Fusco v. US Treasury Dept., Court No. 87-11-01081.

Decision Date14 September 1988
Docket NumberCourt No. 87-11-01081.
Citation695 F. Supp. 1189,12 CIT 835
PartiesRobert J. FUSCO, Plaintiff, v. UNITED STATES TREASURY DEPARTMENT, Defendant.
CourtU.S. Court of International Trade

Galvin, Haroian & Mlawski, Richard Haroian, New York City, for plaintiff.

John R. Bolton, Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Civ. Div., Commercial Litigation Branch, U.S. Dept. of Justice, New York City, Michael T. Ambrosino, Washington, D.C., for defendant.

OPINION

TSOUCALAS, Judge:

Plaintiff filed this action to contest the decision of the Secretary of the Treasury ("Secretary") revoking his customhouse broker's license (No. 5502) pursuant to 19 U.S.C. § 1641 (1982), amended by 19 U.S. C. § 1641 (Supp. II 1984). This Court has jurisdiction under 28 U.S.C. § 1581(g)(2). Defendant has moved for judgment upon the agency record in accordance with USCIT R. 56.1(a).

Background

On August 16, 1984, the Regional Commissioner of Customs served upon plaintiff a "Notice of Preliminary Proceedings" and a "Proposed Notice to Show Cause and Statement of Charges." This Notice indicated that the United States Customs Service ("Customs") was considering instituting formal proceedings against plaintiff for the purpose of revoking his license to practice as a customhouse broker. Administrative Record Exhibit 1.1

The preliminary proceedings afforded plaintiff the opportunity to show cause why his license should not be revoked and to avoid the institution of formal proceedings. The issue not being resolved in the preliminary stage, Customs instituted formal proceedings on December 2, 1985, by serving upon plaintiff a "Notice to Show Cause and Statement of Charges,"2 which read as follows:

CHARGE I: Violation of Section 111.29(a) of the Customs Regulations (19 C.F.R. 111.29) which provides in pertinent part that "funds received by broker from a client for payment of duty ... owing to the Government shall be paid to the Government within 30 days from date of receipt or date due, whichever is later."
SPECIFICATION: For Entry No. 524901, you received the sum of $101,125.94 for duties from Jeri-Jo Knitwear on October 26, 1982, but never turned over such funds to Customs. Therefore, you did not turn over the funds to Customs within 30 days following the date you received payment from the importer.
CHARGE II: Violation of Section 111.36 of the Customs Regulations (19 C.F.R. 111.36(a)) which prohibits a broker from entering into any agreement with an unlicensed person to transact Customs business for others "in such manner that the fees or other benefits resulting from the services rendered for others inure to the benefits of the unlicensed person."
SPECIFICATION: On April 30, 1982 and May 5, 1982 Armen Cargo Services, Inc., an unlicensed person, "(Armen)" used entry numbers assigned to you for Entry Nos. 82-753500 and 82-753505. Customs duty and other charges for both entries were billed to the importer, Argenta USA, Inc. by Armen Cargo Services, Inc. A corporate Power of Attorney (Customs Form 5291) dated September 8, 1981 which was executed by Argenta USA, Inc. named "R.J. Fusco/Armen Cargo Services/Jack Nourijanian as agents for Customs transactions. On Entry No. 82-753500 the entry summary was presented to Customs on May 17, 1982 without payment together with a letter on Armen's stationary sic indicating the entry was being surrendered without payment because the importer "refused or is unable to pay." You paid the duty to Customs on August 24, 1982 and billed Armen for the duty on this entry.
On Entry No. 82-753505, Armen paid the duty directly on September 23, 1982 and on May 21, 1982 sic presented the entry summary to Customs on your Consumption Entry Form CF 7501.
CHARGE III: Violation of Section 111.37 of the Customs Regulations (19 C.F.R. 111.37) which prohibits a broker from permitting his license or his name to be used by or for any unlicensed person, other than his own employees.
SPECIFICATION: The same as set forth under Specification of Charge III.3
The charges and specifications set forth herein, jointly and separatly sic, constitute grounds for the revocation of your license to engage in the business of a Customhouse broker.
Sections 554 and 558, Title 5 United States Code, (5 U.S.C. 554, 558) are applicable to the formal proceedings. You will be notified within ten (10) days after service of this notice of the time and place of a hearing on the charge. You have the right to be represented by counsel and you will have the right to cross-examine the witnesses at such hearing. Prior to a hearing on the charges, you may file in duplicate your verified answers to the charges with the Regional Commissioner of Customs, New York, New York.

A.R. Ex. 2.

