O'Quinn v. U.S.

• Decision Date: 10 May 2000
• Docket Number: Slip Op. 00-53.,Court No. 99-03-00136.
• Citation: 100 F.Supp.2d 1136
• Parties: Allen N. O'QUINN, Plaintiff, v. The UNITED STATES; United States Secretary of Treasury, Defendants.
• Court: U.S. Court of International Trade

100 F.Supp.2d 1136

Allen N. O'QUINN, Plaintiff, v. The UNITED STATES; United States Secretary of Treasury, Defendants.

Slip Op. 00-53.

Court No. 99-03-00136.

United States Court of International Trade.

May 10, 2000.

Fitch, King and Caffentzis (James Caffentzis), New York City, for plaintiff.

David W. Ogden, Acting Assistant Attorney General, Washington, DC, Joseph I. Liebman, Attorney-in-Charge, International Trade Field Office, New York City, Mikki Graves Walser, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, New York City; Christopher C. Smith, Office of the Assistant

Chief Counsel, U.S. Customs Service, Of Counsel, for defendants.

OPINION

POGUE, Judge.

Plaintiff Allen O'Quinn ("Plaintiff") requests judgment upon the agency record pursuant to USCIT Rule 56.1. Plaintiff challenges a decision of the Deputy Assistant Secretary ("Assistant Secretary") of the Department of Treasury ("Treasury") affirming the U.S. Customs Service's ("Customs") denial of credit for his responses to two questions on the April 1998 customs broker examination.¹

Background

19 U.S.C. § 1641(b)(1)(1994) provides that "[n]o person may conduct customs business (other than solely on behalf of that person) unless that person holds a valid customs broker's license issued by the Secretary [of Treasury] under paragraph (2) or (3)." Paragraph (2) states,

In assessing the qualifications of an applicant [for a customs broker's license], the Secretary [of Treasury] may conduct an examination to determine the applicant's knowledge of customs and related laws, regulations and procedures, bookkeeping, accounting, and all other appropriate matters.

19 U.S.C. § 1641(b)(2).

In April 1998, Plaintiff sat for the customs broker examination for the purpose of obtaining a customs broker's license. Plaintiff received a score of 73.07%, 1.93% below a passing score.² Pursuant to 19 C.F.R. § 111.17(a), Plaintiff wrote a letter to Customs on May 13, 1998, requesting a review of his examination and challenging six of the test questions.³ By letter dated August 21, 1998, Customs informed Plaintiff that he would be given credit for one additional answer. Nevertheless, Plaintiff's new score of 74.4% was still short of a passing grade.

Pursuant to 19 C.F.R. § 111.17(b), Plaintiff appealed Customs' decision to Treasury on September 28, 1998, specifically requesting review of questions 17 and 62. In response, the Assistant Secretary determined that Plaintiff's responses to questions 17 and 62 were incorrect and denied his appeal by letter on January 4, 1999. Suit in this court subsequently followed. See 19 U.S.C. § 1641(e)(1); 19 C.F.R. § 111.17(c).

Jurisdiction and Standard of Review

Pursuant to 28 U.S.C. § 1581(g)(1)(1994), the Court has exclusive jurisdiction over a denial of a customs broker's license. Regarding the appropriate standard of review, the statute provides that "the findings of the Secretary [of Treasury] as to the facts, if supported by substantial evidence, shall be conclusive." 19 U.S.C. § 1641(e)(3)(emphasis added). Both 19 U.S.C. § 1641 and 28 U.S.C. § 2640 (1994), however, are silent as to the standard of review the Court should apply to legal questions in customs broker's license denial cases. "Therefore, [in reviewing legal questions,] the [C]ourt refers to the Administrative Procedure Act [(`APA')], which gives general guidance regarding the scope and standard of review to be applied in various circumstances." United States v. Ricci, 21 CIT 1145, 1146, 985 F.Supp. 125, 126 (1997), aff'd, 178 F.3d 1307 (Fed.Cir.1998) (citations omitted); see also Tarnove v. Bentsen, 17 CIT 1324, 1324 (1993); DiIorio v. United States, 14 CIT 746, 747 (1990).

Here, there is no dispute between the parties with regard to the facts. Rather Plaintiff's motion challenges the legal basis of the Assistant Secretary's decision. Therefore, applying the APA, the Court will uphold the final administrative decision of the Assistant Secretary in this case, unless his decision was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A)(1994). When applied to agency action independent of review of findings of fact, the arbitrary and capricious test requires that the agency engage in reasoned decision-making in grading the exam. See generally 2 Kenneth Culp Davis and Richard J. Pierce, Jr., Administrative Law Treatise § 11.4, at 203 (3d ed.1994).

