
B. Liability Under Count II – 19 U.S.C. § 1641(d)(1)(C)
Count II of the Government’s Complaint invokes 19 U.S.C. § 1641(d)(1)(C), which
authorizes Customs to impose a penalty on any customs broker who “has violated any provision
of any law enforced by [Customs] or the rules or regulations issued under any such provision.” 19
U.S.C. § 1641(d)(1)(C); Complaint ¶ 22.
Here, the Government alleges that Puentes violated two applicable customs regulations.
Complaint ¶ 23; Pl.’s Brief at 7-8; see generally Complaint ¶¶ 21-32; Crawford Declaration ¶¶ 3-
10; Pl.’s Brief at 2-3. First, the Government asserts that Puentes violated 19 C.F.R. § 111.29,
which is titled “Diligence in correspondence and paying monies.” Complaint ¶¶ 23, 24-27; Pl.’s
Brief at 7; see also Complaint ¶¶ 4-13; Crawford Declaration ¶¶ 3-10; Pl.’s Brief at 1-3. 11 And,
10
As explained in section III.B below, these same facts also underpin, in part, Count II of
the Complaint. See generally Complaint ¶¶ 25, 31; 19 U.S.C. § 1641(d)(1)(C) (authorizing
imposition of penalty on any customs broker who has violated any customs law, rule, or
regulation); 19 C.F.R. § 111.29 (requiring customs brokers to exercise “due diligence” in
correspondence and making payments); 19 C.F.R. § 111.32 (prohibiting customs brokers from
knowingly giving Customs false or misleading information).
11
19 C.F.R. § 111.29(a) states:
Each broker must exercise due diligence in making financial settlements,
in answering correspondence, and in preparing or assisting in the preparation and
filing of records relating to any customs business matter handled by him as a broker.
Payment of duty, tax, or other debt or obligation owing to the Government for
which the broker is responsible, or for which the broker has received payment from
a client, must be made to the Government on or before the date that payment is due.
Payments received by a broker from a client after the due date must be transmitted
to the Government within 5 working days from receipt by the broker. Each broker
Court No. 14-00310 Page 11
second, the Government asserts that Puentes knowingly gave false or misleading information to
Customs, in violation of 19 C.F.R. § 111.32, which is titled “False information.” Complaint ¶¶
23, 30-32; Pl.’s Brief at 7-8; see also Complaint ¶¶ 4-8, 11-13; Crawford Declaration ¶¶ 5-10; Pl.’s
Brief at 1-3. 12 The specific facts alleged to give rise to the violations of 19 C.F.R. § 111.29 and §
111.32, respectively, are reviewed in turn below.
1. Violations of 19 C.F.R. § 111.29
Section 111.29 of the customs regulations requires that a customs broker “exercise due
diligence in making financial settlements, in answering correspondence, and in preparing or
assisting in the preparation and filing of records relating to any customs business matter” handled
by the broker. 19 C.F.R. § 111.29. The same regulation further requires that “[p]ayment of duty,
tax, or other debt or obligation owing to the Government for which the broker is responsible, or
for which the broker has received payment from a client, must be made to the Government on or
before the date that payment is due.” Id.
must provide a written statement to a client accounting for funds received for the
client from the Government, or received from a client where no payment to the
Government has been made, or received from a client in excess of the
Governmental or other charges properly payable as part of the client’s customs
business, within 60 calendar days of receipt. No written statement is required if
there is actual payment of the funds by a broker.
12
Pursuant to 19 C.F.R. § 111.32:
A broker must not file or procure or assist in the filing of any claim, or of any
document, affidavit, or other papers, known by such broker to be false. In addition,
a broker must not knowingly give, or solicit or procure the giving of, any false or
misleading information or testimony in any matter pending before the Department
of Homeland Security or any representative of the Department of Homeland
Security.
Court No. 14-00310 Page 12
Count II first alleges that Puentes violated 19 C.F.R. § 111.29 when he failed to forward to
Customs all of the monies for payment of merchandise processing fees that he received from his
client Florexpo. See Complaint ¶ 25, Ex. A; see also id. ¶¶ 4-8; Crawford Declaration ¶¶ 5-8, Exs.
