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 U.S. Customs and Border Protection

19 CFR Parts 24 and 111

Docket No. USCBP-2020-0009

 

The Florida Customs Broker and Forwarders Association (“FCBF”) submits this response to the U.S. Customs and Border Protection’s (“CBP”) Notice of Proposed Rule Making (“NPRM”) published in the Federal Register on June 5, 2020. FCBF represents more than 400 customs brokers, freight forwarders, and other trade professionals throughout the state of Florida. 

We thank CBP for the opportunity to offer these comments and support the effort to modernize 19 CFR Part 111 to align with current commercial conditions. Here, we offer commentary on certain proposed provisions that are not conducive to the responsibilities and daily activities of a customs broker.  We feel strongly against the concept of a customs broker being a “force multiplier” from an enforcement perspective and, while we do want to ensure there is “enhanced compliance,” deputizing brokers, as some of these proposed changes demand, can lead to an unnecessarily conflictive, non-productive  broker-importer as well as broker-CBP client relationship.

Additionally, we would like to express our support of CBP’s pending Advance Notice of Proposed Rulemaking (“ANPRM”) requiring continuing education, which will align the customs broker profession to other regulated professions that do require recurrent training. As a general practice, many customs brokers regularly engage in continuing education opportunities. As a next step, CBP should issue the ANPRM without delay, in order to structure these training requirements, increasing professionalism and compliance in an ever-changing trade environment. 

Supporting those changes that truly modernize existing regulations, our comments will focus only on those parts where we do not feel that the proposed changes reflect the responsibility or intent of the customs broker’s role as a party licensed to conduct customs business.  

 

§ 111.19 National Permit:

We have a partial concern with this proposed change. In the Federal Register Notice, CBP describes a vague requirement for a supervision plan implemented by the customs broker but does not detail what said plan will entail, noting the wording from the proposed regulation as follows:

111.19(b)(8) [The application must set forth or attach the following…] a supervision plan describing how responsible supervision and control will be exercised over the customs business conducted under the national permit, including compliance with § 111.28;    

FCBF Comments: CBP should dictate clear requirements for what they believe is an appropriate “supervision plan” to avoid any delays or, worse yet, rejections, in issuing any national permit application, which is tantamount to conducting customs business. Recognizing that there are many business models, some clear guidance on minimum criteria specifying what the “supervision plan” should include would be appreciated to ensure this requirement is transparent and readily met.  

 

§ 111.24 Records Confidential:

 While we are mostly neutral about records confidential, we feel this proposed rule change needs some clarification in order to fully understand what is being required of customs brokers as follows: 

111.24 Records confidential

The records referred to in this part and pertaining to the business of the clients serviced by the broker are to be considered confidential, and the broker must not disclose their contents or any information connected with the records to any persons other than those clients, their surety on a particular entry, and representatives of the Department of Homeland Security (DHS), or other duly accredited officers or agents of the United States, except on subpoena or court order by a court of competent jurisdiction, or when authorized in writing by the client. This confidentiality provision does not apply to information that properly is available from a source open to the public.

FCBF Comments: We request that CBP provide greater clarity on what constitutes “records,” as well as the opportunity to provide further input on the feasibility of this proposed change once the definition is determined. Certain commercial circumstances dictate the disclosure of information that may not be permissible under the current proposal, for example: collections, banking or financial matters.  Is a customs broker invoice for services considered a confidential record?  If so, how would a broker engage a collection agency to assist in collection from a non-compliant importer of record where that same IOR does not agree to disclose their information?  The NPRM mentions the word “record” sixty-six (66) times. We understand that CBP will continue to define the term “record” consistent with 19 CFR §111.1.,[1] but this definition does not contemplate records maintained outside of these requirements. Some of these records still include client-related information for which CBP would not grant confidentiality, but must be transmitted or shared to process a client’s cargo, e.g., for screening, transportation, etc. Limiting the universe of disclosable information only opens the broker for additional liability in an unforeseen manner. 

 

§ 111.28 Responsible Supervision & Control:

This proposed rule change adds in yet more layers of ambiguity in defining the broker’s responsibility. We do not support this change. We have taken the liberty of underlining the questionable additions:

111.28 Responsible supervision and control.

(a) General. Every individual broker operating as a sole proprietor, every licensed member of a partnership that is a broker, and every licensed officer of an association or corporation that is a broker must exercise responsible supervision and control (see § 111.1) over the transaction of the customs business of the sole proprietorship, partnership, association, or corporation. A sole proprietorship, partnership, association, or corporation must employ a sufficient number of licensed brokers relative to the job complexity, similarity of subordinate tasks, physical proximity of subordinates, abilities and skills of employees, and abilities and skills of the managers. While the determination of what is necessary to perform and maintain responsible supervision and control will vary depending upon the circumstances in each instance, factors which CBP may consider in its discretion and to the extent any are relevant include, but are not limited to the following:

FCBF Comments: CBP should define the rubric used to determine the “sufficient number of licensed brokers” to ensure the proper supervision. At minimum, specific guidance should be provided to clarify the requirement by CBP and avoid ambiguity or subjective interpretation. In addition, the change to “may consider” from “will consider” with regards to the discretion of the specified factors determining responsible supervision and control allows for arbitrary decisions from CBP. We request that it remain “will” to ensure standard application and enforcement in a uniform manner. Finally, the proposed five (5) additional factors indicative of responsible supervision and control regarding “responsiveness,” “communications” and “timeliness” are largely subjective requirements and decrease a broker’s certainty in adopting and executing the necessary processes and procedures to meet the responsible supervision and control standard. 

