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“Tag, you’re it!” Who has best access to importer’s true intentions?

By Carl Soller

Soller Law Intl

Through the years, United States Customs (hereinafter Customs) and its successor agency United States Customs and Border Protection (Customs) have issued numerous proposed Regulations amending 19 CFR 111, regulations pertaining to Customs broker responsibilities. From former commissioner William von Raab to the current commissioner, proposals suggesting “doing away with Customs brokers” to the current proposal imposing stringent requirements on Customs brokers with regards to obtaining importer of record/owner identification prior to designating a client as “importer of record.” Subsequent to each of the proposed Regulations previously promulgated, the industry has responded with practical reasons as to why the proposals did not resolve issues relating to securing our population or protection of the US revenue. Unfortunately, in conjunction with many of these proposals, the livelihood of the “Customs broker” has been ignored or would have complicated the process to the extent that information required would be impossible to timely acquire.

Its sister agency, Transportation Security Administration (TSA), has in the past few years gone through similar reviews relating to identifying exporters to ensure the security of our air export freight. The “known shipper program” initially required the forwarder, exporter, or carrier to verify the legitimacy of the exporting entity as well as certifying all businesses taking the freight from the exporter to the air carrier. After many months of discussions, it was recognized that the forwarder usually has no way to verify the efficacy of the individual exporter. As a result, the TSA along with other government agencies were tasked with the responsibility of ensuring that the export “entities” were legitimate companies or related entities. Once the shipper was properly designated, the carrier could safely accept freight after ensuring its inspection or examination.

The proposed Regulations with regards to “Customs broker verification of importers’ identity” does not resolve security issues. Any changes in an attempt to identify fraudulent imports must begin with the required “informed compliance” as required by the current US Code Title 19 and attendant regulations. Customs’ reliance on private industry to certify the legitimacy of importers is beyond the capability of most Customs brokers. The entities which can more properly identify those false or fraudulent imports are Customs and other government agencies which have access to confidential tax and corporate filings, as well as individual or partnership tax returns and IRS information. It is thus unlikely that a Customs broker  exercising due diligence is equipped to  identify an import that is false or fraudulent except by reviewing the historical  background of that importing company. For new entities or new clients without certification by Customs, the legitimacy of that entity is open to question, and is not available in most circumstances to either the Customs broker or the freight forwarder. The solution to this problem lies within Customs existing regulatory scheme. As has been argued many times in the past, control of the “importer of record definition” lies with Customs. In the 1980s, the JFK Airport Customs Brokers and Forwarders Association brought an action in the Court of International Trade to require a limited definition of “consignee.” However, the Court decided that the consignee could be the entity named in an air waybill/transportation document; it did not require any additional ownership interest in the imported cargo. The “Customs Regulations” amended subsequent to that opinion created rules which continue until today. It provided that a non-owner consignee could not be importer of record but can appoint an entity which is a Customs broker to submit an entry in the name of that Customs broker. That created a circumstance where “express consignment entities” often designate its Customs broker corporate sister as the importer of record and the entity authorized to act as the broker. In those circumstances, Customs rarely looks to the actual owner until after import review.

The two entities most likely able to properly identify legitimate importers are Customs and the surety companies which write the bonds ensuring that Customs is paid the required duties and/or liquidated damages should the “importer of record” fail to pay.

It is difficult to dispute that certain of the “minimum information” identified in the proposal, that a Customs Broker is required to collect, is often either difficult or impossible to obtain; it is often corporate information that in the course of business the Customs broker has no need to collect.  Copies of credit reports or similar financial information is either too expensive to gather or nonexistent; state regulations regarding corporate governance differ from state to state: for example New York does not require reporting of the names of corporate officers or officials to the state of New York.

Other issues that need to be reviewed are for example in section A 5 on page 40305 of the previously cited Federal Register notice such as the circumstance where the client has multiple physical locations and sometimes only the corporate headquarters and locations where merchandise is not located but drop shipped after import. To insist upon the Customs broker to physically visit its clients is impractical and often impossible. This is particularly so as most Customs brokers operate under “national permits” and are not local, making it inconvenient to visit the clients’ locations. Also, under corporate state or local governance, the proposed rules may be contrary to what is required by those state statute or corporate regulations.

There are many other reasons why the Aug. 14 proposed rules may be inappropriate or too onerous. The likelihood of requiring a broker to obtain information which is more easily obtained by either the Department of Homeland Security, Customs, or surety is questionable. We would expect those importers and Customs brokers impacted by these proposed regulations to file comments before the expiration date of Oct. 15, 2019. Should you wish to discuss the issues or any other related support to include in your comments, please do not hesitate to contact us.

Carl R. Soller, Customs, International Cargo and Regulatory Compliance Attorney is counsel to companies engaged in all elements of the import/export supply chain and a recognized expert in his practice areas.  He and his firm concentrate their International, Regulatory and Cargo Practice in all business and regulatory matters on a nationwide basis.  He offers advice on supply chain security and its related Government Regulations to the Cargo Community as well as advice and a vast range of assistance to importers and exporters of all kinds of consumer goods.  He can be reached at (516) 812-6650 or (212) 643-6650 or

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