Court Opinion

ID: 819024
Source: CourtListenerOpinion
Date Created: 2013-02-04 06:03:25.810694+00
Date Added: 2024-06-11T09:02:54.707288
License: Public Domain

Slip Op. 02-126

           UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
                                     :
MARK YUAN-SHENG CHANG                :
                                     :
            Plaintiff,               :
                                     :
            v.                       : Court No. 02-00261
                                     :
THE UNITED STATES SECRETARY          :
OF THE TREASURY,                     :
                                     :
            Defendant.               :
____________________________________:

[Denial of customs broker’s license sustained.]

                                                                  Dated: October 24, 2002

       Mark Yuan-Sheng Chang, pro se.

      Robert D. McCallum, Jr., Assistant Attorney General, David M. Cohen, Director,
Commercial Litigation Branch, Civil Division, United States Department of Justice (John J.
Mahon and Arthur J. Gribbin), for defendant.

                                               OPINION

       RESTANI, Judge: This matter is before the court on defendant’s motion for judgment

upon the administrative record pursuant to USCIT Rule 56.1(a). Plaintiff Mark Yuan-Sheng

Chang challenges the decision of the Deputy Assistant Secretary of the Department of Treasury

(“Treasury”) affirming the United States Customs Service’s (“Customs”) denial of his

application for a customs broker’s license.1

       1
          The Secretary of the Treasury is authorized to decide appeals of a customs broker’s
license denial by Customs. The Secretary of the Treasury (“Secretary”) has delegated this
authority to the Deputy Assistant Secretary. See Rudloff v. United States, 19 CIT 1245, 1246 n.2
(1995), aff’d, 108 F.3d 1392 (Fed. Cir. 1997).
COURT NO . 02-00261                                                                         PAGE 2

                      JURISDICTION AND STANDARD OF REVIEW

       Pursuant to 28 U.S.C. § 1581(g)(1) (2000), the court has exclusive jurisdiction to review

the denial of a customs broker’s license. See O’Quinn v. United States, 100 F. Supp. 2d 1136,

1137 (Ct. Int’l Trade 2000). Findings of fact by the Secretary of the Treasury supporting a

customs broker’s license denial are conclusive unless they are not supported by substantial

evidence. 19 U.S.C. § 1641(e)(3) (2000); see also Bell v. United States, 17 CIT 1220, 1223-25,

839 F. Supp. 874, 877-79 (1993).2 The decision of the Assistant Secretary to deny a broker’s

license based upon those facts will be upheld unless arbitrary and capricious. See O’Quinn, 100

F. Supp. 2d at 1138 (reviewing a Treasury decision to deny a broker’s license under the arbitrary

and capricious standard as provided in the Administrative Procedures Act).

                                        BACKGROUND

       Plaintiff Mark Yuang-Sheng Chang applied for a customs broker’s license (“license”) on

March 1, 2000. In order to obtain a license, an applicant must, among other things, pass both a

written examination and background investigation. See 19 C.F.R. § 111.13 (examination); 19

C.F.R. § 111.14(d) (investigation). On April 3, 2000, Mr. Chang sat for and passed the written

broker’s examination. Customs then proceeded to investigate Mr. Chang’s qualifications,

integrity, character, and reputation as required by 19 C.F.R. § 111.14(d). In the course of its

investigation, Customs determined that Mr. Chang had been involved in the mis-classification of

goods in order to obtain a lower rate of duty. The discovery came about as a result of an

       2
          The statute provides that under certain conditions additional evidence may be received
by the court for further fact finding by the Secretary. See 19 U.S.C. § 1641(e)(4). This provision
is not applicable here.
COURT NO . 02-00261                                                                          PAGE 3

unrelated investigation of two shoe importing companies.

       Mr. Chang was employed as an entry writer at United Customhouse Brokers, Inc.

(“UCB”), a Customs Broker. UCB was the designated broker for Peter’s Shoes, an importer of

athletic shoes. Customs investigated the mis-classification of a certain style of athletic shoe

previously imported by Peter’s Shoes. Customs determined that Peter’s Shoes had mis-classified

a particular style of shoe, along with several others, as made of leather when they were actually

made of plastic in order to obtain a lower duty rate.3 Mr. Chang prepared the entries on behalf of

Peter’s Shoes. As a result of the mis-classification, Customs issued a Custom Form 29 (“CF29”)

notifying Peter’s Shoes of the proper classification and requesting that Peter’s Shoes submit the

correct duty owed.

