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United States v. Robert E. Landweer & Co. , 816 F. Supp. 2d 1364 ( 2012 )


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  •                                         Slip Op 12-17
    UNITED STATES COURT OF INTERNATIONAL TRADE
    UNITED STATES,
    Plaintiff,
    Before: Leo M. Gordon, Judge
    v.
    Court No. 09-00060
    ROBERT E. LANDWEER & CO.,
    Defendant.
    OPINION
    [Defendant’s USCIT Rule 12(b)(1) motion denied; Defendant’s USCIT Rule 12(b)(5)
    motion granted.]
    February 8, 2012
    Stephen C. Tosini, Senior Trial Counsel, Commercial Litigation Branch, Civil
    Division, U.S. Department of Justice, of Washington, DC, for Plaintiff United States. On
    the briefs were David S. Silverbrand and Michael D. Panzera, Trial Attorneys. With them
    on the briefs were Tony West, Assistant Attorney General, and Patricia M. McCarthy,
    Assistant Director. Of counsel on the briefs was Leigh Sellari, Office of Assistant Chief
    Counsel for U.S. Customs and Border Protection of Seattle, WA.
    Joel R. Junker, Joel R. Junker & Associates, of Seattle, WA, for Defendant
    Robert E. Landweer & Co. With him on the brief was Emily Lawson.
    Gordon, Judge: Defendant Robert E. Landweer & Co. (“Landweer”) moves to
    dismiss this action pursuant to USCIT Rule 12(b)(1) for lack of subject matter jurisdiction
    and USCIT Rule 12(b)(5) for failure to state a claim upon which relief can be granted.
    This Court has subject matter jurisdiction pursuant to 
    28 U.S.C. § 1582
    (1) and therefore
    denies Defendant’s USCIT Rule 12(b)(1) motion to dismiss. However, Plaintiff has failed
    to state a claim upon which relief can be granted. Accordingly, Defendant’s USCIT Rule
    12(b)(5) motion to dismiss is granted.
    Court No. 09-00060                                                                  Page 2
    Background
    In its original complaint Plaintiff alleged that Landweer, a customs broker, violated
    
    19 U.S.C. § 1641
    (b)(4) and 
    19 C.F.R. § 111.28
    (a) as well as 
    19 U.S.C. § 1641
    (d) and 
    19 C.F.R. §§ 111.29
     and 143.6, and was liable to the United States for a penalty in the
    amount of $30,000 pursuant to 
    19 U.S.C. §§ 1641
    (d)(1)(C) and (d)(2)(A). Thereafter
    Plaintiff filed a motion for leave to amend the complaint to remove the allegations that
    Landweer failed to exercise responsible supervision and control over its customs
    business, and therefore, violated 
    19 U.S.C. § 1641
    (b)(4) and 
    19 C.F.R. § 111.28
    (a).
    Plaintiff did not seek to add any new allegations. Rather, the sole reason offered in
    Plaintiff’s motion was an intervening decision of U.S. Court of Appeals for the Federal
    Circuit, United States v. UPS Customshouse Brokerage, Inc., 
    575 F.3d 1376
    , 1383 (Fed.
    Cir. 2009) (“UPS I”), remanded to, 34 CIT ___, 
    686 F. Supp. 2d 1337
     (2010) (“UPS II”),
    which held that U.S. Customs and Border Protection (“Customs”) must consider all ten
    factors listed in 
    19 C.F.R. § 111.28
    (a) to establish a violation of 
    19 U.S.C. § 1641
    (b)(4).
    Plaintiff explained that it would have been unable to make this showing and requested
    leave to remove from the complaint the allegations that referenced 
    19 U.S.C. § 1641
    (b)(4) and 
    19 C.F.R. § 111.28
    (a). The court then granted the unopposed motion for
    leave to file an amended complaint. Order on Pl.’s Mot. for Leave to File Amend. Comp.,
    ECF No. 22 (June 9, 2010).       Remaining in the amended complaint were Plaintiff’s
    claims, pursuant to 
    19 U.S.C. § 1641
    (d), regarding Defendant’s alleged violation of any
    provision of any law, rule, or regulation enforced by Customs, specifically 
    19 C.F.R. §§ 111.29
     and 143.6. Subsequently, Landweer filed its motion to dismiss.