The hearing concerning plaintiff's license revocation was held on January 30, 1986 before Anthony L. Piazza, the hearing officer designated by Customs pursuant to 19 U.S.C. § 1641(b), amended by 19 U.S.C. § 1641(d)(2)(B). A.R. Ex. 4. After the hearing, Mr. Piazza recommended revocation of the plaintiff's customhouse broker's license and the Assistant Secretary of the Treasury agreed, thereby revoking plaintiff's license on July 15, 1987. See A.R. Ex. 13 at 7; A.R. Ex. 27.

Plaintiff now claims that the hearing before Mr. Piazza was a nullity because it was conducted under section 641 of the Tariff Act of 1930, 19 U.S.C. § 1641(b) (1982), prior to the amendments made by section 212(a) of the Trade and Tariff Act of 1984, 19 U.S.C. § 1641(d) (Supp. II 1984) (hereinafter the "1984 Act"). Insisting that the revocation proceedings were not "instituted" until after the effective date of the 1984 Act, October 30, 1984, plaintiff maintains that the amended version of section 641 should apply to the instant action.4 Plaintiff argues that revocation proceedings are not "instituted" until the commencement of formal proceedings upon receipt of the "Notice to Show Cause and Statement of Charges." Defendant, on the other hand, asserts that revocation proceedings are instituted upon the commencement of the preliminary proceedings, when the "Proposed Notice to Show Cause and Notice of Preliminary Proceedings" are received.

The significant difference between the pre-amended and the amended statutes is that the amended version of section 641 provides for the revocation hearing to be held before an Administrative Law Judge appointed pursuant to 5 U.S.C. § 3105, whereas the pre-amended section 641 only required an "appropriate customs officer" to conduct the hearing. The plaintiff, therefore, concludes that the Secretary lacked the requisite power to enforce the hearing officer's decision in the absence of the administrative hearing required by statute.

The issue in the instant action is whether the revocation proceedings against plaintiff are deemed "instituted" from the date preliminary proceedings are commenced or from the date formal proceedings are initiated.

Plaintiff also alleges a violation of his due process rights because his request for review of the agency record prior to the hearing was denied by the hearing officer.

Discussion

Section 214(d)(3) of the Trade and Tariff Act of 1984 provides that:

any proceeding for revocation or suspension of a license instituted under section 641 of the Tariff Act of 1930 before the date of the enactment of this Act shall continue and be governed by the law in effect at the time the proceeding was instituted.

Pub.L. 98-573, 98 Stat. 2948, 2989 (codified at note to 19 U.S.C. § 1304) (emphasis added). The preliminary proceedings initiated against plaintiff according to 19 C.F.R. § 111.595 fit squarely within section 214 of the 1984 Act. Section 214 encompasses "any proceeding for revocation or suspension of a license"; it does not differentiate between preliminary and formal proceedings. See 19 C.F.R. §§ 111.59-.62. If Congress had intended the 1984 amendments to apply only upon the institution of formal proceedings, it would not have used the expansive "any proceedings" terminology. Furthermore, under the regulations a broker must be afforded the opportunity to participate in preliminary proceedings to possibly avoid formal proceedings against his license. 19 C.F.R. § 111.59.

Plaintiff asserts the proceedings are not "instituted" until commencement of formal proceedings, when the "Notice to Show Cause" is issued. Plaintiff reasons that the Notice to Show Cause initiates the procedures required to be followed in connection with the hearing, whereas the "Notice of Preliminary Proceedings" accompanied by the "Proposed Notice to Show Cause" triggers no such action. The Court is not persuaded by plaintiff's argument. "Preliminary Proceedings" are, in fact, proceedings within the ambit of section 214 of the 1984 Act; they are commenced under the customs regulation entitled "Preliminary proceedings." Id. (emphasis added). The applicable law, therefore, is the law in effect at the time the preliminary proceedings are instituted. The Court now turns to the question of whether the revocation decision was supported by the evidence in the record.

Standard of Review

The applicable standard for reviewing the Secretary's decision to revoke plaintiff's broker's license is whether the determination is supported by substantial evidence. 19 U.S.C. § 1641(b). Substantial evidence means more than a mere scintilla "it means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938). In the case at bar, the Court concludes that there is substantial evidence in the record to support the Secretary's revocation decision.

Plaintiff was charged with violating three different sections of the Customs regulations.6 The conduct which led to violation of 19 C.F.R. § 111.29(a)7 was plaintiff's failure to pay Customs $101,125.94 for Customs duties received from Jeri-Jo Knitwear ("Jer...

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