Customs Broker Recordkeeping Requirements Regarding Location and Method of Record Retention, 13699-13702 [2010-6362]

Agencies

• DEPARTMENT OF HOMELAND SECURITY
• U.S. Customs and Border Protection
• DEPARTMENT OF THE TREASURY
• Department of Treasury

[Federal Register Volume 75, Number 55 (Tuesday, March 23, 2010)]
[Proposed Rules]
[Pages 13699-13702]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-6362]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 111 and 163

[USCBP-2009-0019]
RIN 1505-AC12


Customs Broker Recordkeeping Requirements Regarding Location and 
Method of Record Retention

AGENCY: Customs and Border Protection, Department of Homeland Security; 
Department of the Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes amendments to title 19 of the Code of 
Federal Regulations regarding customs broker recordkeeping requirements 
as they pertain to the location and method of record retention. 
Specifically, Customs and Border Protection (CBP) proposes to amend the 
CBP regulations to permit a licensed customs broker to store records 
relating to his customs transactions at any location within the customs 
territory of the United States, so long as the broker's designated 
recordkeeping contact, identified in the broker's permit application, 
makes all records available to CBP within a reasonable period of time 
from request at the broker district that covers the CBP port to which 
the records relate. This document also proposes to remove the 
requirement, as it currently applies to brokers who maintain separate 
electronic records, that certain entry records must be retained in 
their original format for the 120-day period after the release or 
conditional release of imported merchandise. The changes proposed in 
this document are intended to conform CBP's recordkeeping requirements 
to reflect modern business practices whereby documents are often 
generated, stored and transmitted in an electronic format. The proposed 
changes serve to remove duplicative recordkeeping requirements and 
streamline recordkeeping procedures for brokers who maintain electronic 
recordkeeping systems without compromising the agency's ability to 
monitor and enforce recordkeeping compliance.

DATES: Comments must be received on or before May 24, 2010.

ADDRESSES: You may submit comments, identified by USCBP docket number, 
by one of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments via docket number 
USCBP-2009-0019.
     Mail: Trade and Commercial Regulations Branch, Regulations 
and Rulings, Office of International Trade, U.S. Customs and Border 
Protection, 799 9th Street, NW. (Mint Annex), Washington, DC 20229.
    Instructions: All submissions received must include the agency name 
and USCBP docket number for this rulemaking. All comments received will 
be posted without change to https://www.regulations.gov, including any 
personal information provided. For detailed instructions on submitting 
comments and additional information on the rulemaking process, see the 
``Public Participation'' heading of the SUPPLEMENTARY INFORMATION 
section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov. Submitted comments 
may also be inspected during regular business days between the hours of 
9 a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch, 
Regulations and Rulings, Office of International Trade, U.S. Customs 
and Border Protection, 799 9th Street, NW., 5th Floor, Washington, DC 
Arrangements to inspect submitted comments should be made in advance by 
calling Joseph Clark at (202) 325-0118.

FOR FURTHER INFORMATION CONTACT: Cynthia Whittenburg, Trade Policy and 
Programs, Office of International Trade, Customs and Border Protection, 
202-863-6512.

SUPPLEMENTARY INFORMATION:

Public Participation

    Interested persons are invited to participate in this rulemaking by 
submitting written data, views, or arguments on all aspects of the 
proposed rule. Customs and Border Protection (CBP) also invites 
comments that relate to the economic, environmental, or federalism 
effects that might result from this proposed rule. If appropriate to a 
specific comment, the commenter should reference the specific portion 
of the proposed rule, explain the reason for any recommended change,

[[Page 13700]]

and include data, information, or authority that support such 
recommended change.

Background

    This document proposes amendments to title 19 of the Code of 
Federal Regulations (19 CFR) regarding broker recordkeeping 
requirements as they pertain to the location and method of record 
retention.
    Many recordkeeping requirements that were once deemed necessary to 
ensure CBP's ability to monitor broker compliance and enforce the 
regulations were promulgated at a time when most records existed in a 
paper format. New technologies in data processing have served to 
streamline business operations and have drastically changed or rendered 
obsolete many long-standing business practices.

Location of Stored Records

    As the trade operates in an increasingly paperless environment, 
this document proposes amendments to the CBP regulations that would 
permit a licensed customs broker to store records relating to its 
customs transactions at any location within the customs territory of 
the United States, so long as the designated recordkeeping contact 
identified in the broker's applicable permit application makes all 
records available to CBP within a reasonable period of time from 
request at the broker district that covers the CBP port to which the 
records relate. These amendments serve to modernize the CBP regulations 
to reflect the automated commercial environment in which most documents 
are generated, stored and transmitted electronically, while preserving 
the agency's ability to monitor and enforce recordkeeping compliance.