    Court No. 09-00060                                                                   Page 3
    Standard of Review
    In deciding a USCIT Rule 12(b)(1) motion to dismiss that does not challenge the
    factual basis for the complainant's allegations and a USCIT Rule 12(b)(5) motion to
    dismiss for failure to state a claim upon which relief can granted, the court assumes all
    factual allegations to be true and draws all reasonable inferences in plaintiff's favor.
    Henke v. United States, 
    60 F.3d 795
    , 797 (Fed. Cir. 1995) (subject matter jurisdiction);
    Cedars-Sinai Med. Ctr. v. Watkins, 
    11 F.3d 1573
    , 1583-84 & n.13 (Fed. Cir. 1993) (failure
    to state a claim).
    Plaintiff’s factual allegations must be “enough to raise a right to relief above the
    speculative level on the assumption that all the allegations in the complaint are true (even
    if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 
    550 U.S. 544
    , 555 (2007). “[T]o
    raise a right to relief above the speculative level,” a complaint must allege “enough factual
    matter (taken as true)” by making allegations “plausibly suggesting (not merely consistent
    with)” a valid claim. 
    Id. at 556
    . The basis of the court’s determination is limited to the
    facts stated on the face of the complaint, documents appended to the complaint, and
    documents incorporated in the complaint by reference. See Asahi Seiko Co. v. United
    States, 33 CIT ___, ___, (2009), 
    2009 WL 3824745
    , at *4 (quoting Allen v.
    WestPoint-Pepperell, Inc., 
    945 F.2d 40
    , 44 (2d Cir. 1991)).
    Discussion
    1. Subject Matter Jurisdiction
    Subject matter jurisdiction is a threshold inquiry. Steel Co. v. Citizens for a Better
    Environment, 
    523 U.S. 83
    , 94-95 (1998). Plaintiff carries “the burden of demonstrating
    Court No. 09-00060                                                                   Page 4
    that jurisdiction exists.” Techsnabexport, Ltd. v. United States, 
    16 CIT 420
    , 422, 
    795 F. Supp. 428
    , 432 (1992) (citing McNutt v. Gen. Motors Acceptance Corp., 
    298 U.S. 178
    ,
    189 (1936)).
    Pursuant to 
    28 U.S.C. § 1582
    , this Court possesses exclusive jurisdiction to
    entertain “any civil action which arises out of an import transaction and which is
    commenced by the United States” to recover a civil penalty under the relevant provisions
    of section 641 of the Tariff Act of 1930. 1     
    28 U.S.C. § 1582
     (2006).       
    19 U.S.C. § 1641
    (d)(1)(C), in turn, provides that Customs “may impose a monetary penalty . . . if it is
    shown that the broker . . . has violated any provision of any law enforced by the Customs
    Service or the rules or regulations issued under any such provision.” Plaintiff’s amended
    complaint alleges that Landweer is liable for a penalty under 
    19 U.S.C. §§ 1641
    (d)(1)(C)
    and (d)(2)(A) for violating 
    19 C.F.R. §§ 111.29
     and 143.6 by filing 21 entries of Chinese
    freshwater crawfish with an incorrect dumping duty deposit rate of zero percent ad
    valorem, and incorrectly identifying the supplier of the merchandise as Yantai Haixing
    Aquatic Products on nine of those 21 entries. It further alleges that the court possesses
    jurisdiction to entertain this action pursuant to 
    28 U.S.C. § 1582
    , that this is an action to
    collect civil penalties pursuant to 
    19 U.S.C. § 1641
    , and that all notices required by 
    19 U.S.C. § 1641
     were issued to Landweer. Am. Compl. ¶¶ 1-9, ECF No. 36.
    Landweer argues that the underlying section 1641 administrative proceeding was
    legally defective because Customs never provided “any notice, allegations, petitions,
    1
    Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
    Title 19 of the U.S. Code, 2006 edition.
