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Customs business without a license after revocation: will CBP mitigate?

October 2024 examBroker ComplianceQuestion 12 of 80

Sam Sly's customs broker license was revoked by operation of law for failure to file a triennial status report and pay the fee. Sam thought that his employer ABC Brokerage (ABC) filed his report and paid the fee on his behalf, so he ignored the warning letter from CBP. In addition to his work at ABC, Sam completes freelance jobs classifying merchandise and filling out entry documents, but not filing them with CBP, for clients he obtains from a website that brings service providers together with businesses who buy freelance services. CBP discovers Sam's side business, determines that Sam is advertising publicly that he is a licensed customs broker, and discovers that he has conducted customs business for five importers of commercial goods after his license was revoked. CBP sends a penalty notice to Sam for conducting customs business without a license for $10,000.00. This is Sam's first penalty, and he has the ability to pay the fine, but he has requested mitigation claiming that he did not know his license was revoked. Based upon the guidelines in Appendix C to 19 CFR Part 171, will CBP mitigate and, if so, to what amount?

How to get there

19 CFR Part 171, Appendix C, § II (excerpts)B.1. The maximum penalty for any one incident of conducting Customs business without a license is $10,000. … As a general rule, $10,000 will be the maximum assessment for a violation solely involving conducting Customs business without a license, without regard to the frequency of violations. …
C. Customs business includes: 1. Classification and valuation. … 4. Filing of entries or other documents …
E.5. A $10,000 penalty when: a. Violator falsely holds himself out as being a licensed Customs broker. …
F. Mitigation: No mitigation will be afforded for any violation involving conducting Customs business without a license unless the violator can show an inability to pay such penalty.
I. Intent to violate the law is not an element of this violation.

Classifying goods and preparing entry documents for clients is customs business, even without filing them (C.1; § 111.1's definition covers preparation). Sam advertises as a licensed broker, which is the E.5.a trigger for $10,000. He can pay, so under § F there's no mitigation, and not knowing about the revocation doesn't help (§ I). The answer is C.

Why the other choices are wrong

A) $250: the first-violation amount for ordinary unlicensed commercial activity (E.3). It doesn't apply when the violator falsely claims to be licensed, and § F bars mitigation anyway.
B) $1,000: the repeat-violation amount (E.4). Same problem.
D) Raised to $30,000 for five violations: $10,000 is generally the cap for unlicensed activity “without regard to the frequency of violations” (B.2). $30,000 is the aggregate cap across all broker-penalty violations.
Tip
Unlicensed customs business ladder: family or unpaid non-commercial, no penalty; first commercial, $250; repeat, $1,000; holding out as licensed or a continuing course of conduct, $10,000. Mitigation only for inability to pay.

Source: 19 CFR Part 171, Appendix C, § II (eCFR); 19 CFR 111.1 (“Customs business”).

CBP answer key: Answer C · 19 CFR Part 171, Appendix C II. E(5), II F, II GSource: CBP past exams ↗