AMERICAN CUSTOMS BROKERS v. US Customs Service

• Decision Date: 27 May 1986
• Docket Number: Court No. 86-04-00526.
• Citation: 637 F. Supp. 218,10 CIT 385
• Parties: AMERICAN CUSTOMS BROKERS CO., Plaintiff, v. UNITED STATES CUSTOMS SERVICE, Defendant.
• Court: U.S. Court of International Trade

637 F. Supp. 218

10 CIT 385

AMERICAN CUSTOMS BROKERS CO., Plaintiff, v. UNITED STATES CUSTOMS SERVICE, Defendant.

Court No. 86-04-00526.

United States Court of International Trade.

May 27, 1986.

Law Offices of Leonard M. Fertman (Leonard M. Fertman and Donald A. Rezak), Los Angeles, Cal., for plaintiff.

Richard K. Willard, Asst. Atty. Gen., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office and Nancy Reich, Civ. Div., U.S. Dept. of Justice, Washington, D.C., for defendant.

OPINION AND ORDER

RESTANI, Judge:

Plaintiff American Customs Brokers (ACB) is a licensed customhouse broker. As such, it enters goods as an agent of the importer of record or as the importer of record itself. When immediate delivery is involved, it exercises the immediate delivery privileges of its principal, the importer of record, in the first instance, and it exercises its own immediate delivery privileges in the latter case.¹ In late March, the United States Customs Service (Customs) discontinued plaintiff's immediate delivery privileges for an indefinite period, ostensibly because ACB listed erroneous social security or tax identification numbers on entry papers of a number of automobiles which were entered under bond pending installation of emissions control and automobile safety equipment meeting U.S. standards.² In addition, ACB was denied the right to act as a broker on any transaction involving the immediate delivery privileges of any other party acting as importer of record. Approximately one month after the discontinuance of the privileges, plaintiff filed a complaint seeking a temporary restraining order, and preliminary and permanent injunctions reinstating these privileges. The court issued a temporary restraining order on April 30, 1986, barring Customs from continued implementation of the revocation pending disposition of plaintiff's motion for a preliminary injunction, now before the court.

The parties do not dispute the following facts underlying the action. In May of 1985, Customs seized two vehicles entered by ACB because the entry identification numbers were not social security numbers issued by the Social Security Administration.³ Shortly thereafter, ACB provided the correct numbers and the vehicles were released. On November 27, 1985, ACB received a letter from Customs informing it that an audit of the firm would be conducted by Customs on December 12, 1985, to determine compliance with customs regulations. Upon completion of the audit, Customs concluded that of the 242 entries into the Los Angeles, California district that contained erroneous social security numbers in identifying importers of record, 102 were entries in which ACB had acted as broker.⁴ In response to this finding, Customs decided to take the action challenged here. On March 28, 1986, Aileen Colon, Chief Inspector of Customs at Terminal Island, orally informed representatives of ACB of Customs' decision. Subsequently, plaintiff's representatives had several discussions with Customs in an attempt to identify reasons for the discontinuance and to persuade Customs to reinstate the privileges. When these discussions proved unsatisfactory to plaintiff, plaintiff filed suit in this court.

Plaintiff contends that, at a minimum, it was entitled to written notice and an opportunity to respond before Customs could discontinue its privileges. It claims that the procedures followed by Customs deprived it of its right to procedural due process, rendering the discontinuance invalid. Thus, plaintiff seeks to have its privileges reinstated until the matter can be resolved on the merits.

The Court of Appeals for the Federal Circuit has defined the criteria for issuance of a preliminary injunction as follows:

(1) the threat of immediate irreparable harm;

(2) the likelihood of success on the merits;

(3) whether the public interest would be better served by issuing rather than by denying the injunction; and

(4) whether the balance of hardships on the parties favors issuing the injunction.

Zenith Radio Corp. v. United States, 710 F.2d 806, 809 (Fed.Cir.1983); S.J. Stile Associates, Ltd. v. Snyder, 68 CCPA 27, 30, 646 F.2d 522, 525 (Fed.Cir.1981); Azurin v. United States, 10 CIT ___, 632 F.Supp. 30, 31-32 (1986).

To demonstrate irreparable injury, plaintiff must prove that unless the injunction is awarded, some harm will result to it that cannot be reasonably redressed in a court of law. National Juice Products Association v. United States, 10 CIT ___, 628 F.Supp. 978, 984 (1986) (citing Manufacture de Machines du Haut Rhin v. Von Raab, 6 CIT 60, 569 F.Supp. 877, 881-82 (1983)). In making this determination, the court must focus on the immediacy of the harm and the adequacy of future corrective relief. S.J. Stile, 63 CCPA at 30, 646 F.2d at 525 ("A presently existing, actual threat must be shown."); Azurin, 10 CIT at ___, 632 F.Supp. at 32 ("An injury is irreparable if it cannot be undone through monetary remedies."); National Juice Products, 10 CIT at ___, 628 F.Supp. at 984 (the magnitude of the injury is not critical, rather the immediacy of the injury and the adequacy of the future relief).

