Customs and Border Protection is publishing a proposed rule to require customs brokers to collect certain information from importers to enable the brokers to verify the identity of importers, including nonresident importers, CBP said.
Only a limited amount of information currently is required for customs brokers to receive power of attorney (POA), according to CBP.
This has created an atmosphere of “broker shopping” in which an importer not wishing to provide the additional information might refuse to provide information to one broker in the hopes that another broker won’t ask for the information. And if the second broker doesn’t ask, it could lead to the broker engaging in business that encourages the use of shell or shelf companies, CBP said.
Shelf companies are firms legally created and maintained but are left dormant for a period before their sale, which can serve to conceal the buyer’s identity and history of business transactions so as not to appear as a new business entity.
“Preventing the use of shell or shelf companies by importers would help reduce instances of a misclassification of merchandise to avoid duties, protect against intellectual property rights violations, reduce antidumping/countervailing duty infractions and reduce the importation of unsafe merchandise,” CBP said.
Specifically, the proposed rule would at a minimum require customs brokers, at the time they obtain a valid POA needed to transact customs business on behalf of an importer client, to collect the following information from the client, if applicable:
· Client’s name.
· For a client who is an individual, date of birth.
· For a client that is a partnership, corporation or association, the grantor’s date of birth and the client’s trade or fictitious names.
· Address of the client’s physical location and telephone number. (For a partnership, corporation or association, the physical location would be the client’s headquarters.)
· Client’s email address and business website.
· Copy of the grantor’s unexpired government-issued photo identification.
· Client’s IRS number, employer identification number or importer of record number.
· Client’s publicly available business identification number, such as a data universal numbering system number.
· Recent credit report.
· Copy of the client’s business registration and license with state authorities.
· Grantor’s authorization to execute power of attorney on client’s behalf.
CBP defines “grantor” as the individual executing the POA on behalf of the client.
The proposed rule would require the broker to collect all information applicable to the particular client.
“Some information might not be applicable to a client depending on whether the client is an individual, partnership, corporation or association,” CBP said. “For example, a small business might not have a business website. Or a client who is an individual would not have a business registration and license with state authorities or a publicly available business identification number. Additionally, if certain foreign jurisdictions do not provide credit reports, the broker is not required to collect a recent credit report from that client.”
The proposed rule anticipates CBP penalties of up to $10,000 per client or revocation or suspension of the customs broker’s license or permit in cases in which a broker fails to meet information collection requirements.
The proposed rule includes a comprehensive list of recommended procedures for customs brokers to verify the authenticity of information collected from clients.
Potential methods include in-person verification, review of the proper evidence of the grantor’s authorization to execute the POA and/or research performed using various federal agency, state government and publicly available data sources, CBP said.
“The broker must use as many of the recommended verification means as necessary to be reasonably certain of the client’s identity,” the proposed rule states.
Additionally, the broker would be required to check if the client is a sanctioned person or entity or if the client is suspended or debarred from doing business with the U.S. government, according to CBP.
For prospective clients, customs brokers would be required to comply with new importer identity verification requirements as of the effective date of the final rule and would be required to reverify the client’s identity on an annual basis.
Brokers would have two years from the effective date of the final rule to verify the required information for existing clients with a POA issued by a partnership and would have to reverify the client’s identity on an annual basis after the initial verification.
Brokers would have three years from the effective date of the final rule to verify the identities of all other existing clients and to update necessary identification and verification records. They also would have to reverify clients’ identities on an annual basis after the initial verification.
In addition, the proposed rule would establish a reverification process to be carried out every year. The agency said it believes the formalization of these processes will improve brokers’ knowledge of importer clients.
Brokers would be required to retain records related to identification and verification of importer clients. At a minimum, brokers would be required to retain descriptions for any documents relied upon, any nondocumentary methods, results of measures undertaken and any resolution of discrepancies as well as who performed the verification and the date the verification was performed, CBP said.
CBP will accept comments on the proposed rule through October 13.