    Court No. 09-00060                                                                    Page 5
    adjudication or written determination” that Landweer violated 
    19 C.F.R. §§ 111.29
     and
    143.6, which Landweer argues is required by 
    19 U.S.C. § 1641
    (d)(2)(A) (“The notice shall
    advise the customs broker of the allegations or complaints against him. . . . [After any 
    19 U.S.C. § 1618
     proceeding], the appropriate customs officer shall provide to the customs
    broker a written statement which sets forth the final determination and the findings of fact
    and conclusions of law on which such determination is based.”). Mem. in Supp. of Def.’s
    Mot. to Dismiss at 11-13, ECF No. 28 (“Def.’s Mem.”). Plaintiff responds that Customs
    sufficiently satisfied its obligations under section 1641 by notifying Landweer that by filing
    21 entries of Chinese freshwater crawfish with an incorrect deposit rate of zero percent ad
    valorem, and by incorrectly identifying the supplier of the merchandise as Yantai Haixing
    Aquatic Products on nine of those 21 entries, Landweer was liable for a penalty under 
    19 U.S.C. § 1641
    (d)(1)(C) (for violating “any provision of any law enforced by the Customs
    Service or the rules or regulations issued under any such provision”). Pl.’s Resp. to
    Def.’s Mot. to Dismiss at 4, ECF No. 36 (“Pl.’s Resp.”).
    In support of the motion to dismiss, Defendant primarily relies on UPS II and United
    States v. Optrex Am., Inc., 
    29 CIT 1494
     (2005), arguing that Customs failed to properly
    exhaust the statutory procedures of 
    19 U.S.C. § 1641
    .              Defendant’s exhaustion
    argument implicates a question of the framework to properly analyze whether section
    1641 is jurisdictional (a USCIT Rule 12(b)(1) analysis) or non-jurisdictional (a USCIT Rule
    12(b)(5) analysis of the sufficiency of Customs’ claim).
    When reviewing whether the exhaustion of statutory requirements is jurisdictional
    or non-jurisdictional, the court presumes that exhaustion is non-jurisdictional unless
    Court No. 09-00060                                                                    Page 6
    Congress has stated in sweeping and direct language (i.e., in clear and unequivocal
    terms) that there is no subject matter jurisdiction prior to exhaustion. Avocados Plus Inc.
    v. Veneman, 
    370 F.3d 1243
    , 1248 (D.C. Cir. 2004) (internal citations and footnotes
    omitted). If non-jurisdictional, the exhaustion requirement is treated as an element of the
    underlying claim.    
    Id.
       To help determine whether statutory prerequisites, such as
    exhaustion, are jurisdictional limitations or elements of a cause of action, the U.S. Court of
    Appeals for the Federal Circuit recently explained that
    [a] statutory condition that requires a party to take some action before filing a
    lawsuit is not automatically “a jurisdictional perquisite to suit.” Rather, the
    jurisdictional analysis must focus on the “legal character” of the requirement,
    which we discern[] by looking to the condition’s text, context, and relevant
    historical treatment. We similarly have treated as nonjurisdictional other types of
    threshold requirements that claimants must complete, or exhaust, before filing a
    lawsuit.
    Ford Motor Co. v. United States, 
    635 F.3d 550
    , 555 (Fed. Cir. 2011) (quoting Reed
    Elsevier, Inc. v. Muchnick, ___U.S. ___, 
    130 S. Ct. 1237
    , 1246-47 (2010)).
    Turning to an analysis of the “text, context, and relevant historical treatment” of
    Section 1641(d)(2)(A), that provision sets forth the predicate requirements for obtaining a
    civil penalty against a customs broker. It provides that Customs first shall serve a
    customs broker with written notice (“pre-penalty notice”) that the broker may be subject to
    a monetary penalty for violation of section 1641(d)(1), specifying the allegations or
    complaints against the broker. Following the issuance of the pre-penalty notice, the
    customs broker has an opportunity to respond to the allegations and complaints.
    Thereafter, Customs issues a written penalty decision. Once the penalty issues, the
    broker then has a reasonable opportunity to seek remission or mitigation of the penalty
    Court No. 09-00060                                                                   Page 7
    pursuant to 
    19 U.S.C. § 1618
    . Following the section 1618 proceedings Customs issues
    a final decision on the monetary penalty, including findings of fact and conclusions of law.
    
    19 U.S.C. § 1641
    (d)(2)(A).
