Court Finds CBP May Not Deactivate Customs Broker's Filer Code without Due Process

On October 4, 2010, the U.S. Court of International Trade (CIT) issued an opinion in Lizarraga Customs Broker v. Bureau of Customs and Border Protection, holding that U.S. Customs and Border Protection (CBP) may not deactivate customs broker's filer code without due process. 

U.S. customs entries can be filed either manually or electronically through the Automated Broker Interface (ABI) system. According to CBP, currently 96% of all entries are filed electronically. In order to use ABI, the broker must have an active entry filer code and be approved for participation in the ABI system. 

On October 21, 2008, the Director of Field Operations at the Otay Mesa Port Entry in San Diego wrote to the Assistant Commissioner of the Office of International Trade and requested that Guillermo Lizarraga's entry filer code be deactivated for misuse. On November 3, 2008, the Assistant Commissioner made a final determination to indefinitely and immediately suspend Lizarraga's entry filer code for misuse. 

Customs did not provide Lizarraga with notice of its internal administrative review or an opportunity for a hearing, or solicit a written submission from him prior to its final determination, but on November 10, 2008, Customs notified Lizzaraga that, effective November 14, 2008, it would "immediately and indefinitely" suspend his entry filer code. The notice stated that the action was "necessary to prevent the misuse of the filer code in the conducting of customs business," and that the suspension was to prevent Mr. Lizarraga from using his individual filer code to "facilitate smuggling narcotics" and to ensure that plaintiff's "license, permit, name, and filer code are not used by persons who are not employed by Lizarraga and authorized to act for Lizarraga."

Lizarraga argued that "suspending a broker's entry filer code effectively puts that broker out of business because it is impossible to compete with other licensed brokers with active filer codes." 

Following CIT's grant of Lizarraga's motion for a temporary restraining order (TRO) and preliminary injunction seeking to enjoin Customs from suspending or deactivating plaintiff's broker entry file code in the port of San Diego, CA, CBP filed the Confession of Judgment in plaintiff's favor on April 23, 2010. The confession of judgment stated that CBP agreed not to suspend or deactivate Lizarraga's entry filer code for any past fact or event. Customs stated in its oral argument that it would not seek to summarily suspend a broker's entry filer code saying that "brokers are entitled to the [Administrative Procedure Act] (APA) if their entry filer code is deactivated, the procedural protections of the APA. So with respect to what occurred to Mr. Lizarraga in this instance, the Customs treatment of Mr. Lizarraga, it's certain that that is not going to occur again."  

With respect to APA, CIT noted that Customs was referring to 5 U.S.C. §558(c), which states, in relevant part: 

"Except in cases of willfulness or those in which public health, interest, or safety requires otherwise, the withdrawal, suspension, revocation, or annulment of a license is lawful only if, before the institution of agency proceedings therefor, the licensee has been given notice by the agency in writing of the facts or conduct which may warrant the action; and opportunity to demonstrate or achieve compliance with all lawful requirements."

CIT stressed, however, that it was not finding that the due process afforded by 5 U.S.C. §588 would be legally sufficient in similar future cases.