Method of Entry Record Storage During Prescribed 120-Day Period From 
Release or Conditional Release of Imported Merchandise

    The recordkeeping provisions set forth in part 163 of title 19 of 
the CFR require the retention of records for a 5-year period either in 
their original format (i.e., as created or received by the person 
responsible for maintenance) or in an alternative format (i.e., 
electronic formats that are in compliance with generally accepted 
business standards), unless the records are entry documents (excluding 
packing lists) in which case they must be retained in their original 
formats for the prescribed 120-day period from release or conditional 
release of the imported merchandise.
    Currently, all records relating to a broker's customs business, 
even if originally submitted in paper, are typically stored in an 
electronic format as the broker receives them and/or at the time the 
broker files the entry summary in satisfaction of the general 5-year 
record retention requirement. In situations where the ``original'' 
entry documents are in an electronic format, there is no undue hardship 
in electronically retaining the records for the prescribed 120-day 
period inasmuch as it runs concurrently with the requisite 5-year 
document retention period. However, where the ``original'' entry 
documents are in a paper format, the broker currently must keep the 
``original'' paper entry records for the prescribed 120-day period 
regardless of the fact that these same records have already been stored 
electronically. In these situations, a broker will end up retaining two 
sets of records (one paper and one electronic) for the same document. 
Moreover, because the period of retention for original entry documents 
varies depending on the extent of the ``conditional release'' period 
and/or whether a redelivery notice has been issued, a broker is 
precluded from establishing a reliable schedule for the systematic 
destruction of these types of documents. In most cases, a broker ends 
up maintaining both sets of records for the entire 5-year recordkeeping 
period.
    This document proposes to remove this duplicative record retention 
requirement as it currently applies to brokers who maintain separate 
electronic records. While importers still must retain entry records in 
their original format for the 120-day period after the release or 
conditional release of imported merchandise, brokers who are not 
serving as the importer of record are exempted from this requirement so 
long as they retain all records electronically for 5 years. In 
addition, this exemption does not apply to brokers who do not maintain 
electronic records (that is, all brokers who only transmit paper 
documents to CBP). Also, this exemption does not apply to any document 
that is required by law to be maintained as a paper record, such as 
some softwood lumber documents.

Explanation of Amendments

    For the reasons described above, it is proposed to amend Sec. Sec.  
111.23 and 163.5 of title 19 of the CFR (19 CFR 111.23 and 163.5) 
regarding broker recordkeeping requirements as they pertain to the 
location and method of record retention. It is also proposed to amend 
Sec.  163.12 (19 CFR 163.12) to reflect address changes. A more 
detailed explanation of the proposed amendments, other than those 
involving technical corrections or minor wording and editorial changes, 
is set forth below.

Section 111.23: Retention of Records

    Section 111.23 sets forth entry record retention requirements. 
Paragraph (a)(1) of this section describes where records must be kept. 
Paragraph (a)(2) provides, in pertinent part, that the records 
described in paragraph (a)(1) of this section, other than powers of 
attorney, must be retained for at least 5 years after the date of 
entry. Paragraph (b) prescribes the manner by which brokers may 
exercise the option to store records on a consolidated system. This 
provision requires a broker to submit written notice to CBP providing 
each address at which the broker intends to maintain the consolidated 
records, a detailed statement describing all the records to be 
maintained at each location and the methodology of storage, as well as 
an agreement that there will be no change in the records or their 
method of storage without first notifying Regulatory Audit.
    As CBP proposes to permit a licensed customs broker to store 
records relating to its customs transactions at any location within the 
customs territory of the United States, and to remove the requirement 
that the records must be retained within the specified broker district, 
a separate consolidated system of record retention as prescribed by 
existing Sec.  111.23(b) is no longer necessary. Accordingly, CBP 
proposes to remove current paragraph (b) in Sec.  111.23 and to 
restructure Sec.  111.23 to set forth the new standards applicable to 
the location of record storage in paragraph (a), and to redesignate 
existing paragraph (a)(2), which pertains to the period of record 
retention, as paragraph (b).

Section 163.5: Methods for Storage of Records

    Section 163.5 of title 19 of the CFR prescribes the manner by which 
records must be stored. Within Sec.  163.5, paragraph (a) sets forth 
the storage requirements applicable to original records and provides 
that all persons listed in Sec.  163.2 (i.e., owners, importers, 
consignees, importers of record, entry filers, or other persons) must 
maintain all records required by law and regulation for the required 
retention periods and as original records, whether paper or electronic, 
unless alternative storage methods have been adopted.
    Paragraph (b) prescribes the standards applicable to ``alternative 
methods of storage'' and states that any record, other than those that 
are specifically required by law to be maintained as original, may be 
stored in an alternative format.