       Shortly thereafter, the owner of Peter’s Shoes, Peter Zanag, and his wife formed a new

importing company, Jenny Footwear,4 to import those shoes that were the subject of the CF29’s

issued to Peter’s Shoes.5 The entries filed by Jenny Footwear on these shoes continued to

classify the shoes as made of leather and to claim the lower duty rate of 8.5%. UCB was again

the designated broker for Jenny Footwear and the entries were prepared by Mr. Chang. 6

       3
          At the time of the investigation, leather shoes carried a duty rate of 8.5% whereas
plastic shoes carried a duty rate of 48% or 90 cents per pair plus 37.5% depending on the value of
the shoe.
       4
           The mailing address for Jenny Footwear was listed as Zanag’s home address.
       5
         Customs determined that the shoes were from the same supplier, and the merchandise,
invoice and price were identical to those previously imported by Peter’s Shoes. The only
difference, according to Customs, was that the style number listed on the invoice had been
changed from “918" to “951.” Neither shoe was actually labeled with a style number.
       6
           Mr. Chang no longer works for UCB.
COURT NO . 02-00261                                                                          PAGE 4

       At a May 9, 2000 meeting held to investigate the entries, Mr. Chang was asked by a

Customs Import Specialist Team Leader, Rene LaRue, why, after receiving the CF29’s for

Peter’s Shoes, he had continued to mis-classify the same merchandise. Mr. Chang responded

that Zanag had told him that the shoes were leather. In addition, Mr. Chang commented that he

was sympathetic towards Zanag because he had recently been robbed and was generally having a

difficult time. Mr. Chang acknowledged that he was aware that Jenny Footwear and Peter’s

Shoes were related companies. Mr. Chang stated that he regretted disregarding the CF29’s. On

August 11, 2000, the Customs agent assigned to Mr. Chang’s background check for the license

again asked why he had disregarded the CF29’s. Mr. Chang altered his response somewhat and

stated that he did not fully understand some of the classification descriptions.

       On September 11, 2000, Customs issued “Report of Investigation No.

LA10CH00LA0041.” Based on the findings in the report, the Assistant Port Director for U.S.

Customs Service Trade Operations recommended that Mr. Chang’s application be denied in

accordance with 19 C.F.R. §§ 111.16(b)(1), (3) and (6),7 for aiding and abetting an importer in

       7
           § 111.16 provides, in relevant part:

(b) Grounds for denial. The grounds sufficient to justify denial of an application for a license
include, but need not be limited to:

       (1) Any cause which would justify suspension or revocation of the license of a broker
       under the provisions of § 111.53;
       ...
       (3) A failure to establish the business integrity and good character of the applicant;
       ...
       (6) A reputation imputing to the applicant criminal, dishonest, or unethical conduct, or a
       record of that conduct.
COURT NO . 02-00261                                                                         PAGE 5

the evasion of Customs duties, and assisting the importer in changing his identity to achieve this

evasion. On January 19, 2001, the Assistant Commissioner, U.S. Customs Service, Office of

Field Operations, notified Mr. Chang by letter that his application for a customs broker’s license

had been denied.

       Pursuant to 19 C.F.R. § 111.17(a), Mr. Chang appealed the denial of his application by

letter dated February 20, 2001. Mr. Chang argued that he had never dealt with a CF29 before,

that he had relied on information provided by Peter’s Shoes, and that his conduct was not

intentional. Mr. Chang later presented an oral appeal by telephone to the Customs Service’s

Broker Licensing Review Board. Mr. Chang’s appeal was denied.

       Pursuant to 19 C.F.R. § 111.17(b), Mr. Chang appealed Custom’s denial of his

application by letter to the U.S. Department of the Treasury. A Treasury memorandum

reviewing Chang’s appeal noted, among other things, that he had failed to directly address his

admission that he disregarded the CF29’s. The memorandum also noted that the potential loss of

revenue for these erroneous entries was at least $186,653.00 and that such conduct would be

cause for suspension or revocation of a broker’s license under 19 C.F.R. § 111.53. The

memorandum recommended that the denial be upheld. On January 28, 2002, the Acting Deputy

Assistant Secretary of the Department of Treasury, Timothy E. Skud, denied Mr. Chang’s appeal

by letter. This appeal followed.

       As before, Mr. Chang challenges the denial of his application for a customs broker’s

license and, presumably, the subsequent decisions by Customs and Treasury affirming the denial.

