A customs broker’s license is the foundation of their business. When CBP initiates a penalty action or revocation proceeding under 19 U.S.C. § 1641, the broker faces not just a monetary fine but a potential loss of the license or permit that authorizes them to transact customs business on behalf of clients. These proceedings move on strict timelines, involve formal hearings before an administrative law judge, and can ultimately be reviewed by the Court of International Trade. If you have received a notice of charges, a show cause notice, or a monetary penalty notice under § 1641, you need experienced customs legal counsel immediately.
Great Lakes Customs Law represents licensed customs brokers — individual licensees, corporate and partnership brokers, and permit holders — in all phases of § 1641 proceedings, from the initial notice through administrative hearings, settlement negotiations, and judicial appeal.
Who Is Subject to 19 U.S.C. § 1641
Section 1641 governs all persons granted a customs broker’s license by CBP, as well as persons who transact customs business without a license. A “customs broker” under the statute is any person granted a license by the Secretary of Homeland Security. “Customs business” is broadly defined to include all activities involving transactions with CBP concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges, and the preparation and electronic transmission of documents and forms filed with CBP in furtherance of import or export activity.
Two categories of persons are exposed to § 1641 liability: licensed brokers subject to disciplinary action for violations of the statute or regulations, and unlicensed persons who intentionally transact customs business on behalf of others without holding a valid license.
Grounds for Penalty, Suspension, or Revocation
Section 1641(d)(1) sets out five categories of conduct that can give rise to monetary penalties, suspension, or revocation of a broker’s license or permit:
§ 1641(d)(1)(A) — False or Misleading Statements on License or Permit Applications
Making a false or misleading statement, or a material omission, in any application for a customs broker’s license or permit. If the false statement was material enough that the license would not have been issued but for it, suspension or revocation is the appropriate sanction rather than a monetary penalty. Where the misstatement would not have definitely resulted in denial, monetary penalties of $5,000 per false statement, up to a maximum of $30,000, may be imposed. Material facts include the applicant’s moral character, criminal history, corporate organization, and the license status of officers or partners.
§ 1641(d)(1)(B) — Criminal Convictions
Conviction of a misdemeanor or felony relating to the conduct of customs business, or conviction of any crime involving larceny, theft, robbery, extortion, counterfeiting, fraudulent concealment, conversion, embezzlement, or misappropriation of funds. For felony convictions and the enumerated financial crimes, monetary penalties are not available — suspension or revocation is the mandatory sanction. For misdemeanor convictions related to customs business where the domestic value of merchandise involved is under $15,000, mitigation to an amount equal to the domestic value may be appropriate.
§ 1641(d)(1)(C) — Violation of Any Law Enforced by CBP
Violation of any law enforced by CBP, or of any rule or regulation issued under such a law. This is the broadest category and encompasses violations of the customs laws, trade regulations, export laws, and the many other statutes CBP enforces. Penalties under this subsection may be imposed in addition to any penalty under the law directly violated — meaning a broker who assists a client in violating 19 U.S.C. § 1592 may face both a § 1592 aiding and abetting penalty and a separate § 1641 penalty on their license.
§ 1641(d)(1)(D) — Failure to Exercise Responsible Supervision and Control
Failure to exercise responsible supervision and control over the customs business that the broker transacts. This is the supervision and control obligation — a licensed broker is responsible for the conduct of their employees and agents acting within the scope of customs business. Inadequate supervision that results in errors, misclassifications, or compliance failures can expose the broker to disciplinary action even where the broker had no direct knowledge of the specific violation. Monetary penalties under this subsection are $1,000 per occurrence up to a maximum of $5,000 for a series of related violations, or $5,000 for failure to produce records requested by CBP.
§ 1641(d)(1)(E) — Knowingly Employing a Convicted Felon
Knowingly employing, or continuing to employ, any person convicted of a felony without obtaining written approval from the Secretary of Homeland Security. A broker who discovers a felony conviction has 30 days to seek approval. Failure to seek approval within 30 days triggers a $5,000 penalty; knowingly employing a felon without ever seeking approval triggers a $25,000 penalty; continuing to employ a felon after approval is denied can result in a $30,000 penalty and is generally grounds for license revocation.
Unlicensed Customs Business: § 1641(b)(6)
Any person who intentionally transacts customs business on behalf of others without holding a valid CBP-issued customs broker’s license is liable for a monetary penalty of up to $10,000 per transaction. This provision applies to freight forwarders, trade consultants, and others who cross the line into customs business without the required license. The statute reaches conduct that is intentional — there is no penalty for unknowing or inadvertent transactions — but the definition of what constitutes customs business is broad enough to capture a wide range of import-related activity.
