Court Reprimands CBP for Bureaucratic Incompetence in Seeking Penalties of $33,595,112.00 from Common Carrier
January 20, 2015
The United States Court of Appeals for the Eighth Circuit berated the United States Customs and Border Protection (CBP) for assessing over $30 million in penalties against Union Pacific Railroad:
“CBP's reasoning is inconsistent, incomplete, and at times even incomprehensible”
Between 2001 and 2006, CBP found 38 instances of drug smuggling hidden on trains, that arrived at the U.S. border by two Mexican Railroads, Ferrocarril Mexicano S.A. de C.V. (Ferromex) or Kansas City Southern de Mexico S.A. de C.V. (KCSM).
Union Pacific Railroad Company (UP) only took control of the trains after the trains arrived in the U.S. and only after CBP had an opportunity to conduct its inspection. However, CBP assessed over $30 million in penalties against UP—not Ferromex or KCSM.
According to CBP, UP was liable for the smuggled drugs, even though UP had no control over the trains until after CBP made the discovery. By UP presenting the Mexican manifests in the United States, CBP asserted that UP “is responsible for [the manifests'] accuracy,” and “it is incumbent upon to ensure that the railcars are inspected in Mexico.” CBP concedes UP had no knowledge of the drugs, which were hidden in railcar “spines” (i.e., an area outside the locked cargo hold), in exposed chutes, under exterior plates, or inside tank cars.
CBP presumed that 19 U.S.C. § 1584(a)(2) authorized the government to punish an innocent owner or recipient of property for misuse of the property while the property is entirely under a third party's control even if the misuse occurs without the third party's knowledge and despite the third party's best efforts to prevent it.
However, as the court noted, if CBP's interpretation is correct, then §1584(a)(2) pushes the limits of the Fifth Amendment, which guarantees UP shall not “be deprived of ... property [ ] without due process of law.”
The court scolded CBP: "neither our court nor the Supreme Court has ever sanctioned a scheme to punish innocent owners for “the misconduct of mere strangers, over whom such owners or [the owners'] consignees could have no control.” Additionally, “the statute does not authorize penalties against UP for drugs found on railcars UP neither owns nor controls. And the statute certainly does not authorize CBP to require UP, as a common carrier, to do more than reasonably possible to prevent Mexican drug cartels from hiding drugs on trains UP does not control in a country in which UP has no operations.” See Union P. R. Co. v. U.S. Dept. of Homeland Sec., 738 F.3d 885, 888 (8th Cir. 2013).