EPA Withdraws Penalty Case Against Customs Broker
A customs broker is off the hook for alleged violations of the federal pesticide regulations, after an administrative law judge on March 6 dismissed an Environmental Protection Agency civil penalty proceeding. EPA had accused Mara Shipping of failing to file required notices of arrival on several shipments of pesticides. It originally requested a $172,500 penalty, according to Mara. But Mara argued customs brokers aren’t responsible for filing notices of arrival. The fight paid off, as EPA withdrew its complaint in late February. EPA did not respond for comment on why it dropped the case.
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EPA’s case revolved around 23 entries of zinc borate filed in 2010 and 2011. EPA claimed the importer failed to file the required EPA Form 3340-1 (Notice of Arrival of Pesticides and Devices). According to a blog post by Mara's lawyer Christopher Kane of Simon Gluck Kane (here), the importer of record for the shipments, Royce Associates settled for $34,000. But EPA also brought a civil penalty proceeding against Mara, who served as customs broker for Royce Associates. The complaint alleged that Mara was also liable because Mara served as the importer’s agent, and is therefore an importer under 19 CFR 101.1. CBP’s Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) regulations at 19 CFR 12.112(a) require importers to file notices of arrival before arrival of a pesticide shipment.
Mara responded that the notices of arrival had indeed been filed -- otherwise, CBP wouldn't have released the shipments -- but even if they hadn't been, the customs broker wasn't responsible. Mara acknowledged that the importer of record is required to file a notice of arrival before a shipment of pesticides gets to the United States. But while customs brokers can act as importers under CBP's regulations, here Royce Associates was clearly the importer of record, and Mara was only Royce's agent for the purpose of filing customs documentation, it said. Royce Associates was the party with a financial interest in the goods, said Mara. The pesticides entered on Royce's bond, and Royce was responsible for the payment of duties to CBP.
Just as the requirement to file a tax return is specific to the taxpayer, so is the obligation to file a FIFRA notice of arrival specific to the importer. “The Internal Revenue Service has no separate or additional claim against a preparer who has not filed a return,” said Mara in its response to EPA's complaint. “Neither does the EPA against a licensed Customs broker if a notice of importation of pesticides is not filed,” said Mara.
According to Mara's lawyer's blog post, EPA originally requested a $172,500 penalty against Mara. But as discussions to settle the case progressed, EPA gradually lowered the requested penalty amount to $14,100. After Mara still wouldn't settle, EPA on Feb. 28 formally withdrew the complaint against Mara. An administrative law judge formally ended the proceeding on March 6, dismissing the case with prejudice, which prevents EPA from bringing the same charges against Mara again (here).
Kane said Mara was so willing to fight EPA on the penalties because of the consequences that settlement would have had for the company's broker license. Under 19 CFR 111.53(c), CBP can revoke a broker's license if the broker violates “any provision of law enforced by Customs or the rules or regulations issued under any provision of any law enforced by Customs.” As the requirement to file a FIFRA notice or arrival is contained in the Customs regulations at 19 CFR 12.112(a), any admission of guilt by Mara to EPA could have resulted in revocation of its customs broker license, said Kane. “For licensed Customs brokers, the admission of a violation of any part of any law or regulation administered by Customs can be as bad as a finding of a violation in an administrative proceeding or by a court in a judicial proceeding,” said Kane in his blog post. “With a full understanding of the risks, there are instances when fighting the government may be the only choice.”