Customs Broker Verification of an Importer's Identity

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.

Under New Rule by the U.S. Customs and Border Protection on 08/14/2019

This new rule (dtd. 14.08.2019) proposes to amend the U.S. Customs and Border Protection (CBP) regulations to require customs brokers to collect certain information from importers to enable the customs brokers to verify the identity of importers, including nonresident importers. CBP proposes these amendments, pursuant to section 116 of the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), which directs CBP to promulgate regulations to require brokers to verify the identity of the importers who are their clients.

Section 641 of the Tariff Act of 1930, as amended (19 U.S.C. 1641), provides that individuals and business entities must hold a valid customs broker's license and permit in order to transact customs business on behalf of others. The statute also sets forth standards for the issuance of broker's licenses and permits, provides for disciplinary action against brokers in the form of suspension or revocation of such licenses and permits or assessment of monetary penalties, and provides for the assessment of monetary penalties against other persons for conducting customs business without the required broker's license.

Under section 641(19 CFR part 111); Customs brokers serve many functions when acting on behalf of their clients. Customs brokers file information about their clients' merchandise and transactions with CBP. Customs brokers also track shipments, pay duties and fees to CBP, and keep current documents and records about the business they transact on behalf of their clients, all to help their clients comply with Federal import and export laws. Therefore, customs broker must obtain a valid power of attorney (POA) under 19 CFR 141.46. A POA authorizes the customs broker to become that client's agent and to prepare and file the necessary customs documents on their behalf.

A valid POA requires the principal to provide only limited information. The principal is required to provide:

1. A statement from the principal authorizing the customs broker to act as the principal's agent and for the customs broker to file entry/entry summary in the principal's name for a shipment;
2. The name of the individual or the authorized representative of the sole proprietorship, partnership, or corporation executing the POA; and
3. The name and address of the individual or business on whose behalf the POA is being executed.

Customs Brokers' Practice for Verifying Importer's Identity

While only a limited amount of information is required for a valid POA, CBP recommends that a broker must collect, at a minimum, the following information from the client, if applicable:

• The client's name;
• For a client who is an individual, the client's date of birth;
• For a client that is a partnership, corporation, or association, the grantor's date of birth;
• For a client that is a partnership, corporation, or association, the client's trade or fictitious names;
• The address of the client's physical location (for a client that is a partnership, corporation, or association, the physical location would be the client's headquarters) and telephone number;
• The client's email address and business website;
• A copy of the grantor's unexpired government-issued photo identification;
• The client's Internal Revenue Service (IRS) number, employer identification number (EIN), or importer of record (IOR) number;
• The client's publicly available business identification number (e.g., Data Universal Numbering System (DUNS) number, etc.);
• A recent credit report;
• A copy of the client's business registration and license with state authorities; and
• The grantor's authorization to execute power of attorney on behalf of client.

The broker must collect all the information that is applicable to that particular client. Some information might not be applicable to a client depending on whether the client is an individual, partnership, corporation, or association. 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.

Under current practice, most brokers already collect all of the above applicable information from the client in the ordinary course of business. Most brokers currently require this information to ensure that the client is not concealing his or her identity, misusing another business owner's identity, or using a shell or shelf corporation to further a business fraud scheme. By requiring all of the applicable information above from all of the broker's clients, the proposed rule would also eliminate the ability of prospective clients to “broker shop.”

For more information, please mail to mail@localkonnect.com