C-D; Pl.’s Brief at 1-2. 13 As discussed above, the Government alleges that, as to 79 entries,
Puentes collected merchandise processing fees from Florexpo in an amount that exceeded the sum
that he remitted to Customs on the company’s behalf. Complaint ¶¶ 5-7, 25, Ex. A; see also
Crawford Declaration ¶¶ 5-8, Exs. C-D; Pl.’s Brief at 1-2. 14
Specifically, for the 79 entries in question, Puentes sent Florexpo CF 7501s that reflected
the true value of the imported merchandise and correctly calculated the amount that the company
13
In its Complaint, the Government claims that Puentes’ handling of Florexpo’s
merchandise processing fees constitutes a violation of 19 C.F.R. § 111.29. See Complaint ¶¶ 24-
25. However, the Government does not argue that claim in its brief. See Pl.’s Brief at 7 (claiming,
as violations of 19 C.F.R. § 111.29, only Puentes’ untimely filing of CF 7501s as to 250 entries
and his wholesale failure to file CF 7501s as to another 58 entries).
Ordinarily, arguments that are not briefed are deemed waived. See, e.g., SmithKline
Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1319-20 (Fed. Cir. 2006) (and cases cited there);
Novosteel SA v. United States, 284 F.3d 1261, 1273-74 (Fed. Cir. 2002). Indeed, here it is a claim
– not a mere argument – that the Government has failed to brief.
However, a court has discretion to consider arguments (and claims) that might otherwise
be considered to have been waived. See, e.g., SmithKline Beecham Corp., 439 F.3d at 1320 n.9.
Moreover, in the case at bar, Puentes has not appeared, and thus no party has argued waiver.
Further, in this case, both the basis for (i.e., the validity of) the penalty and the amount of the
penalty are subject to de novo review. Under these circumstances, it is within the court’s authority
to consider the Government’s claim which it asserted in its Complaint but did not brief. Cf. United
States v. Santos, 36 CIT at ____ n.2, 883 F. Supp. 2d at 1325 n.2 (holding that, “[b]ecause the
court determines the amount of the penalty de novo,” court had authority to correct error where
complaint alleged penalty of $4000, but penalty notice stated that penalty was $5000).
14
As explained above, Puentes’ handling of Florexpo’s merchandise processing fees is also
the subject of Count I of the Complaint. See supra section III.A. In Count II, that same conduct
is alleged to violate both 19 C.F.R. § 111.29 and 19 C.F.R. § 111.32. See sections III.B.1 & III.B.2.
Court No. 14-00310 Page 13
owed to Customs for merchandise processing fees. Complaint ¶ 5; see also id. ¶ 25; Crawford
Declaration ¶ 7, Exs. C-D; Pl.’s Brief at 2. But, after receiving payment from Florexpo in the full
and correct amount due, Puentes submitted different CF 7501s to Customs – i.e., CF 7501s that
reflected lower declared values and correspondingly lower merchandise processing fees.
Complaint ¶¶ 6-7, Ex. A; see also id. ¶ 25; Crawford Declaration ¶ 7, Exs. C-D; Pl.’s Brief at 2.
As such, Puentes failed to “exercise due diligence in making financial settlements, . . . and in
preparing or assisting in the preparation and filing of records.” 19 C.F.R. § 111.29.
Similarly, when Puentes failed to forward to Customs the full amount of the merchandise
processing fees that were paid by Florexpo and due to Customs, Puentes failed to make “[p]ayment
of duty, tax, or other debt or obligation owing to the Government” for which he was responsible
and “for which [he] ha[d] received payment from a client.” 19 C.F.R. § 111.29. Taking as true
the facts alleged in the Complaint, Puentes’ handling of Florexpo’s merchandise processing fees
violated 19 C.F.R. § 111.29.
Count II next alleges that Puentes violated 19 C.F.R. § 111.29 by filing untimely CF 7501s.