    Once Customs has perfected its civil penalty administratively, it may then seek to
    enforce the civil penalty against the customs broker. Section 1641, however, is silent as
    to the enforcement of Customs’ final penalty determination.              Compare section
    1641(d)(2)(A) with section 1641(e) (judicial review of the denial, suspension, or
    revocation of a custom broker’s license or the imposition of a monetary penalty in lieu
    thereof). To recover a section 1641 civil penalty, the United States must commence an
    action in the Court of International Trade pursuant to 
    28 U.S.C. § 1582
    (1). In authorizing
    the commencement of an action against a customs broker for a civil penalty, Congress
    did not enumerate a section 1641 enforcement action within the scope of 
    28 U.S.C. § 2637
    (a)-(c), the mandatory statutory exhaustion provisions for actions in the Court of
    International Trade. These mandatory jurisdictional preconditions exist only for actions
    commenced under 
    28 U.S.C. §§ 1581
    (a), (b), and (h). H.R. Rep. 96-1235, at 57 (1980),
    as reprinted in 1980 U.S.C.C.A.N. 3729, 3768-69.
    For example, for an action brought under 
    28 U.S.C. § 1581
    (a), an importer must
    have timely filed a protest under section 515 of the Tariff Act of 1930, and have that
    protest denied, in whole or in part. See DaimlerChrysler Corp. v. United States, 
    442 F.3d 1313
    , 1319 (Fed. Cir. 2006) (“the filing of a protest is a jurisdictional requirement.”); see
    also United States v. Boe, 64 CCPA 11, 15-16, 
    543 F.2d 151
    , 154-55 (CCPA 1976). In
    addition, the importer must have paid all liquidated duties, charges, or exactions at the
    Court No. 09-00060                                                                     Page 8
    time the action is commenced. See 
    28 U.S.C. § 2637
    (a). This payment requirement is
    a mandatory condition precedent for invoking the jurisdiction of the Court of International
    Trade. If payment is not made, then this Court must dismiss an importer’s cause of
    action for lack of jurisdiction. See Syva Co. v. United States, 
    12 CIT 199
    , 201 (1988)
    (citing Boe, 64 CCPA at 18, 543 F.2d at 155-56)).
    Similarly, for a domestic manufacturer to commence an action in this Court under
    
    28 U.S.C. § 1581
    (b) challenging the classification, valuation, or rate of duty of imported
    merchandise, the domestic manufacturer must file a petition with Customs, and have that
    petition denied. See 
    19 U.S.C. § 1516
    , 
    28 U.S.C. § 2637
    (b) (“A civil action contesting
    the denial of a petition under section 516 of the Tariff Act of 1930 may be commenced in
    the Court of International Trade only by a person who has first exhausted the procedures
    set forth in such section.”). Then and only then, upon satisfying the statutory condition
    precedent, is the domestic manufacturer authorized to commence an action in the Court
    of International Trade. See National Corn Growers Ass’n v. Baker, 
    840 F.2d 1547
    , 1557
    (Fed. Cir. 1988) (failure to file a section 516 petition renders jurisdiction under 
    28 U.S.C. § 1581
    (b) impossible).
    In an action brought pursuant to 
    28 U.S.C. § 1581
    (h), an importer, prior to
    importation of subject merchandise, may challenge a ruling or a refusal to issue or change
    a ruling by Customs only if the importer can show that it would be irreparably harmed if
    required to exhaust its administrative remedies. See 
    28 U.S.C. § 2637
    (c). To establish
    subject matter jurisdiction in a 1581(h) action, the importer must demonstrate that: (1) the
    review sought must be prior to importation; (2) the review sought must pertain to a
    Court No. 09-00060                                                                   Page 9
    Customs ruling; (3) the ruling must relate to certain subject matter; and (4) irreparable
    harm will result unless judicial review prior to importation is obtained.        Where the
    importer cannot satisfy all of these preconditions, subject matter jurisdiction under 
    28 U.S.C. § 1581
    (h) will not attach. See American Air Parcel Forwarding Co. v. United
    States, 
    718 F.2d 1546
    , 1551-52 (Fed. Cir. 1983). See also CPC Int’l, Inc. v. United
    States, 
    19 CIT 978
    , 979, 
    896 F. Supp. 1240
    , 1242 (1995) (“preimportation judicial review
    should be available only in exceptional cases and where the importer can demonstrate it
    would be irreparably harmed unless given an opportunity to obtain judicial review prior to
    importation”).
    In all other actions, including those under 
    28 U.S.C. § 1582
    (1), the Court of
    International Trade may exercise its discretion, where appropriate, to require the
    exhaustion of administrative remedies. 