 

§ 111.32 False Information:

We are not in favor of the proposed change to § 111.32, which essentially enacts brokers as “force multipliers” of CBP. CBP does not have the authority to deputize customs brokers as an extension of law enforcement. From the Federal Register Notice: 

The proposed new requirement puts an affirmative duty on the broker to document and report to CBP when the broker terminates representation of a client as a result of determining that the client is attempting to defraud or otherwise commit any criminal act against the U.S. Government. This requirement covers situations where a broker advises the client of a noncompliance, error, or omission, the client directs the broker to continue such noncompliance, error, or omission, and in response the broker terminates its relationship with the client. The proposed changes will allow brokers to act as “force multipliers” in combating fraud and other schemes against the government.

The proposed regulation is quoted here (emphasis added):

111.32 A broker must not file or procure or assist in the filing of any claim, or of any document, affidavit, or other papers, known by such broker to be false. In addition, a broker must not give, or solicit or procure the giving of, any information or testimony that the broker knew or should have known was false or misleading in any matter pending before the Department of Homeland Security or to any representative of the Department of Homeland Security. A broker also must document and report to CBP when the broker separates from or cancels representation of client as a result of determining the client is intentionally attempting to use the broker to defraud or otherwise commit any criminal act against the U.S. Government.

FCBF Comments: A broker has a fiduciary responsibility to protect the interest of their client, just as they should ensure transactions are compliant with US regulations. The term “should have known” is a potentially restrictive term and very arbitrary as it applies in a very broad sense to any “any matter” pending before DHS or a representative of DHS. Further, requiring a broker to “document and report” upon separation or cancelation can put the broker at risk for civil action and transitions the broker into “policing” the import community, which is clearly not the role of a customs broker. This change requires the customs broker to act more than just a “force multiplier,” to enhance compliance but in a role that would then equate and elevate the responsibility of the broker to that of an enforcement arm of CBP. This is not the role of a customs broker. Should customs brokers now be responsible for discerning an importer’s intent in assessing whether they meant to conduct a fraudulent or criminal act? Further clarification is also needed to determine the implications of a customs broker making an erroneous claim in reporting an importer-client inevitably found not to have conducted a fraudulent or criminal act. According to the terms of the power of attorney and the regulations set forth in 19 CFR 141, Subpart C, §§ .31-.46, the customs broker’s responsibility lies with its importer-client consistent with the customs laws and regulations. To the contrary, per 19 U.S.C. §1641(f), CBP shoulders the primary duty to protect the revenue and enforce the customs laws.

 

111.39 Advice to client:

As with previous comments above, we are not in favor of this proposed change due to a charge to the customs broker to become an enforcer, going far beyond the legal responsibilities of the broker. The proposed provision provides: 

111.39 Advice to client.

(a) Withheld or false information. A broker must not withhold information relative to any customs business from a client who is entitled to the information. The broker must not knowingly impart to a client false information relative to any customs business.

 

(b) Due diligence. A broker must exercise due diligence to ascertain the correctness of any information which the broker imparts to a client, including advice to the client on the proper payment of any duty, tax, or other debt or obligation owing to the U.S. Government.

 

(c) * * *The broker must advise the client on the proper corrective actions required and retain a record of the broker’s communication with the client in accordance with § 111.23 of this part.

FCBF Comments: Our concern is with item (c) corrective action and the required retention of these records. This action crosses the line from “enhances to enforces” and surpasses authority, responsibility and liability of a broker, in particular because it does not clarify what type of “record” is necessary.  Customs brokers readily correct information prior to or post entry to reflect proper actions taken, but our concern lies with the consequences of potentially requiring the broker to maintain a record that could be used for an investigation or proceeding against the interests of the broker or their importer-client.

Summary

In summary, the members of the FCBF feel strongly that the role of the customs broker should remain clearly defined as a fiduciary to its clients and should not be expected to enforce the code of law. The idea of obligating a customs broker to a certain level of reporting suspected fraudulent or criminal activity from a client-importer, in particular, extends far beyond the statutory constructs of 19 U.S.C. §1641 and even what attorneys are required to do in representing their own clients. 

We appreciate the opportunity to comment on such impactful legislation in the Modernization of Customs Brokers Regulations and remain available to you should any questions arise regarding our comments.

 

 

[1] “Records” means documents, data and information referred to in, and required to be made or maintained under, this part and any other records, as defined in § 163.1(a) of this chapter, that are required to be maintained by a broker under part 163 of this chapter.

 

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