See Complaint ¶ 26, Ex. B; see also id. ¶ 9; Crawford Declaration ¶ 3, Ex. A (listing the 250 late-
filed CF 7501s); Pl.’s Brief at 2-3, 7. As explained above, customs regulations generally require
the filing of a CF 7501 no later than 10 working days after merchandise is entered. 19 C.F.R. §§
142.11(a), 142.12(b). According to the Government, however, between September 2008 and
February 2009, Puentes late-filed CF 7501s as to some 250 entries, on behalf of seven separate
clients. Complaint ¶¶ 9, 26, Ex. B; Crawford Declaration ¶ 3, Ex. A; Pl.’s Brief at 2-3, 7. At a
minimum, Puentes thus failed to “exercise due diligence . . . in preparing or assisting in the
preparation and filing of records” relating to customs business that had been entrusted to him as a
Court No. 14-00310 Page 14
broker. 19 C.F.R. § 111.29. Taking as true the facts alleged in the Complaint, Puentes violated
19 C.F.R. § 111.29 by failing to timely file CF 7501s on his clients’ behalf.
Count II further alleges that Puentes violated 19 C.F.R. § 111.29 by failing to file any CF
7501s whatsoever for dozens of entries of merchandise. Complaint ¶ 26, Ex. C; see also id. ¶ 10;
Crawford Declaration ¶ 4, Ex. B (listing the 58 entries as to which no CF 7501s were filed); Pl.’s
Brief at 3, 7. Although customs regulations generally require the filing of a CF 7501 no later than
10 working days after merchandise is entered (19 C.F.R. §§ 142.11(a), 142.12(b)), the Government
alleges that – as to 58 entries made between September 2008 and January 2009 – Puentes failed to
file any CF 7501s whatsoever. Complaint ¶¶ 10, 26, Ex. C; Crawford Declaration ¶ 4, Ex. B; Pl.’s
Brief at 3, 7. Taking as true these facts alleged in the Complaint, Puentes failed to “exercise due
diligence . . . in preparing or assisting in the preparation and filing of records” relating to customs
business that had been entrusted to him as a broker and thus violated 19 C.F.R. § 111.29 when he
failed to file 58 CF 7501s on behalf of his clients.
Lastly, Count II alleges that Puentes violated 19 C.F.R. § 111.29 by misstating the importer
of record on certain CF 7501s that he submitted to Customs. Complaint ¶ 27; see also id. ¶¶ 11-
13; Crawford Declaration ¶¶ 9-10, Ex. E; Pl.’s Brief at 3. 15 In particular, the Government alleges
15
Again the Government has asserted a claim in its Complaint that it has failed to brief.
See supra n.13 (addressing Government’s failure to brief claim that Puentes’ handling of
Florexpo’s merchandise processing fees constituted violation of 19 C.F.R § 111.29). Specifically,
in its Complaint, the Government claims that Puentes’ identification of WorldFresh as the importer
of record on CF 7501s for 43 entries, without the company’s knowledge or authorization,
constitutes a violation of 19 C.F.R § 111.29. See Complaint ¶¶ 24, 27. But the Government failed
to brief that claim. See Pl.’s Brief at 7 (claiming, as violations of 19 C.F.R § 111.29, only Puentes’
untimely filing of CF 7501s as to 250 entries and his wholesale failure to file CF 7501s as to
another 58 entries). The claim is nonetheless considered here, for the reasons summarized in note
13 above.
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that, between April 2009 and April 2010, Puentes filed CF 7501s for 43 entries where he identified
WorldFresh as the importer of record, without the authorization or knowledge of that company.
Complaint ¶¶ 11-12, 27; see also Crawford Declaration ¶¶ 9-10, Ex. E; Pl.’s Brief at 3. However,
Puentes was the actual importer of record for the 43 entries. He therefore should have identified
himself as such on the CF 7501s. Complaint ¶ 13; see also Crawford Declaration ¶¶ 9-10; Pl.’s
Brief at 3. 16 Again, at a minimum, Puentes thus failed to “exercise due diligence . . . in preparing
or assisting in the preparation and filing of records.” 19 C.F.R. § 111.29. Taking as true the facts
alleged in the Complaint, Puentes’ failure to correctly identify the importer of record on the CF
7501s in question constituted a violation of 19 C.F.R. § 111.29.