    28 U.S.C. § 2637
    (d); H.R. Rep. 96-1235, at 57,
    as reprinted in 1980 U.S.C.C.A.N. at 3768-69.
    A scan of other customs laws - such as liquidated damages upon a bond, and
    collection of unpaid duties, taxes, or fees - fail to reveal similar preconditions (statutory
    exhaustion requirements) for the commencement of a civil action in the Court of
    International Trade. See 
    28 U.S.C. § 1582
    (2) (liquidated damage claims); 
    28 U.S.C. § 1582
    (3) (collection of unpaid duties generally); 19 U.S.C § 1592(d) (collection of unpaid
    duties resulting from a violation of 
    19 U.S.C. § 1592
    ); and 
    19 U.S.C. § 1553
     and 
    19 C.F.R. § 18.8
    (c) (collection of duties caused by a failure to make the required transportation,
    delivery, and report for merchandise transported in bond from port to another in the
    United States). A review of the statutes that govern the commencement of actions in
    Court No. 09-00060                                                                    Page 10
    district court for the administration and enforcement of the customs laws not within the
    jurisdiction in the Court of International Trade yields a similar result. See 
    28 U.S.C. § 1355
     and § 2461 et seq. (fines, penalties, and forfeitures); and 
    28 U.S.C. § 1356
    (seizure). Defendant is unable to point to any customs statute that imposes a condition
    precedent on the commencement of an action other than those identified by the court.
    As for the historical treatment of the procedures for perfecting a civil penalty claim
    similar to those contained in section 1641, Defendant is unable to point to a case in a
    district court or a circuit court of appeals prior to the creation of the Court of International
    Trade that addressed the sufficiency of those procedures as a condition precedent to
    commencing a civil penalty action under the customs laws.
    The text of 
    19 U.S.C. § 1641
    (d), and 
    28 U.S.C. §§ 1582
    (1) and 2637, as well as the
    legislative history of section 2637, do not support Defendant’s position that Congress
    intended to create a statutory precondition for the Government to invoke this Court’s
    subject matter jurisdiction under 28 U.S.C § 1582(1) to collect a civil penalty from a
    customs broker for a violation of 
    19 U.S.C. § 1641
    (d)(1). Defendant’s argument also
    fails contextually in comparison to what Congress has imposed as threshold
    requirements in other provisions of the customs laws for commencing an action in the
    Court of International Trade.       Lastly, the historical treatment of the section 1641
    procedures for perfecting a civil penalty does not provide a basis to conclude that the
    “legal character” of that provision creates a statutory precondition that the Government
    must satisfy prior to commencing an action under 
    28 U.S.C. § 1582
    (1).
    Court No. 09-00060                                                                   Page 11
    Defendant relies heavily on UPS II, arguing that the court has spoken “specifically
    to what it has the jurisdiction to do and what it does not have jurisdiction to do in a § 1641
    broker penalty collection action under § 1582.” Def.’s Resp. to Court’s Order for Further
    Brg, at 2, ECF No. 41 (“Def.’s First Supplemental Resp.”).           Defendant’s argument
    focuses on the following language from UPS II:
    “[The court] has no direct jurisdiction [under § 1582] to independently
    impose a penalty for violation of the predicate statute . . . The Court's
    statutory role is not to impose penalties on customs brokers, but rather to
    decide whether to permit recovery of penalties the government has already
    imposed. See 
    28 U.S.C. § 1582
    (1).”
    UPS II, 
    686 F. Supp. 2d at 1346
    . Defendant though misreads this language as a holding
    on the question of subject matter jurisdiction.        It is not.   It is simply the court’s
    observation about the different statutory roles of Customs in imposing a civil penalty
    (under 
    19 U.S.C. § 1641
    ) and the court in enforcing that civil penalty against a customs
    broker (under 
    28 U.S.C. § 1582
    ). UPS II and its prior judicial opinions (both at the trial
    and appellate level) did not involve or address subject matter jurisdiction. In fact there
    was no hint whatsoever from the Federal Circuit that the Court of International Trade
    lacked subject matter jurisdiction to entertain the action. See UPS I, 
    575 F.3d at 1383
    .
