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American ShipperRegulationRisk & ComplianceTrade Compliance

Customs brokers outline burdens of importer verification rule

NCBFAA generally supports Customs and Border Protection’s goal to protect against illicit importers but said the agency’s proposed importer verification rule has “grossly miscalculated the cost” to customs brokers.

The National Customs Brokers and Forwarders Association of America (NCBFAA) said it generally supports the Customs and Border Protection’s proposed rule to enhance the practices of verifying importers operating in the U.S. but warned that it could become a burdensome requirement for the country’s customs broker industry if certain adjustments are not made. 

Section 116 of the 2015 Trade Facilitation and Trade Enforcement Act (TFTEA) required CBP to establish rules for customs brokers to verify importer identifications and maintain this information within their records. 

CBP’s proposed rule, which was published in an Aug. 14 Federal Register notice, would require a customs broker to collect 12 data elements or documents at the time that a power of attorney (POA) is obtained from the importer. 

According to CBP, there are about 350,000 importers actively transacting customs business with the agency through the nation’s customs brokers. The agency estimates that the customs broker industry will collectively spend about $22.3 million from 2019 to 2023 to comply with the new rule, once it’s implemented. 

Alan Klestadt, NCBFAA’s Customs counsel, wrote in comments that were filed to CBP on Oct. 10 that the agency’s proposed rule has “grossly miscalculated the cost” for the customs brokers to comply. 

“It is unlikely that the importer will provide the broker with all of the required information at once and it is equally unlikely that all of the information can be validated at one time, especially since the verification exercise will require that the broker consult multiple reference resources,” he said. 

Under the proposed rule, customs brokers would be required to obtain personal details about the “grantor” or the individual signing the POA on behalf of the importer. CBP believes this information would help it to track down individuals who use shell companies for illicit imports and then attempt to disappear. 

The NCBFAA said that seeking this level of information from the grantor may “discourage” some importers from using customs brokers altogether and instead become self-filers of their import entries. 

“Whereas an importer that works with a broker will be vetted before merchandise is presented for entry into the United States, under the proposed rule, self-filers are not subject to any screening or vetting process and as such, represent a greater compliance/security risk to CBP,” Klestadt said. 

CBP’s proposed rule also calls for the customs broker to obtain a credit report from the prospective importer. The NCBFAA said these reports do not help to establish an importer’s identity and would impose an unnecessary cost on customs brokers, especially since the information has already been obtained by the sureties during the importer’s bond application process. 

“Is CBP suggesting that brokers cannot transact customs business for companies that do not have extensive business operations or credit reports?” Klestadt wrote, adding this would be a problem for customs brokers since many small and one-time importers would be unable to fulfill this requirement. 

The NCBFAA is concerned that a properly vetted importer, which is later determined by CBP to be a “bad actor,” may result in unfair penalties for the customs broker. 

The proposed rule anticipates CBP penalties of up to $10,000 per client or revocation or suspension of a customs broker’s license or permit in cases in which the broker fails to meet information collection requirements. 

“If CBP does not want brokers to transact customs business for shell or shelf companies, CBP needs to prepare definitive guidance so that brokers can identify shell or shelf companies and confirm whether such companies are entitled to issue POAs and act as importers of record,” Klestadt said. 

The association also called for CBP to either delete those portions or provide clearer guidance for the proposed importer verification requirement involving compliance with U.S. sanctions and obtaining both a copy of the client’s business registration and license with state authorities for nonresident importers of record. 

In addition, the NCBFAA questioned the regulatory value of CBP’s proposed vetting of existing importers and the annual reverification of those clients by customs brokers. The association asked the agency to remove these requirements from the proposed rule. 

Klestadt said an “unintended consequence” of the information burden associated with the proposed rule may persuade some customs brokers to become importers of record. “The proposed rule is aimed at those clients who provide a POA and the broker needs no POA if the broker chooses to act as the importer of record,” he said.

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Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.

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