[[Page 13701]]

Section 163.5(b)(2)(iii) identifies entry records, other than packing 
lists, as among the types of records that must be stored ``in their 
original formats'' for a prescribed time period. It is proposed to 
amend Sec.  163.5(b)(2)(iii) to provide that the requirement to store 
entry records in their original format for the prescribed time period 
is limited to importers, brokers who are serving as importers of 
records, and brokers who only maintain paper records.
    Section 163.5(b)(5) sets forth the manner by which CBP will address 
a failure to comply with alternative storage requirements. This 
provision currently states that if a person uses an alternative storage 
method for records that is not in compliance with the regulations, the 
appropriate CBP office may instruct the person in writing to 
immediately discontinue the use of such method. The instruction to 
discontinue the alternative storage method, per the regulations, is 
effective upon receipt. This document proposes to amend Sec.  
163.5(b)(5) to provide that, prior to a discontinuance of the 
alternative storage method, CBP will provide the recordkeeper with 30-
days written prior notice that describes the facts giving rise to the 
action. If, within that 30-day period, the recordkeeper provides 
written notice to CBP that establishes, to CBP's satisfaction, that 
compliance has been achieved, the alternative storage method may 
continue. Failure to timely respond to CBP will result in CBP requiring 
discontinuance of the alternative storage method.

The Regulatory Flexibility Act and Executive Order 12866

    Because these proposed amendments liberalize broker recordkeeping 
requirements, and place no new regulatory requirements on small 
entities to change their business practices, pursuant to the provisions 
of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., it is 
certified that, if adopted, the proposed amendments will not have a 
significant economic impact on a substantial number of small entities. 
Further, these proposed amendments do not meet the criteria for a 
``significant regulatory action'' as specified in E.O. 12866.

Paperwork Reduction Act

    The information collections contained in this proposed rule have 
been previously submitted and approved by the Office of Management and 
Budget (OMB) and assigned OMB control numbers 1651-0076 and 1651-0034. 
An agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a valid 
control number assigned by OMB.

Signing Authority

    This document is being issued in accordance with 19 CFR 0.1(a)(1).

List of Subjects

19 CFR Part 111

    Administrative practice and procedure, Brokers, Customs duties and 
inspection, Licensing, Penalties, Reporting and recordkeeping 
requirements.

19 CFR Part 163

    Administrative practice and procedure, Customs duties and 
inspection, Penalties Reporting and recordkeeping requirements.

Amendments to the Regulations

    For the reasons set forth in the preamble, parts 111 and 163 of 
title 19 of the Code of Federal Regulations are proposed to be amended 
as set forth below.

PART 111--CUSTOMS BROKERS

    1. The authority citation for part 111 continues to read in part as 
follows:

    Authority:  19 U.S.C. 66, 1202 (General Note 3(i), Harmonized 
Tariff Schedule of the United States), 1624, 1641.
* * * * *
    2. Section 111.23 is revised to read as follows:


Sec.  111.23  Retention of records.

    (a) Place of retention. A licensed customs broker may retain 
records relating to ts customs transactions at any location within the 
customs territory of the United States in accordance with the 
provisions of this part and part 163 of this chapter. Upon request by 
CBP to examine records, the designated recordkeeping contact identified 
in the broker's applicable permit application, in accordance with Sec.  
111.19(b)(6) of this chapter, must make all records available within a 
reasonable period of time to CBP at the broker district that covers the 
CBP port to which the records relate.
    (b) Period of retention. The records described in this section, 
other than powers of attorney, must be retained for at least 5 years 
after the date of entry. Powers of attorney must be retained until 
revoked, and revoked powers of attorney and letters of revocation must 
be retained for 5 years after the date of revocation or for 5 years 
after the date the client ceases to be an ``active client'' as defined 
in Sec.  111.29(b)(2)(ii), whichever period is later. When merchandise 
is withdrawn from a bonded warehouse, records relating to the 
withdrawal must be retained for 5 years from the date of withdrawal of 
the last merchandise withdrawn under the entry.

PART 163--RECORDKEEPING

    3. The authority citation for part 163 continues to read as 
follows:

    Authority:  5 U.S.C. 301; 19 U.S.C. 66, 1484, 1508, 1509, 1510, 
1624.