2. Violations of 19 C.F.R. § 111.32
In relevant part, 19 C.F.R. § 111.32 prohibits a broker from “fil[ing] . . . any document . .
. known by such broker to be false.” 19 C.F.R. § 111.32. Count II first alleges that – as to 79
entries between April 2008 and February 2009 – Puentes violated 19 C.F.R. § 111.32 by filing
with Customs CF 7501s which he knew at the time included false valuations for Florexpo’s
merchandise. See Complaint ¶ 31, Ex. A; see also id. ¶¶ 4-8; Crawford Declaration ¶¶ 5-8, Exs.
C-D; Pl.’s Brief at 1-2, 7-8.
According to the Government, Puentes prepared two separate sets of CF 7501s – one set
of CF 7501s that he submitted to Florexpo (reflecting the true value of the imported merchandise
and accurately stating the associated merchandise processing fees), and a second set of CF 7501s
16
Count II of the Complaint alleges that Puentes’ identification of WorldFresh as the
importer of record on the 43 CF 7501s at issue violates both 19 C.F.R § 111.29 and 19 C.F.R §
111.32. See sections III.B.1 & III.B.2.
Court No. 14-00310 Page 16
that he filed with Customs (which specified declared values and merchandise processing fees that
were lower than those stated in the CF 7501s provided to Florexpo). Complaint ¶¶ 5-7, Ex. A; see
also id. ¶¶ 4-8; Crawford Declaration ¶¶ 5-8, Exs. C-D; Pl.’s Brief at 1-2, 7-8. Thus, on at least
these 79 occasions, Puentes “fil[ed] . . . [a] document . . . known by [him] to be false.” Taking as
true the facts alleged in the Complaint, Puentes violated 19 C.F.R. § 111.32 by filing CF 7501s
which misstated the value of Florexpo’s imported merchandise as well as the amount of
merchandise processing fees owed to Customs.
Lastly, Count II alleges that Puentes violated 19 C.F.R. § 111.32 by filing with Customs
CF 7501s that he knew falsely identified WorldFresh as the importer of record. Complaint ¶ 32;
see also id. ¶¶ 11-13; Crawford Declaration ¶¶ 9-10, Ex. E; Pl.’s Brief at 3. In particular, the
Government alleges that, between April 2009 and April 2010, Puentes filed CF 7501s for 43 entries
where he identified WorldFresh as the importer of record, without the company’s knowledge or
authorization. Complaint ¶¶ 11-12, 32; see also Crawford Declaration ¶¶ 9-10, Ex. E; Pl.’s Brief
at 3. The actual importer of record for the 43 entries was Puentes, who should have identified
himself as such on the CF 7501s for those entries. Complaint ¶¶ 13, 32; see also Pl.’s Brief at 3.
Thus, on these 43 occasions, Puentes “fil[ed] . . . [a] document . . . known by [him] to be false.”
Taking as true the facts alleged in the Complaint, Puentes violated 19 C.F.R. § 111.32 by filing
with Customs CF 7501s that falsely identified WorldFresh as the importer of record.
3. Implications of Violations of 19 C.F.R. § 111.29 and 19 C.F.R. § 111.32
As detailed above, taking the facts alleged in the Complaint as true, Puentes violated both
19 C.F.R. § 111.29 and 19 C.F.R. § 111.32 on numerous occasions. See supra sections III.B.1 &
Court No. 14-00310 Page 17
III.B.2. Accordingly, above and beyond his liability pursuant to 19 U.S.C. § 1641(d)(1)(F) (see
supra section III.A), Puentes is also liable under 19 U.S.C. § 1641(d)(1)(C), which authorizes
Customs to impose a penalty on any customs broker who has violated customs regulations. 19
U.S.C. § 1641(d)(1)(C).
C. The Amount of the Penalty
Customs imposed a $30,000 penalty on Puentes. See Complaint ¶¶ 20, 33; Crawford
Declaration ¶ 11; Pl.’s Brief at 3-4, 8-9. The Government requests that default judgment be entered
against Puentes for that sum, together with post-judgment interest and costs. See Complaint at 6
(ad damnum clause, seeking judgment “in the amount of $30,000.00, plus interest and costs”);
Pl.’s Brief at 1, 9.