    Defendant also relies on United States v. Optrex Am., Inc., 
    29 CIT 1494
     (2005),
    contending that the issue of Customs’ failure to satisfy the requirements of 
    19 U.S.C. § 1641
     is jurisdictional. Optrex involved an action under 
    28 U.S.C. § 1582
     to collect a
    penalty for a violation of 
    19 U.S.C. § 1592
    , in which the Government sought to amend its
    complaint to add claims for gross negligence and fraud that Customs had not asserted
    during the administrative civil penalty proceeding. The Optrex court ultimately denied
    Court No. 09-00060                                                                  Page 12
    the motion to amend, holding that the administrative penalty underlies, and forms the
    basis of, the section 1582 cause of action, and Customs failure to pursue gross
    negligence and fraud at the administrative level precluded Customs from asserting them
    in the section 1582 action. See Optrex, 29 CIT at 1499-1500. Although Optrex can be
    read as a jurisdictional decision (a Rule 12(b)(1) perspective), it can also be read as a
    decision predicated on non-jurisdictional exhaustion considerations (a Rule 12(b)(5)
    perspective). The court believes that the latter is the better reading.
    To explain, Optrex did not address subject matter jurisdiction as its own discrete
    problem; the court was instead preoccupied with the more specific issue of whether to
    permit Plaintiff (the government) to amend its complaint. The Optrex court therefore did
    not have before it straightforward motions to dismiss for lack of subject matter jurisdiction
    or failure to state a claim upon which relief may be granted. More important, the Optrex
    court did not have the benefit of the Federal Circuit’s guidance in Ford Motor Co. on how
    to analyze whether section 592 civil penalty procedures are jurisdictional or
    non-jurisdictional. Read through the updated lens of Ford Motor Co., Optrex appears to
    have applied non-jurisdictional exhaustion under 28 U.S.C § 2637(d), with the net effect
    being a failure of the government to satisfy the required elements of a cause of action to
    recover penalties for gross negligence and fraud. See Optrex, 29 CIT at 1500-01.
    In examining the section 1641 procedures against a presumption that exhaustion
    is non-jurisdictional, the court is unable to discern any “sweeping and direct language”
    that establishes that those procedures are intended to be preconditions to invoking this
    Court’s subject matter jurisdiction under 
    28 U.S.C. § 1582
    (1).             Moreover, after
    Court No. 09-00060                                                               Page 13
    considering the text, context, and relevant historical treatment of the procedures, the
    court concludes that the “legal character” of section 1641 does not create a condition
    precedent for the commencement of a civil penalty enforcement action. Accordingly, the
    court has subject matter jurisdiction over Plaintiff’s amended complaint.
    2. Failure to State a Claim upon Which Relief Can Be Granted
    Although the requirements of section 1641 may not be jurisdictional, they are
    nevertheless requirements that must be satisfied as elements of the Government’s
    section 1582 cause of action. The court next turns to whether the Government has
    stated a claim upon which relief can be granted. In its complaint the Government alleges
    that, pursuant to 
    19 U.S.C. § 1641
    (d)(1)(C), a monetary penalty may be imposed against
    a customs broker for violating any provision of any law enforced by Customs or the rules
    or regulations issued under any such provision. Am. Compl. ¶ 5. The Government also
    alleges that 
    19 C.F.R. § 111.29
    (a) requires a customs broker to exercise due diligence in
    preparing and filing records involving its customs business, and that 
    19 C.F.R. § 143.6
    requires a broker who uses the Customs Automated Broker Interface (“ABI”) system to
    adhere to ABI performance requirements and operational standards in the transmission
    of data and to follow Customs directives and policies as to the proper use of the ABI
    system. 
    Id.
     ¶¶ 6 and 7. Plaintiff further asserts that Defendant filed 21 entries of
    Chinese freshwater crawfish with an incorrect dumping duty deposit rate and on nine of
    those entries Defendant also incorrectly identified the supplier of the subject
    merchandise. 
    Id.
     ¶¶ 8 and 9. Therefore, the Government claims that the acts and
    omissions of the Defendant in filing these entries constituted “violations of 19 C.F.R. §§
    Court No. 09-00060                                                                   Page 14
    111.29, and 143.6,” and as a result, Defendant is liable “pursuant to 
    19 U.S.C. §§ 1641
    (d)(1)(C) and (d)(2)(A) for a civil penalty in the amount of $30,000. 
    Id.
     ¶¶ 11 and 12.