    4. In Sec.  163.5:
    a. Paragraph (a) is amended in the first sentence by removing the 
word ``shall'' and adding in its place the word ``must'', and in the 
second sentence by removing the word ``Customs'' and adding in its 
place the term ``CBP'' ;
    b. Paragraph (b)(2) introductory text is amended in the second 
sentence by removing the word ``Customs'' and adding in its place the 
term ``CBP'';
    c. Paragraph (b)(2)(iii) is revised;
    d. Paragraph (b)(2)(v) is amended by removing the word ``Customs'' 
and adding in its place the term ``CBP'';
    e. Paragraph (b)(2)(vi) is amended by removing the word ``shall'' 
and adding in its place the word ``must'';
    f. Paragraph (b)(3) is amended by removing the words ``the Miami 
regulatory audit field office'' and adding in their place the language, 
``Regulatory Audit, Office of International Trade, Customs and Border 
Protection, 2001 Cross Beam Drive, Charlotte, North Carolina 28217'';
    g. Paragraph (b)(4) is amended by removing the words ``shall be'' 
and adding in their place the word ``are''; and
    h. Paragraph (b)(5) is revised.
    The revision of Sec.  163.5(b) reads as follows:


Sec.  163.5  Methods for storage of records.

* * * * *
    (b) * * *
    (2) * * *
    (iii) Except in the case of packing lists (see Sec.  163.4(b)(2)), 
entry records must be maintained by the importer in their original 
formats for a period of 120 calendar days from the end of the release 
or conditional release period, whichever is later, or, if a demand for 
return to CBP custody has been issued, for a period of 120 calendar 
days either from the date the goods are redelivered or from the date 
specified in the demand as the latest redelivery date if redelivery has 
not taken place. Customs brokers who are not serving as the importer of 
record and who maintain separate electronic records are exempted from 
this requirement. This exemption does not apply to any document that is 
required by law to be maintained as a paper record.
* * * * *

[[Page 13702]]

    (5) Failure to comply with alternative storage requirements. If a 
person listed in Sec.  163.2 uses an alternative storage method for 
records that is not in compliance with the conditions and requirements 
of this section, CBP may issue a written notice informing the person of 
the facts giving rise to the notice and directing that the alternative 
storage method must be discontinued in 30 calendar days unless the 
person provides written notice to the issuing CBP office within that 
time period that explains, to CBP's satisfaction, how compliance has 
been achieved. Failure to timely respond to CBP will result in CBP 
requiring discontinuance of the alternative storage method until a 
written statement explaining how compliance has been achieved has been 
received and accepted by CBP.


Sec.  163.12  [Amended]

    5. In Sec.  163.12:
    a. Paragraph (a) is amended by removing the word ``Customs'' 
wherever it appears and adding in its place the term ``CBP'';
    b. Paragraph (b)(2) is amended: by removing the word ``shall'' 
wherever it appears and adding in its place the word ``must'', and; in 
the second sentence, by removing the words ``Customs Recordkeeping'' 
and adding in their place the words ``CBP
    Recordkeeping'' and removing the language ``the Customs Electronic 
Bulletin Board (703-921-6155)'' and adding in its place the language, 
``CBP's Regulatory Audit Web site located at https://www.cbp.gov/xp/
cgov/import/regulatory--audit--program/archive/compliance--assessment/
'';
    c. Paragraph (b)(3) introductory text is amended: in the first, 
third and fourth sentences, by removing the word ``Customs'' wherever 
it appears and adding in its place the term ``CBP'', and; in the second 
sentence, by removing the word ``Customs'' and adding in its place the 
words ``all applicable'';
    d. Paragraphs (b)(3)(iii), (iv), (v), and (vi) are amended by 
removing the word ``Customs'' wherever it appears and adding in its 
place the term ``CBP'';
    e. Paragraph (c)(1) is amended by removing the word ``shall'' 
wherever it appears and adding in its place the word ``will'';
    f. Paragraph (c)(2) is amended: by removing the word ``Customs'' 
and adding in its place the term ``CBP''; by removing the word 
``Miami'' and adding in its place the word ``Charlotte'', and; by 
removing the word ``shall'' and adding in its place the word ``will'';
    g. Paragraph (d)(1) is amended: in the first sentence, by removing 
the words ``Customs shall'' and adding in their place the words ``CBP 
will'', and; in the second sentence, by removing the word ``Customs'' 
and adding in its place the word ``CBP'';
    h. The introductory text to paragraph (d)(2) is amended by removing 
the word ``shall'' and adding in its place the word ``must''; and
    i. Paragraph (d)(3) is amended: by removing the word ``shall'' and 
adding in its place the word ``must'', and; by removing the word 
``Customs'' and adding in its place the term ``CBP''.

David V. Aguilar,
Acting Deputy Commissioner, U.S. Customs and Border Protection.
    Approved: March 10, 2010.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 2010-6362 Filed 3-22-10; 8:45 am]
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