On January 28, 2010, the CIT issued its decision in UPS Customshouse Brokerage, Inc. v. United States in which the US Government sought to recover penalties that CBP imposed on Plaintiff UPS Customshouse Brokerage, Inc. (UPS). The underlying dispute in this case involves CBP’s determination that UPS—by repeatedly misclassifying goods that did not contain cathode ray tubes within HTSUS subheading 8473.30.9000—failed to exercise responsible supervision and control of its customs brokerage business in violation of 19 U.S.C. § 1641(b)(4). The CIT ultimately held that the Government was not entitled to recover penalties.

The CIT issued the instant decision on remand from a decision by the CAFC. Previously, the CIT affirmed CBP’s determination, which the CAFC vacated and remanded in part because it found that CBP failed to consider each of ten regulatory factors in making its determination that UPS violated 19 U.S.C. § 1641(b(4). These factors include, among others: (1) issuance of written instructions and guidelines by the broker, (2) employee training by the broker, (3) volume and type of business of the broker, (4) frequency of internal audits, (5) maintenance of current editions of CBP regulations and (6) the broker’s real interest in brokerage operations.

In reaching its decision, the CIT found that the Government failed to demonstrate that the “appropriate Customs officer” (the Fines, Penalties and Forfeitures Officer for the relevant port) considered all ten regulatory factors when issuing penalties against UPS. The CIT further reasoned that the Government had not proffered any evidence upon which the Court could independently consider all ten factors. The CIT rejected the Government’s request for an evidentiary hearing, finding that the evidence the Government indicated it would present at such a hearing would not demonstrate the consideration of all ten factors. Moreover, the CIT declined to remand the matter to CBP for further administrative proceedings, finding that this would render the Government’s burden of proof to show consideration of the regulatory factors meaningless, and permit the Government to “create the facts prerequisite to recovery” post-trial to procure a judgment in its favor.