    In particular, the Government contends that “[t]he amended complaint contains
    specific allegations that Landweer is liable for penalties . . . for violating 
    19 C.F.R. §§ 111.29
     and § 143.6 and that ‘[a]ll notices required by 
    19 U.S.C. § 1641
     were transmitted
    to Landweer . . . .’” Pl.’s Resp. at 4-5. Problematically though, as the Government
    acknowledges, Customs did not specifically allege that Defendant violated sections
    111.29 and 143.6 during the underlying administrative proceeding. The Government
    instead maintains that Customs “did allege facts that informed Landweer of a violation of
    these regulations.” 
    Id. at 9
    .
    Customs’ claim in the pre-penalty notice was predicated on Defendant’s failure “to
    exercise reasonable supervision” over its customs business under 
    19 C.F.R. § 111.28
    ,
    and 
    19 U.S.C. §§ 1641
    (b)(4) and 1641(d)(1)(C). Def.’s Mem., Ex. 1. The pre-penalty
    notice identified two claims - (1) Defendant’s filing of 21 entries with a false antidumping
    duty deposit rate and (2) Defendant’s failure to correctly identify the supplier on nine of the
    21 entries. Landweer acknowledged that it made a clerical error in selecting the code
    identifying the shipper of the subject merchandise for the nine entries, asserting that it did
    not intend to circumvent the regulations or mislead Customs. Def.’s Mem., Ex. 2. In
    response, Customs, however, never raised a claim of a lack of due diligence under
    section 111.29 or a failure to adhere to the ABI system requirements or standards or
    follow Customs directives or policies under section 143.6 on the part of Landweer.
    Court No. 09-00060                                                                  Page 15
    Rather, Customs continued to center its attention on the sole claim of Landweer’s lack of
    responsible supervision and control over its customs business. See 
    id.,
     Exs. 7 and 8.
    While the pre-penalty notice mentions a Customs directive (Administrative
    Message No. 02-1362) issued to all ABI brokers regarding duty rates in antidumping
    cases, it does not include any allegation that Defendant failed to exercise due diligence
    under 
    19 C.F.R. § 111.29
    , or to adhere to ABI system requirements or operational
    standards or follow Customs’ directives pursuant to 
    19 C.F.R. § 143.6
    . 
    Id.
     Throughout
    the remainder of the administrative proceeding, Landweer explained that it took
    reasonable steps, through queries using the ABI system, to identify the applicable
    dumping duty deposit rate for the subject entries, but claimed that the ABI system was
    flawed leading to the inclusion of the incorrect deposit rate on the 21 entries. See 
    id.,
    Exs. 4, 5, and 6. Despite references to the Administrative Message in its responses to
    Defendant, Customs never made an allegation that Defendant violated section 143.6 for
    failure to follow Customs directives or policies.      If anything, Customs continued to
    address the Administrative Message solely in the context of Landweer’s alleged lack of
    responsible supervision and control.
    Given the breadth of section 1641(d)(1)(C) - “any provision of any law enforced by
    . . . Customs or the rules or regulations issued” thereunder – and the singular focus in
    Customs’ pre-penalty notice, penalty determination, and mitigation petition decisions on
    Defendant’s alleged failure to abide by its duty to exercise “responsible supervision and
    control over the customs business that it controls” under section 1641(b)(4), it is difficult
    for the court to conclude that Defendant was made aware during the administrative
    Court No. 09-00060                                                                 Page 16
    penalty proceeding that it was potentially liable for a violation of 
    19 C.F.R. §§ 111.29
     or
    143.6.
    Nevertheless, the Government argues that nothing in section 1641 requires that
    Customs “identify each and every regulation that Landweer’s conduct could be deemed
    to have violated,” in contrast to 
    19 U.S.C. § 1592
    , which specifically requires that a
    pre-penalty notice identify “‘all laws and regulations allegedly violated.’” Pl.’s Resp. at
    5-6. Following the logic of the Government’s argument, Customs would only have to
    assert a violation under the “any law, rule, or regulation” language of section
    1641(d)(1)(C) and no more. Consequently, a customs broker would have to divine every
    possible basis for a claim by Customs of a violation of section 1641 in the administrative
    proceeding and in a follow-on penalty collection action, even if it was never apprised of
    the specific violation.   Congress provided a great deal of process in section 1641,
    starting with the pre-penalty notice where Customs is to provide written notice to a
    customs broker of a potential violation of section 1641 and an opportunity for the broker to
    respond, followed by the penalty notice, which is Customs’ written decision after
    considering the broker’s initial response.