Neither the statute nor the regulations provide any particular framework for determining
the amount of the penalty here, except that such penalties are “not to exceed $30,000 in total.” 19
U.S.C. § 1641(d)(2)(A); see also 19 C.F.R. § 111.91 (stating that monetary penalty may not
“exceed an aggregate of $30,000 for one or more of the reasons set forth in [19 C.F.R. § 111.53]
(a) through (f) . . .”). Within these bounds, the amount of the penalty is largely committed to
Customs’ sound discretion. See, e.g., United States v. Santos, 36 CIT at ____, 883 F. Supp. 2d at
1330. Although the court is required to review the amount of a penalty de novo, where – as here
– Customs’ determination as to the amount is unchallenged, the agency’s determination generally
will be upheld so long as it is reasonable and supported by the facts. See 28 U.S.C. § 2640(a)(5);
see also United States v. Santos, 36 CIT at ____, 883 F. Supp. 2d at 1330 (citation omitted); United
States v. Santos, 37 CIT at ____, 2013 WL 6801087, at *5 (2013).
Court No. 14-00310 Page 18
The $30,000 penalty that Customs imposed on Puentes is the maximum permitted by
statute. See 19 U.S.C. § 1641(d)(2)(A). However, that penalty is the result of multiple serious
statutory and regulatory violations, concerning a substantial number of entries (and on behalf of
numerous clients), over an extended period of time. Further, many, if not all, of the violations
were intentional. These facts support Customs’ decision to impose the maximum penalty under
the law. See generally Pl.’s Brief at 9. Moreover, although he had the opportunity to do so, Puentes
sought no relief from the monetary penalty that Customs imposed. See Pl.’s Brief at 8-9; see also
id. at 3-4; Complaint ¶ 14; Crawford Declaration ¶ 11. More generally, he has been accorded all
the process to which he is entitled by law. 19 U.S.C. § 1641(d)(2)(A); Complaint ¶ 14; Crawford
Declaration ¶ 11; Pl.’s Brief at 3-4, 8.
Based on the record as it stands, the $30,000 penalty imposed on Puentes is reasonable and
supported by the facts and the law. Cf. United States v. Ricci, 21 CIT 1145, 985 F. Supp. 125
(1997) (holding that penalty in amount of $30,000 was warranted where customs broker
intentionally made 145 late payments of duties). 17
17
The Complaint requests the entry of judgment in the amount of $30,000, which is the
amount of the penalty that Customs imposed for all of the violations alleged pursuant to 19 U.S.C.
§ 1641(d)(1)(C) and 19 U.S.C. § 1641(d)(1)(F). See Complaint at 6 (ad damnum clause, seeking
judgment “in the amount of $30,000.00, plus interest and costs”). However, the Complaint also
asserts that the violation alleged as the basis for the imposition of a penalty pursuant to 19 U.S.C.
§ 1641(d)(1)(F) is itself alone sufficient to justify a penalty of $30,000. See id. ¶ 20. Similarly,
the Complaint asserts that the violations alleged as the basis for the imposition of a penalty
pursuant to 19 U.S.C. § 1641(d)(1)(C) alone warrant a penalty of $30,000 (i.e., without regard to
the violation alleged pursuant to § 1641(d)(1)(F)). See id. ¶ 33.
As set forth above, the record as it stands establishes Puentes’ liability under both Count I
and Count II for a penalty in the amount of $30,000. There is therefore no need to consider whether
a $30,000 penalty might have been justified on the basis of fewer than all of the violations alleged
in the Complaint.
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IV. Conclusion
For the reasons set forth above, Plaintiff’s Motion for Entry of Default Judgment in the
amount of $30,000, together with post-judgment interest and costs, is granted. See 28 U.S.C. §
1961 (interest); 28 U.S.C. § 1920 (costs); USCIT R. 54(d) (same).
Judgment will enter accordingly.
/s/ Delissa A. Ridgway
Delissa A. Ridgway
Judge
Decided: March 29, 2017
New York, New York