Modernization of the Customs Brokers Examination, 29714-29719 [2017-13829]

Download as PDF 29714 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations II. Regulatory Requirements ACTION: This Policy Guidance is a non-binding general statement of policy articulating considerations relevant to the Bureau’s exercise of its supervisory and enforcement authority. It is therefore exempt from notice and comment rulemaking requirements under the Administrative Procedure Act pursuant to 5 U.S.C. 553(b). Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a). The Bureau has determined that this Policy Guidance does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring OMB approval under the Paperwork Reduction Act, 44 U.S.C. 3501, et seq. SUMMARY: Dated: June 26, 2017. Richard Cordray, Director, Bureau of Consumer Financial Protection. Background [FR Doc. 2017–13799 Filed 6–29–17; 8:45 am] BILLING CODE 4810–25–P DEPARTMENT OF COMMERCE Bureau of Industry and Security 15 CFR Part 744 Control Policy: End-User and End-Use Based CFR Correction In Title 15 of the Code of Federal Regulations, Parts 300 to 799, revised as of January 1, 2017, on page 498, in supplement number 4 to part 744, under United Arab Emirates, remove the entry for ‘‘Indira Mirchandani’’. ■ [FR Doc. 2017–13802 Filed 6–29–17; 8:45 am] BILLING CODE 1301–00–P DEPARTMENT OF HOMELAND SECURITY U.S. Customs and Border Protection 19 CFR Part 111 mstockstill on DSK30JT082PROD with RULES [Docket No. USCBP–2016–0059; CBP Dec. No. 17–05] RIN 1651–AB07 Modernization of the Customs Brokers Examination U.S. Customs and Border Protection, Department of Homeland Security. AGENCY: VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 Final rule. This document adopts as a final rule, with changes, the amendments proposed to the U.S. Customs and Border Protection (CBP) regulations concerning the customs broker’s examination provisions. Specifically, this rule transitions the examination to a computer automated customs broker examination, adjusts the dates of the examination to account for the fiscal year transition period and payment schedule requirements, and increases the examination fee to cover the cost of delivering the exam. DATES: Effective July 31, 2017. FOR FURTHER INFORMATION CONTACT: Julia Peterson, Chief, Broker Management Branch, Office of Trade, U.S. Customs and Border Protection, (202) 863–6601, julia.peterson@cbp.dhs.gov. SUPPLEMENTARY INFORMATION: Section 641 of the Tariff Act of 1930, as amended (19 U.S.C. 1641), provides, among other things, that a person (an individual, corporation, association, or partnership) must hold a valid customs broker’s license and permit in order to transact customs business on behalf of others, sets forth standards for the issuance of a broker’s license and permit, and provides for disciplinary action against brokers that have engaged in specific infractions. This section also provides that an examination may be conducted to assess an applicant’s qualifications for a license. The regulations issued under the authority of section 641 are set forth in title 19 of the Code of Federal Regulations, part 111 (19 CFR part 111). Part 111 sets forth the regulations regarding, among other things, the licensing of, and granting of permits to, persons desiring to transact customs business as customs brokers. These regulations also include the qualifications required of applicants and the procedures for applying for licenses and permits, including examination procedures and requirements. Currently, a customs broker’s examination consists of a paper test booklet and a scannable answer sheet which is administered by the Office of Personnel Management (OPM). CBP supplements OPM’s resources by providing CBP officials to proctor the examination and space to conduct the examination. There is a $200 fee to take the examination. This fee, which has not changed since 2000, currently does not cover the administrative costs of the paper-based examination as the costs of administering the examination have PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 increased. At the same time that CBP is looking to update its fee to reflect the costs of administering the exam, OPM has informed CBP that it will no longer administer the paper-based examination and it is shifting all the examinations it administers to an electronic format. On September 14, 2016, CBP published a document in the Federal Register (81 FR 63149) proposing to amend title 19 of the Code of Federal Regulations (‘‘19 CFR’’) to modernize the customs broker’s examination provisions. Specifically, CBP proposed amending the customs broker’s examination provisions, which are contained in 19 CFR part 111, to permit automation of the examination. CBP proposed removing references to the ‘‘written’’ examination to accommodate the transition from the paper and pencil format to an electronic format; and proposed removing the requirement that CBP grade the examinations to permit officials at the Office of Personnel Management (OPM) or OPM contractors to grade the examinations. CBP proposed removing the reference to ‘‘Headquarters’’ to allow CBP offices nationwide to assist in preparing the examination. CBP also proposed moving the examination dates to the fourth Monday in April and October to allow more time between the start of the federal fiscal year and the October examination date. To cover the costs of administering the examination, plus the cost of automating the examination, CBP proposed to increase the fee. CBP proposed removing the special examination provision because it was unnecessary. Finally, to better reflect