The Government argues that Customs properly denied Mr. Chang’s application on the grounds

specified in 19 C.F.R. §§ 111.16(b)(1), (3), and (6).
COURT NO . 02-00261                                                                             PAGE 6

                                            DISCUSSION

        Pursuant to 19 U.S.C. § 1641(b) (2000), no person may act as a customs broker without a

license granted by the Secretary of Treasury. Section 1641(f) provides the Secretary with the

authority to “prescribe such rules and regulations relating to the customs business of customs

brokers . . . including rules and regulations governing the licensing of . . . customs brokers . . . .”

19 C.F.R. § 111.16(b) sets out six specific, though not exclusive, grounds for the denial of a

license application. “Customs regulations reasonably permit denial of broker’s licenses to

otherwise qualified persons based on, inter alia, lack of business integrity, engaging in unfair

commercial practices, or having a reputation for dishonest or unethical conduct.” Portal v.

United States, 20 CIT 617, 618 (1996). This is consistent with the purpose of the broader

statutory scheme regulating brokers as contained in 19 U.S.C. § 1641. See United States v.

Federal Ins. Co., 805 F.2d 1012, 1018 (Fed. Cir. 1986) (quoting S. Rep. No. 1170, 74th Cong., 1st

Sess. 3 (1935)) (“[T]he corrupt practices of a few [brokers], unhampered by adequate statutory

provisions for supervision, have proved a grave menace to importers and customs revenues alike.

The present amendments are designed to remedy this situation.”). “The entire Customs entry

system depends on brokers’ honesty.” Portal, 20 CIT at 618.

        After reviewing the evidence, the Secretary concluded that Mr. Chang actively

participated in the mis-classification of merchandise. The Secretary denied Mr. Chang’s

application on grounds that his conduct indicated a lack of business integrity and good character,

and was dishonest and unethical. Mr. Chang argues that he acted on information provided by the

importer and did not fully understand the meaning of the CF29’s and, therefore, did not

intentionally mis-classify the shoes. Mr. Chang does not, however, dispute that he prepared the
COURT NO . 02-00261                                                                          PAGE 7

entries or that he was aware that the two shoe companies were related. Mr. Chang was, at

minimum, on notice that the entries of similar shoes of the same material imported by essentially

the same company should be classified consistently. Mr. Chang’s repeated mis-classification in

the face of that notice raises serious questions. Furthermore, Mr. Chang provided investigators

incomplete and inconsistent explanations of the mis-classification.

       “Under the applicable substantial evidence standard of review, the agency rather than the

reviewing court weighs the evidence and determines its credibility.” Novosteel SA v. United

States, 128 F. Supp. 2d 720, 730 (Ct. Int’l Trade 2001) (discussing the substantial evidence

standard in the context of a challenge to the scope of antidumping and countervailing duty

orders); see also Timken Co. v. United States, 12 CIT 955, 962, 699 F. Supp. 300, 306 (1988),

aff’d, 894 F.2d 385 (Fed. Cir. 1990) (“It is not within the court’s domain either to weigh the

adequate quality or quantity of the evidence for sufficiency or to reject a finding on grounds of a

differing interpretation of the record.”). While it is possible that Mr. Chang did not intentionally

mis-classify the shoes, the court finds that the evidence presented substantially supports the

conclusion that Mr. Chang was actively involved in the mis-classification of merchandise to

obtain a lower duty rate. “[T]he possibility of drawing two inconsistent conclusions from the

evidence does not prevent an administrative agency’s finding from being supported by

substantial evidence.” Consolo v. Federal Maritime Comm’n, 383 U.S. 607, 620 (1966). As a

result, the court finds that the agency’s determination that Chang actively participated in the mis-

classification of goods was supported by substantial evidence. The court further finds that the

agency decision to deny Chang a broker license because of that mis-classification was not

arbitrary and capricious and, therefore, is sustained.
COURT NO . 02-00261                                                                           PAGE 8

                                          CONCLUSION

       For the foregoing reasons, the court finds that the decision of the Deputy Assistant

Secretary of the Treasury to deny Mr. Chang’s application was based upon substantial evidence

and that sufficient grounds for denial of the customs broker’s license existed under 19 C.F.R. §

111.16(b). Defendant’s motion for summary judgment is granted.

                                             ________________________
                                                   Jane A. Restani
                                                      JUDGE

Dated: New York, New York

        This 24th day of October, 2002.