    Congress did not stop there, providing an additional layer of process pursuant to
    
    19 U.S.C. § 1618
    , by authorizing a potential violator to present arguments that Customs
    should remit or mitigate the monetary penalty. At the conclusion of a section 1618
    proceeding, Customs is to provide a customs broker with “a written statement which sets
    forth the final determination and the findings of fact and conclusions of law on which such
    determination is based.” 
    19 U.S.C. § 1641
    (d)(2)(A). To require a potential violator,
    Court No. 09-00060                                                                 Page 17
    such as Defendant, to speculate as to the basis of Customs’ penalty claim would defeat
    Congress’ statutory scheme. Moreover, it runs contrary to the legislative history of
    section 1641. Prior to 1984, Customs had no authority to assess or collect civil penalties
    from customs brokers. See Trade and Tariff Act of 1984, Pub. L. No. 98-573, § 212, 
    98 Stat. 2948
    , 2979-81 (1984).      In granting this new authority, Congress stated (and
    Customs “agreed”) that the regulations governing civil penalty proceedings involving
    customs brokers would parallel those in place for section 592 civil penalty proceedings.
    See H.R. Rep. 98-1015, at 72 (1984), as reprinted in 1984 U.S.C.C.A.N. 4910, 5031. In
    fact, the penalty assessment procedures for a violation of section 1641 mirror those for a
    section 1592 violation. See 19 C.F.R. Part 171, App. C (Guidelines for the Imposition
    and Mitigation of Penalties for Violations of 19 U.S.C. 1641).         Congress therefore
    intended that a claim in a penalty collection action be the same claim as in the underlying
    administrative proceeding, regardless of whether the claim arises under section 1592 or
    section 1641.
    While Customs did allege facts that informed Landweer of some violation of
    section 1641, Customs, by its own acknowledgement, did not specifically allege that
    those facts gave rise to a violation of section 111.28 or 143.6. Therefore, Customs did
    not sufficiently exhaust administrative remedies against Landweer for a violation of 
    19 C.F.R. § 111.28
     for a lack of due diligence nor its claim for violation of 
    19 C.F.R. § 143.6
    for failure to adhere to the performance standards and operational requirements of the
    ABI system or failure to follow Customs directives or policies.
    The role of Customs in a section 1641 civil penalty proceeding is to determine
    Court No. 09-00060                                                                  Page 18
    whether a violation occurred and whether that violation supports the imposition of a
    monetary penalty. It is the “statutory role” of the Court of International Trade “to decide
    whether to permit recovery of penalties the government has already imposed.” UPS II,
    34 CIT at ___, 
    686 F. Supp. 2d at 1346
    . In deciding whether to permit recovery, the court
    looks at the broker’s violation “only insofar as violation of the statute is a crucial
    component of the [section 1641] penalty procedure.” 
    Id.
     The Government is required to
    demonstrate in a collection action that Customs met “all other formal requirements of the
    [section 1641] procedure.”      
    Id.
       Given this framework and the process (including
    mitigation) that Congress has built into section 1641, the issues of a potential violation of
    the statute and the determination of liability for a civil penalty for a customs broker’s
    violation of section 1641 must first be addressed and resolved administratively. See
    Optrex, 29 CIT at 1500 (“The statute was designed to give an importer the opportunity to
    fully resolve a penalty proceeding before Customs, before any action in this Court . . . .”)
    (emphasis added).      Therefore, to announce for the first time in a section 1582
    enforcement action the specific laws or regulations violated by Defendant does not
    comport with the statutory scheme created by Congress. Accordingly, Plaintiff has failed
    to state a claim upon which relief can be granted.
    Court No. 09-00060                                                               Page 19
    Conclusion
    For the forgoing reasons, the court denies Defendant’s Rule 12(b)(1) motion to
    dismiss for lack of subject matter jurisdiction, and grants Defendant’s USCIT Rule
    12(b)(5) motion to dismiss Plaintiff’s amended complaint for failure to state a claim upon
    which relief can be granted.
    /s/ Leo M. Gordon
    Judge Leo M. Gordon
    Dated: February 8, 2012
    New York, New York