Contributing Lawyers


Cyndee Todgham Cherniak

United States

Susan Kohn Ross


Andrew Hudson

Why Can’t CBP Get It Right?

Originally published by the Journal of Commerce in October 2010 -

There has been a lot said in the trade press recently about the decision in U.S. v Pressman-Gutman, et al. (CIT 9-16-10) Slip Op. 10-105. Everyone seems (dare I say it) almost delighted that Customs and Border Protection (CBP) got told off by the court. In short, this case held even CBP has to play by the rules. CBP requested samples from Pressman-Gutman that triggered a conditional release period. 19 C.F.R. 113.62(d) states, if CBP wishes goods redelivered, it must do so within thirty (30) days of when the conditional release period ends. Instead, CBP took several months before demanding redelivery. The importer either would not or could not redeliver the goods, and so CBP eventually sued both the importer and its surety. In rendering its decision, the court severely and repeatedly chastised CBP, even going so far as to call its theory of the case "bankrupt," and its position contrary to 20 years of rulings and having no "colorable claim." The court also stated the action should never have been brought. Most of us in the trade would have said to CBP – what were you thinking? It was bad enough the operational staff at CBP insisting on going forward, but perhaps equally troubling was not one supervisor or manager at CBP stopped the case and not one attorney at CBP put an end to this highly questionable pursuit. Even the Dept. of Justice was made a party to bringing a case which clearly was not well founded. The regulations are clear and mean what they say. Why was that so hard to understand and follow? Or was this yet another case where someone at CBP did not like the outcome and just pushed the issue and others were simply going along to get along? Why no one would stand up and so no is beyond understanding.

At the same time, there were some interesting comments made by an Assistant Port Director at the recent Texas Brokers and Forwarders annual conference which leads one to think perhaps we have not heard the end of CBP getting it wrong. That APD talked about some of the areas where CBP is attempting to find the proverbial needle in a haystack as it does ever more refined risk assessment. Realizing the agency has to do more with less, one area that port is looking at is permits to transfer (PTT). For many years we have heard stories about in-bond shipments being diverted, not being duty paid and, in effect, the goods are smuggled into the country. According to this Customs official, the same thing is happening with goods designated on a PTT. A PTT is typically used to move goods under bond from a steamship terminal or airline warehouse to a third party warehouse to be devanned or unloaded prior to entry being filed at that port or prior to being transported to another port where entry is filed. It really makes you wonder what is happening at CBP that such moves are getting away from the agency.

This same Customs’ official went on to say the agency, at least in that port, is going to start going after forwarders on an aiding and abetting theory when counterfeit goods are offered for import. On the one hand, it is about time! On the other hand, on what basis? While absent red flags (such as saying on an invoice that counterfeit Air Jordans or Air Maxs are being imported, not anticipated in 99.999995% of the cases) the customs broker has little likelihood of knowing the goods inside the shipment are counterfeit, you have to ask the question, how would the forwarder be any better informed? It is one thing to have evidence of knowledge on the part of the service provider due, for example, to the company being in on the scam. It is quite another for CBP to say you should have known simply because you transported the goods (or filed the entry). There is, of course, at least one prominent shoe manufacturer who thinks the blame lies with the brokers for not doing a better job vetting their customers during the power of attorney process, but even that is a highly suspect position as it appears to be neither supported by law nor regulation, nor frankly is there any reason to think sophisticated counterfeiters cannot figure a way around ever-more demands for information.

Perhaps most hair-raising was the comment from this Customs official that in the context of remote location filing (where a broker in one port files entry at another port under a national permit granted by CBP), there have been too many occasions where the entry was filed for goods which are subject to anti-dumping duty and so not eligible for RLF entry. Seeking to put an end to such practices, one solution for at least this CBP Port is to start insisting the importer (and presumably the customs broker) produce the bill of lading. The failure to do is said to result in a record keeping violation and so a penalty. To be fair and accurate, it is indeed a violation of the record keeping regulations if the importer does not have proof of the right to make entry as per 19 C.F.R. §§ 141.11-141.15. There are two important points to keep in mind. The bill of lading is but one example of the documentation required under these regulations. Perhaps this APD’s comments might be explained as given in a speech and so not going into the level of detail expected in an enforcement action. However, this same person went on to say that forwarder receipts were not acceptable. It had to be a carrier issued bill of lading. Of course, in fact, a Forwarder’s Cargo Receipt is a form of a bill of lading and, as a result, qualifies as a compliant record. So, what we have to hope yet again is that if indeed CBP intends to pursue record keeping penalties in the circumstances described above, the agency does so based on what is actually an (a)(1)(A) requirement and not what someone thinks is mandated, or arising out of a lack of understanding of the transport documents which are routinely used in actually shipping goods. Keep your fingers crossed as it is likely that Pressman is not the last case in which CBP will have stepped on its pepperoni!

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