Broker Self-Assessment pilot ends
A project to test whether to create a voluntary program for approved customs brokers to self-monitor and report compliance with trade regulations has been terminated, U.S. Customs and Border Protection said in a report earlier this month.
Four companies, including A.N. Deringer, OHL and Expeditors International, participated in the one-year Broker Self-Assessment demonstration program.
The BSA was modeled on the eight-year-old Importer Self-Assessment program. It was designed to promote high compliance levels with Customs laws and regulations by letting trusted brokers self-report compliance violations so that CBP specialists can devote limited resources to focus on higher-risk companies and enforcement issues.
About 200 companies with strong internal controls have joined ISA in exchange for exemptions from periodic agency audits and cargo inspections for trade violations. Participation is low because many trade professionals don't believe the benefits outweigh the significant cost associated with meeting ISA standards.
Under the BSA program, CBP reviewed whether the brokers are able to update and improve internal controls, perform periodic testing of those controls and disclose to CBP deficiencies discovered through the testing.
A key responsibility for the brokers is to maintain an audit trail linking financial records to entries filed with CBP. The government expects brokers to have strong internal controls to comply with federal regulations and act in their capacity as a fiduciary agent for importers.
A permanent program would have enabled participating brokers to undergo fewer time-consuming audits.
The report by CBP's Office of International Trade said the pilot was not expanded because it could not 'directly correlate' a broker's internal controls for processing customs paperwork with a reduced risk for violations of trade laws on inbound shipments. Brokers have stated they are simply intermediaries and should not be held liable for mistakes made by the importer of record.
One of the challenges presented by the pilot program was a difference in interpretation between the agency and participating brokers on what constituted effective internal controls. Brokers identified areas of risk in their operations that they had not previously considered, the report said.
'The pilot confirmed that there exists a profound limitation in the assurance that import transactions would be compliant based solely upon the broker's internal controls. The broker's submission is only as reliable and accurate as the information it is provided. The burden still rests on the importer to file accurate and correct information with CBP,' the report said.
The National Customs Brokers and Forwarders Association of America pushed for the BSA, hoping it would lead to benefits such as more uniform enforcement of the broker industry, limited liability for self-disclosure of problems, expedited processing of ruling requests, and collaboration on corrective actions instead of sanctions for violations.
The NCBFAA commented in the report that the expense involved to be eligible for a BSA is not worth the limited benefits currently available unless CBP overhauls its entire regime for meting out penalties so that a company's entire compliance history is taken into account instead of issuing fines and other penalties per transaction. It also said CBP appeared unlikely to devote sufficient resources to manage a low-risk broker group given the diversity of the brokerage community. Under the circumstances, the trade association concurred with not proceeding to a second BSA pilot.
The report praised three of the four participating brokers for their commitment to broker oversight and management controls.
CBP said it has agreed to work with the NCBFAA to find other ways to modernize trade compliance functions.
The BSA is still a good idea even though it didn't meet CBP expectations at this time, Robert DeCamp, A.N. Deringer's director of regulatory affairs and consulting, told American Shipper last fall.
He compared it to a Certified Public Accountant auditing a company's financial statements and having the Internal Revenue Service check their work periodically, as needed.
The full Customs report on the BSA pilot can be found here. ' Eric Kulisch