Discussion

The exam instructs applicants to choose the correct answer to each question from among the five alternatives (A, B, C, D or E) presented. See Apr. 1998 Customs Broker's License Examination (attached to Defs.' Am. Mem. in Opp'n to Mot. J. Agency R.). Further, the exam instructs the examinees to refer to Title 19, Code of Federal Regulations (19 C.F.R. Parts 1 to 199) revised as of April 1, 1997, in responding to the questions. See id.

1. Question 17:

Question 17 requires the examinee to assess which deductions are allowed in determining the appraised value of imported goods. The question reads as follows:

The terms of sale stated on the invoice are Freight on Board (FOB). Which of the following deductions are allowed when determining the entered value?

A) The freight costs are deductible.

B) The insurance costs are deductible.

C) The freight and insurance costs are both deductible.

D) The inland freight costs are deductible.

E) No deductions are allowed.

The official answer to question 17 is (E). Plaintiff selected (C) as his answer.

To explain its reasoning for why (E) is the correct answer, Defendants first note that valuation of merchandise is exclusively addressed under 19 U.S.C. § 1401a (1994) and 19 C.F.R. § 152 (1997). See Defs.' Am. Mem. Opp'n to Mot. J. Agency R. at 8-9. Both of these provisions, in turn, instruct that the appraised value of imported merchandise be determined on the basis of the "transaction value." See 19 U.S.C. § 1401a(1); 19 C.F.R. § 152.101(b).⁴ "Transaction value" is defined as the "price actually paid or payable" by the buyer. See 19 U.S.C. § 1401a(b); 19 C.F.R. § 152.103(b). Further, the "price actually paid or payable" is defined as:

[T]he total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.

19 U.S.C. § 1401a(b)(4)(emphasis added); 19 C.F.R. § 152.102(f).

Defendants submit that the "FOB" term supplied in the question indicates that "the price actually paid or payable" did not include any "charges ... incident to the international shipment of the merchandise" that would be required by 19 C.F.R. § 152.102(f) to be deducted. See Defs.' Am. Mem. Opp'n to Mot. J. Agency R. at 12.

As Defendants cite in their brief, see id. at 11, Black's Law Dictionary defines "FOB" as:

Free on board some location (for example, FOB shipping point; FOB destination). A delivery term which requires a seller to ship goods and bear the expense and risk of loss to the F.O.B. point designated. The invoice price includes delivery at seller's expense to that location. Title of goods usually passes from seller to buyer at the FOB location.

Black's Law Dictionary 642 (6th ed.1990).

Defendants argue that the term "FOB," standing alone, is normally used to refer to the port of embarkation, signaling that costs incident to the international shipment of the merchandise are not included in the invoice price in the first place because the seller is only obligated to bear the expense and risk of loss of transporting the goods to the port of export. See Defs.' Am. Mem. Opp'n to Mot. J. Agency R. at 12. Answers (A), (B), (C) and (D) would be incorrect under this analysis because they provide deductions for costs incident to international shipment that would not have been included already in the price paid by the buyer. See id. Thus, Defendants assert that the correct answer to question 17 is (E)("No deductions are allowed."). See id.

Plaintiff chose (C), which allows deductions for freight and insurance costs, as the correct answer to question 17. Plaintiff first asserts that the question is unfair and should have been eliminated from the exam because of its use of the non-industry term "freight on board" as the long description of the invoice's terms of sale. See Pl.'s Mem. Supp. Mot. J. Agency R. at 7-8. In the alternative, Plaintiff argues that the question does not contain sufficient information to choose an answer, since FOB can refer to both port of embarkation and port of delivery. See id. at 8.

Responding to Plaintiff's first argument, Defendants admit that the term "freight on board" is not an industry term. See Defs.' Am. Mem. Opp'n to Mot. J. Agency R. at 11. Nevertheless, Defendants assert that, since "the term `freight on board' is not used in the industry, ... [Plaintiff] should have known that the term `FOB' was the key in responding to the question." Defs.' Am. Mem. Opp'n to Mot. J. Agency R. at 11-12. The question's use of "FOB," however, is ambiguous.

As discussed above, Defendants' reasoning that (E) is the correct answer relies on its assertion that "FOB" standing alone normally refers to the port of embarkation (or the shipping port). See id. at 12. However, Defendants neither cite, nor can the Court locate, any authority for this assertion. To the contrary, legal and international trade dictionaries alike indicate that, under the international understanding of the term, either a shipping point or a destination point should immediately follow the "FOB" term to avoid ambiguity.⁵

For instance, when defining "FOB" in its administrative rulings, Customs itself refers to the International Chamber of Commerce's Incoterms 1990, Publication No. 460 ("Incoterms")....