Revocation by Operation of Law
Corporate and partnership brokers face an additional automatic penalty under § 1641: if a licensed corporation or partnership fails for any continuous period of 120 days to have at least one validly licensed individual officer or partner, its license is automatically revoked by operation of law — no CBP action required. This provision catches brokers who lose their qualifying licensed individual through departure, death, or license suspension without replacing them within the statutory window. Brokers operating under corporate or partnership licenses need to monitor their licensed personnel continuously to avoid triggering this automatic revocation.
The § 1641 Enforcement Process
The procedural framework for § 1641 enforcement is more formal than the typical CBP penalty process and includes an administrative adjudication before an independent ALJ:
- Show cause notice / statement of charges. CBP initiates a revocation or suspension proceeding by serving a written notice upon the broker specifying the grounds of the complaint. The broker has 30 days to respond. For monetary penalty proceedings, CBP issues a separate written notice of the proposed penalty.
- Preliminary proceedings. Following the response, CBP conducts preliminary proceedings to determine whether the charges warrant a formal hearing. If CBP determines a hearing is warranted, it notifies the broker and schedules a hearing before an administrative law judge within 30 days (or later with good cause).
- ALJ hearing. The hearing before an administrative law judge is a formal adjudicative proceeding with the right to present evidence, call witnesses, and make legal arguments. The ALJ issues proposed findings and recommendations to the CBP Executive Assistant Commissioner.
- Commissioner’s decision. The CBP Executive Assistant Commissioner issues the final agency decision on revocation, suspension, or monetary penalty. This decision is the exhaustion of administrative remedies.
- Settlement and compromise. At any stage, CBP may settle and compromise the proceeding on agreed terms — including reduction of a proposed revocation or suspension to a monetary penalty. Settlement is often the most practical resolution, and the mitigation guidelines at 19 C.F.R. Part 171, Appendix C govern the penalty amounts and mitigation standards.
- Court of International Trade appeal. A broker may appeal the final CBP decision to the Court of International Trade within 60 days of the issuance of the order. Commencement of CIT proceedings operates as a stay of the CBP order unless the court specifically orders otherwise.
Statute of Limitations
No § 1641 proceeding may be commenced more than five years from the date the alleged violation was committed. For violations involving fraud, the five-year period runs from the date the violation was discovered — not the date it occurred. This discovery rule for fraud means the limitations period can extend well beyond five years from the underlying conduct in cases where CBP was unaware of the violation when it happened.
Mitigation: Reducing Penalties Under § 1641
The CBP mitigation guidelines at 19 C.F.R. Part 171, Appendix C govern penalty amounts and the circumstances under which CBP will reduce them. Mitigation is available for most monetary penalty categories — with the notable exception that $1,000 supervision and control penalties are generally not mitigable unless extraordinary circumstances are present. For penalties in the higher ranges, mitigation arguments can significantly reduce exposure, and in some cases a proposed license revocation can be converted to a monetary penalty through the settlement process.
Effective mitigation requires a thorough understanding of the specific violation category, the applicable penalty schedule, and the mitigating and aggravating factors that CBP weighs in each category. The same principles that apply to petitions for mitigation in other customs penalty contexts apply here — but the § 1641 process involves an ALJ hearing rather than a standard FP&F petition, which demands a higher level of formal legal preparation.
How Great Lakes Customs Law Can Help
Great Lakes Customs Law represents customs brokers facing penalty proceedings, show cause notices, license revocation or suspension actions, and monetary penalty notices under 19 U.S.C. § 1641. We handle the full range of § 1641 matters — from initial response to the notice of charges, through ALJ hearing preparation and representation, to settlement negotiation and Court of International Trade appeals where warranted.
A § 1641 proceeding is not a standard CBP administrative matter. The ALJ hearing format, the formal record requirements, and the potential for license revocation distinguish these cases from the petition and protest processes that govern most CBP enforcement actions. Brokers facing these proceedings need counsel with direct experience in customs administrative adjudication — not general business litigation experience.
Contact us at our Michigan office at (734) 855-4999 or our Chicago office at (773) 920-1840 for a consultation. For related topics, see our pages on 19 USC 1592 Penalties, Petitions for Mitigation, Prior Disclosures, and Penalty Defense.