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American Shipper

Decision shows importance of electronic customs filing

Decision shows importance of electronic customs filing

   A court opinion handed down Monday by the U.S. Court of International Trade in New York is being described as an important victory for customs brokers.

   The ruling in Lizarraga Customs Broker v. Bureau of Customs and Border Protection, et al. would allow brokers to challenge actions by Customs and Border Protection that could effectively put them out of business if their ability to do business electronically is taken away.

   In November 2008, an assistant commissioner at CBP suspended the entry filer code for Guillermo Lizarraga Customs Broker of San Diego, Calif.

   Lizarraga does a lot of Mexico/U.S. cross-border work, and the opinion quotes a CBP assistant commissioner as saying the suspension was necessary to prevent the code from being used to “facilitate smuggling narcotics” and use of Lizarraga’s “license, permit, and filer code ' by Mexican nationals” — allegations that Arthur K. Purcell of Sandler, Travis & Rosenberg (ST&R), Lizarraga’s attorney, said were never resolved.

   In a letter dated Nov. 10, 2008 and received by Lizarraga the following day, CBP said that the entry filer code would be suspended Nov. 14, immediately and indefinitely, though it said he could continue to do business using manual procedures.

   Lizarraga argued he was unlawfully denied due process by only being given a few days notice of his entry filer code suspension and not being given the benefit of a hearing or an opportunity to make a written submission.

   CBP said that by using alternative filing procedures, Lizarraga could continue conducting customs business, but the broker contended those procedures would make it “virtually impossible to conduct business' and that 'suspending a broker's entry filer code effectively puts that broker out of business.

   “Without access to an entry filer code in today's electronic environment plaintiff cannot realistically compete with all other brokers who have such filer codes. Without a filer code, plaintiff will be forced to spend many hours manually filing entries, incur delays in processing, and be required to immediately pay estimated duties at the time of filing,” argued Lizarraga’s attorneys.

   “Moreover, because 90 percent of plaintiff's clients import FDA (Food and Drug Administration)-regulated produce, manual filing creates additional processing delays, including the fact that for weekends Customs has imposed on Mr. Lizarraga a mere two-hour window to present FDA documentation,” they added.

   A friend of the court brief submitted by the National Customs Brokers and Forwarders Association of America agreed, “the inability to use its entry filer code is nothing less than crippling to a customs broker's business.” Another brief in support of Lizarraga was submitted by the Pacific Coast Council of Customs Brokers and Freight Forwarders Associations, which said “lifting of a broker’s filer code is tantamount to putting them out of business.”

   Lizarraga was able to obtain a temporary restraining order on Nov. 14, 2008, and CBP agreed to take no action against Lizarraga’s entry filer code until the court ruled on the preliminary injunction.

   On April 23, 2010, the government filed a “confession of judgment,” agreeing not to suspend or deactivate Lizarraga’s entry filer code for any past fact or event and said the case was now moot.

   “The ruling would appear to be final and binding on CBP, and not likely to be appealed, since it is based in large part on a confession of judgment made by CBP after almost two years of hard-fought litigation,” Sandler, Travis & Rosenberg said in an advisory to clients.

   “Prior to this litigation, Customs could merely claim filer code misuse, without ever proving it, to immediately put a broker out of business by effectively suspending or revoking the broker’s license without providing any of the due process protections the law affords to brokers in disciplinary actions,” said Purcell. “Mr. Lizarraga deserves enormous credit for being the first broker to stand up to this unconstitutional agency action.”

   At oral argument the government told the court that CBP would not seek to summarily suspend a broker's entry filer code and that “Customs treatment of Mr. Lizarraga, it's certain that that is not going to occur again.'

   “The kind and extent of due process brokers will receive in future filer code misuse cases remains an open question that perhaps will be addressed by legislation or administrative rulemaking,” said ST&R. ' Chris Dupin