US Customs and Border Protection (CBP) just published new rules, effective December 19, aimed at modernizing customs broker regulations and operations.
Like most changes to the US Code of Federal Regulations, they’ll go largely unnoticed. But importers would be wise to pay attention. Some of the new provisions fundamentally change the nature of their relationships with customs brokerage partners. This article summarizes the new CBP rules and actions importers should consider.
Changes to customs broker obligations under the law
Let’s start with the most important changes associated with the new rules.
Going forward, brokers can’t provide CBP with information that the broker knew, or should have known, was false or misleading. Prior to the new rule, it was not unusual for customs brokers and importers to disagree, but the broker would still complete a customs entry following guidance from the importer.
The new rule requires the broker to call out perceived non-compliance and advise the importer on proper corrective actions. The broker must retain a record of that correspondence, as well.
Perhaps the most important provision of the new rules is that customs brokers must notify CBP if a relationship with an importer is terminated (by either party) as a result of the importer committing any criminal act or any act that defrauds the US government. If brokers don’t follow these new rules, they are subject to legal action, fines and penalties and complete loss of their license to do business as a broker.
Importers and customs brokers have often parted ways due to a disagreement, but it ended there. Going forward, there is now a legal obligation for the broker to report non-compliance.
Let’s unpack this.
Hiring a customs broker was always like hiring an attorney or an accountant. Despite disagreements, these professionals remained your confidential advocate. With the new customs broker regulations, the government has made the broker an advocate for CBP. The nature of the importer/customs broker relationship has changed.
Does that matter? You can decide that for yourself, but here’s a scenario.
As an importer, you decide to end a long-term relationship with a broker over a disagreement. The breakup is a little contentious. That broker now has a vehicle to report you to the government if there have been documented disagreements about classification, valuation or other compliance-related matters. In fact, the broker’s license to do business is in jeopardy and they could be considered negligent if they fail to report possible violations.
Advice to importers
Make sure you have one of your “A players” managing the relationship with customs brokers. Take advice from your broker seriously, research compliance matters carefully and resolve conflicts with your broker to the satisfaction of both parties. Vet brokers more carefully and establish long-term partnerships with those you trust rather than jumping from broker to broker.
New customs broker regulations that favor the trade
The latest CBP rules have been many years in the making and there are other provisions worth noting. Let’s look at a couple that are good for the customs broker/trade community.
CBP has eliminated the requirement for customs brokerage firms to hold a license to do business in every customs district, and to have a licensed brokerage professional in each local market. Going forward, one national license will suffice and brokers locally do not require an individual license. This gives customs brokerage firms – particularly companies with many offices – more flexibility in running their businesses. It also puts the onus on them to hire competent people.
CBP has expanded the forms of accepted payment and information to include electronic options. This is in line with CBP’s stated goal to reflect the contemporary business environment to enable customs brokers to operate more efficiently.
Advice to importers
- The elimination of the requirement for a local licensed broker means you need to be more careful and ask more questions, like “Who is the licensed broker in charge of my account and where does that person sit?” and “How do I know the customs clearance process will be done compliantly?”
- Going forward, customs brokerage firms must have written plans that demonstrate compliant processes. You should ask for a copy of this plan or at least discuss the plan with your broker.
Some additional technical updates to the customs broker regulations
Ultimately, CBP wants to make regulations easier to enforce while protecting the interests of importers. Here are some of the new provisions designed to do this.
Customs brokers must now execute a power of attorney directly with the importer of record or drawback claimant, and not a freight forwarder. This promotes a direct relationship and clear lines of communication directly with the importer.
Customs business can only be conducted in US territory. A broker cannot outsource work to offshore resources to save money.
Brokers must keep “audit-ready” records of all transactions. This applies to importers, too. At any time, CBP may provide a list of entries and ask for all backup documents for these entries.
CBP’s preferred method of communication is their ACE Portal. The automated commercial environment (ACE) is the portal through which the trade community reports imports and exports and the government determines admissibility. The good news: CBP is modernizing the ACE platform. The bad news: very few importers even have an ACE account. Given CBP’s intention to drive more communications and transactions through ACE, importers would be wise to register and learn the ACE system.
Advice to importers
- Regarding Powers of Attorney, if your POA is with a forwarder you need to change it to the customs broker directly. It’s probably a good time to reassess all your POAs on file and update them, if needed, or officially revoke those with partners you no longer work with.
- Regarding record keeping, reach out to your customs broker to understand your mutual responsibilities. Learn how the customs broker is keeping records and where you can access them.
- Regarding ACE, establish an account and work with your customs broker or trade compliance consultant to learn how to use the system. It’s a little complicated, but worth it. You gain visibility to what brokers are filing on your behalf; you can more easily manage your POAs; and you receive CBP communications immediately versus waiting for sometimes unreliable US mail notification. CBP does offer videos and classes in ACE usage that ease the learning process.
Take stock of your current trade compliance program
Trade compliance planning is the business equivalent of creating a retirement plan or a Last Will and Testament. We know they are important, but somehow they get pushed aside as we deal with the whirlwind of day-to-day business and life.
According to Dimerco’s trade compliance consultant, Karen Kenney, “These new customs broker regulations may seem obscure, but they fundamentally change the importer/customs broker relationship. It’s definitely a good time to take stock of your own trade compliance program and give your Customs brokerage relationships a tune-up.”