Court: Court of Appeals for the Federal Circuit; June 5, 2003; Federal Appellate Court
Mr. Byung Wu Lee, a licensed customs broker, faced the revocation of his license by the United States Customs Service due to his failure to timely pay two assessed monetary penalties. The penalties included an initial $1,000 penalty for failing to exercise proper supervision over his customs business, later mitigated to $250, which he ultimately paid only after the matter was referred to the Justice Department for collection. Subsequently, Customs notified Mr. Lee of a second penalty of $30,000 for various violations, which he did not contest and remained unpaid. Following several demand letters from Customs, the situation escalated to a collection suit by the Justice Department and preliminary proceedings initiated by Customs to revoke Lee's broker's license based on violations of specific regulatory provisions (19 C.F.R. 111.53(c), 111.29, and 111.94). The Court of International Trade upheld the revocation after Lee's appeal, affirming that he had violated regulations regarding timely payment of penalties.
Mr. Lee contended that Specification I was barred by the statute of limitations and that Specification II was encompassed by the collection action. He further asserted that Customs could not seek license revocation based on the same facts underlying the collection action, as the monetary penalty and license revocation were alternative sanctions. On August 13, 1996, Customs issued a formal Notice of Revocation Proceeding and Notice to Show Cause, reiterating the charges from the Proposed Notice. An Administrative Judge held a hearing on September 11, 1996, where Mr. Lee's arguments were rejected, and it was concluded that Customs had demonstrated violations of 19 C.F.R. 111.29 and 111.94. Consequently, the Judge recommended revocation of Mr. Lee's license, a recommendation adopted by the Secretary of the Treasury, who clarified that the license revocation was based on distinct facts from the penalties assessed, as the failure to timely pay the penalties constituted a separate violation.
Mr. Lee appealed to the Court of International Trade, which upheld the revocation, confirming that the violations related to the revocation were his failures to pay assessed penalties, not the original violations that incurred the penalties. The court emphasized that the failure to pay constituted separate violations under different regulations. Mr. Lee's current appeal asserts that 19 U.S.C. 1641(d) allows Customs to impose either a monetary penalty or seek revocation for the same violation but not both. The relevant statute supports that revocation and monetary penalties are alternative sanctions for a single violation. The distinguishing issue is whether the violations for failing to pay the penalties can be viewed as separate violations. The government counters that the violations leading to penalties are distinct from those resulting from the failure to pay, a position supported by the Court of International Trade. The case involves statutory interpretation, which is subject to de novo review.
This case differentiates between two classes of violations: those leading to penalties and those resulting from late payment of those penalties. Regulations under 19 C.F.R. 111.53(c) allow Customs to revoke a broker's license for failing to pay penalties on time, which Mr. Lee argues exceeds Customs' statutory authority. However, Congress has permitted Customs to create regulations necessary to protect importers and U.S. revenue, and 19 C.F.R. 111.53 is deemed a reasonable exercise of this authority. Mr. Lee's claim that this regulation contradicts the use of "or" in section 1641(d) is unfounded, as nothing in that section prohibits treating late payment as a separate violation.
He also contends that license revocation for late payment impairs his right to judicial review, presenting a dilemma of either paying the penalty and forfeiting review or risking revocation. However, brokers retain the right to judicial review of penalty decisions and have options to avoid revocation, such as paying under protest to preserve appeal rights. Customs has a policy that prevents revocation against brokers who actively contest penalties. Mr. Lee, however, did not follow this policy, ceasing communication with Customs after initially contesting a penalty, which led to his predicament. Moreover, he argues that a penalty is not a "debt or obligation" as defined in 19 C.F.R. 111.29.
Section 111.29 mandates that brokers must pay any duty, tax, or government obligation by its due date. A penalty assessed by Customs does not qualify as a "debt or obligation" until it undergoes full judicial review. In Nippon Miniature Bearing Corp. v. Weise, the Ninth Circuit ruled that a penalty assessment is not a final agency action, which means that importers do not need to pay assessed penalties during administrative review. The obligation to pay arises only after a de novo review by the Court of International Trade (CIT). Despite not being bound by Ninth Circuit precedent, it was noted that the Nippon decision does not favor Mr. Lee's position, as it does not require judicial review before actions like license revocation for unpaid penalties. Customs allows parties to avoid immediate penalty payments during the review process if they contest the penalty's legality.
Customs interprets "debt or obligation" to include penalties, a view that receives substantial deference as per judicial standards. The Supreme Court asserts that agency interpretations are given controlling weight unless clearly erroneous. Customs' interpretation is not plainly erroneous, as it considers penalties as obligations due. Mr. Lee did not demonstrate that Customs improperly revoked his license; the revocation was based on his failure to timely pay penalties, not as a secondary sanction for prior violations. The regulations allowing for license revocation due to late penalty payments fall within the agency's authority and are not improperly interpreted. The Court of International Trade's decision to uphold the revocation of Mr. Lee's broker license is affirmed.
