The National Customs Brokers and Forwarders Association of America (NCBFAA) welcomed a recently proposed rule from U.S. Customs and Border Protection (CBP) that requires customs brokers to have a more complete identification of their importer clients.
For the past few years, the NCBFAA Customs Committee has been working with CBP on the issue of bona fides for import clients and how to implement regulatory changes needed to more accurately verify the identities of importers.
“Without regulatory guidance from CBP, it can be difficult for each customs broker to determine what information they need to collect and confirm,” said Geoff Powell, president of C.H. Powell Co. and the NCBFAA’s board chairman, in an interview. “We therefore welcome CBP proposing clear regulatory guidance and responsibilities of both the broker and the importer.”
By regulation, each importer is required to have a power of attorney with the customs broker before the broker may transact customs business on behalf of the client.
As reported by American Shipper, CBP published a proposed rule in the Federal Register on August 14 requiring customs brokers to collect more detailed information about their import clients, including non-residential importers.
Section 116 of the 2015 Trade Facilitation and Trade Enforcement Act (TFTEA) requires the Secretary of the U.S. Department of Homeland Security to set minimum standards for how customs brokers collect information, as well as verify its authenticity, for both resident and non-resident importers.
The proposed rule will require customs brokers to identify the client’s name and date of birth; physical address and telephone number, email and business website; government-issued photo identification; business identification number; recent credit report; copy of client’s business registration and license with state authorities; and authorization to carry out power of attorney on the client’s behalf.
“For new clients I don’t see this as being too difficult, although I’m sure some importers may be uncomfortable supplying some of the required information,” said NCBFAA President Amy Magnus, who also serves as director of customs affairs and compliance for A.N. Deringer.
The proposed rule also formalizes the record-keeping requirements for this information by the customs brokers.
Those customs brokers who fail to comply with these new regulations risk fines up to $10,000 per violation, as well as the potential revocation of his or her license.
“These proposed regulations illuminate, for the international trade community and the public in general, the important role customs brokers have in verifying prospective clients and in ensuring the quality and integrity of the information they keep,” CBP said in the Federal Register notice.
CBP believes that most customs brokers already verify the identity of their prospective importer clients, but the agency estimates that about 5 percent of importers are “not currently verified or are only minimally verified.”
The challenge for some customs brokers with implementing the proposed rule will be the potentially time-consuming requirement of going back through their existing importer rosters to ensure that the verifications meet the new standard. Going forward, each importer’s bona fides must be reverified annually by the customs brokers.
“For many of our members, what CBP has outlined in the Federal Register may not be difficult to achieve for new customers, whereas having to go through this process for all our existing customers within a specified time period may prove to be very time-consuming,” Powell said.
“As far as brokers are concerned, we want to support CBP’s efforts here, but the requirement that we do this for all our existing customers within a three-year period and update all clients every year may be a challenge for some of our members,” Magnus said.
According to CBP, there are about 350,000 importers actively transacting customs business with the agency through about 2,090 permitted customs brokers. CBP 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.
“By formalizing the verification process and requiring that a reverification process be carried out by brokers every year, CBP believes that a broker’s knowledge of its importer client would be improved,” the agency said.
CBP noted that the proposed rule would eliminate the practice by some importers to “broker shop,” meaning that they will go from customs broker to customs broker seeking out the one that requests the least amount of background information. The agency also said the rule, once implemented, should reduce instances of identity theft, counterfeit product imports, and evasion of anti-dumping and countervailing duty laws.
“It is our hope that the proposed regulations, when properly implemented, will minimize these potential instances of an uneven playing field,” Powell said.
NCBFAA leadership is currently reviewing the proposed rulemaking and its potential impact on the customs broker industry. “It is too early to comment on specific requirements on the proposed regulation,” Powell said. Public comments regarding the proposed rules are due to CBP by October 15.
Magnus said it is equally important for customs brokers’ importer clients to understand the proposed rule and offer their comments to CBP, too.
Powell recalled that a former acting CBP commissioner, who he did not name, proffered the idea of “deputizing” customs brokers to assist and alert the agency when possible violations or red flags are raised.
“This was a big concern by the brokerage community as we have an obligation to our clients to protect their interests, but also have a responsibility to meet the regulations,” Powell said. “It is our hope that the proposed regulations will make this distinction clearer on our role.”
Once the final rule is published, the association will likely create a tool kit, set up webinars to both the customs brokerage and importer communities, and prepare written guidance to assist its members with meeting the new requirements, Powell said.