It does not appear to be disputed here that immediate delivery privileges are an important part of plaintiff's operations. In addition, plaintiff has submitted affidavits (and has produced detailed testimony) that demonstrate that it has lost existing business accounts and has had to forego business opportunities due to the revocation of its immediate delivery privileges. There appears to be evidence of substantial harm to business good will, business reputation and a significant loss of new business. See Lois Jeans & Jackets, U.S.A., Inc. v. United States, 5 CIT 238, 242, 566 F.Supp. 1523, 1527 (1983) (Customs order to redeliver goods enjoined where loss of past and future sales and injury to reputation as a reliable supplier constituted irreparable injury); cf. Mutual of Omaha Insurance Co. v. Novak, 775 F.2d 247, 249 (8th Cir.1985) (court affirmed finding of irreparable injury based on injury to business reputation and good will arising from alleged trademark infringement). It is very difficult to accurately access these types of damage for purposes of monetary recovery. In addition, it is doubtful that the defendant would be subject to suit for the actions alleged here. See 28 U.S.C. § 2680 (1982). "The possibility that adequate compensatory or other corrective relief will be available at a later date ... weighs heavily against a claim of irreparable harm." National Corn Growers Association v. Baker, 9 CIT ___, 623 F.Supp. 1262, 1275 (1985) (quoting Sampson v. Murray, 415 U.S. 61, 90, 94 S.Ct. 937, 953, 39 L.Ed.2d 166 (1974), quoting Virginia Petroleum Jobbers Association v. FPC, 259 F.2d 921, 925 (D.C.Cir. 1958)). Inasmuch as plaintiff has offered substantial evidence on this point and defendant has offered no evidence to the contrary, the court concludes that plaintiff has suffered and will continue to suffer irreparable harm if its immediate delivery privileges are further discontinued.

The second element of the test of whether a preliminary injunction is warranted is an examination of whether plaintiff is likely to succeed on the merits of the case. The court notes that the likelihood of success need not be shown to be a "mathematical probability." Azurin, 10 CIT at ___, 632 F.Supp. at 32 (quoting American Institute for Imported Steel, Inc. v. United States, 8 CIT ___, 600 F.Supp. 204, 209 (1984), citing Committee to Preserve American Color Television v. United States, 4 CIT 202, 204, 551 F.Supp. 1142, 1144 (1982)).

The regulation in question, 19 C.F.R. § 142.25(a), allows the district director of customs to revoke an importer's immediate delivery privileges under certain circumstances.⁵ Defendant argues that this section applies to brokers, as well, and the court agrees. Inasmuch as brokers may obtain special permits under regulations allowing "importers" to be granted immediate delivery privileges, Customs' argument that the discontinuance provisions of section 142.25 also applies to brokers is entirely reasonable.⁶ The question then arises as to whether section 142.25 applies to the denial of a broker's ability to use a separate importer of record's immediate delivery privileges where that importer is the principal in the transaction, assuming other requirements, such as the proper power of attorney, are met. The answer to this question does not appear on the face of section 142.25. In addition, there is the issue of whether either penalty was imposed according to the proper procedures.

In assessing whether procedural due process was accorded to plaintiff, the case of Gallagher & Ascher Company v. Simon, 687 F.2d 1067 (7th Cir.1982), is instructive. In that case, a limited suspension of the immediate delivery privileges of a broker for failure to make timely entries was upheld, but the broker in Gallagher, unlike plaintiff here, remained free to use the importer's/principal's privileges. The Seventh Circuit found that 5 U.S.C. § 558(c)⁷ was applicable in that the permit granting immediate delivery privileges was a form of license.⁸ The court held that a full adjudicatory hearing was not required under section 558(c) and need only be provided when another statute requires a hearing. Id. at 1074. The court observed, however, that section 558(c) allows a "second chance" to be provided the offending party. Id. at 1074, 1075. Under section 558(c) a written warning with opportunity to demonstrate compliance or to amend conduct accords a broker a second chance before discontinuance of its immediate delivery privileges. In this case, unlike the Gallagher case, ACB did not receive the formal warning contemplated by section 558(c). Defendant argues that plaintiff was warned when the two automobiles were seized approximately one year ago and when, subsequently, plaintiff received written notice that an audit was to be commenced. The audit letter,...