CBP’s organizational structure, CBP proposed updating the information on whom to contact when an applicant either would miss an examination, or would file an appeal of examination results. CBP proposed these changes to benefit both applicants and CBP. For applicants, automation would standardize the testing environment and equipment for all examinations, and provide earlier notification of test scores. For CBP, automation would provide for a more efficient use of CBP staff and administrative resources. The notice of proposed rulemaking requested public comments. The public comment period closed on November 14, 2016. Discussion of Comments Eight comments were received in response to the notice of proposed rulemaking. Comment: Six commenters sought clarification about the transition from a paper and pencil format to computer automated examinations as described in E:\FR\FM\30JNR1.SGM 30JNR1 mstockstill on DSK30JT082PROD with RULES Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations the proposed rule. Three of them requested an additional explanation of how the removal of ‘‘written’’ from the description of the examination in the proposed regulations determined the examination format. One commenter suggested replacing ‘‘written’’ with another term, such as ‘‘multiple choice,’’ to describe the exact examination format in the regulations. CBP Response: CBP disagrees that the regulations need to define a specific form of examination. CBP is removing the term ‘‘written’’ to describe the examination from the regulation to provide flexibility in the transition from the paper and pen format to delivering the examination via computer. For that reason, CBP is not limiting the examination format by including specific parameters, such as ‘‘multiple choice.’’ CBP understands the applicants’ desire for transparency on the type of question (e.g. multiple choice, true/false, essay) that will appear on the examination; therefore, CBP will provide guidance to the public on CBP.gov prior to the administration of the electronic examination. Comment: Several commenters raised specific questions about the process of taking the new electronic examination. Commenters asked whether applicants could choose a testing site; whether applicants could bring electronic reference materials to the site, and, if not, whether they would have sufficient space to use their paper reference materials and receive scrap paper for solving problems; whether they could change their answers during the allotted time; whether they could skip questions and return to them later; and whether the computer program would track skipped questions for the examinee. Commenters also asked whether CBP would have a contingency plan for technical difficulties, whether CBP was going to test the automated examination program before requiring it nationwide, whether it would provide a practice test, when it would provide the answer key, and when it would provide the results to the applicants. CBP Response: CBP understands the concerns about a new examination format; thus CBP will provide guidance to the public on CBP.gov prior to the administration of the electronic examination. The selection of an examination location depends on the information in the application. Applicants select their business port when they register for the customs broker’s examination; CBP assigns the applicants to the exam locations closest to their selected port. With the examination location notification, CBP will provide the VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 applicant with contingency plans for system failures, power outages, and other site-related breakdowns or emergencies. The examination sites themselves will offer ample room for hard copies of reference material, and the guidance on CBP.gov will describe the permitted reference materials. Applicants will receive scrap paper at examination sites. The examination sites, however, will provide access to only one computer monitor per examinee: Applicants will not have access to a second monitor or be permitted to access reference materials on-line. The electronic examination itself will allow applicants to skip answers, to return to skipped or completed answers, and to change their answers during the examination period. After the broker’s examination development team completes its testing of the electronic examination, CBP will provide a link to a sample practice examination so that applicants can familiarize themselves with the format and how to navigate within the examination. The guidance CBP will provide on CBP.gov will include information on how and when CBP anticipates it will provide a copy of the examination and its answer key. CBP will post the examination online at CBP.gov after the completion of all the examinations at all examination locations. CBP will post the examination answer key on CBP.gov after it vets the examination results. Comment: Several commenters questioned the examination fee increase to $390, or requested more information about the basis for the increase in the fee. They compared the new fee to other licensing fees, and the increase in the examination fee to increases resulting from inflation or changes in the cost of living since 2000; and stated that the fee would be expensive for individuals beginning their trade careers. Commenters questioned how automation could be so expensive when it would save administrative resources. CBP Response: CBP appreciates that the fee may be expensive for some individuals but CBP disagrees that its examination fee increase is too high as it is set to cover CBP’s costs to provide the exam under the new exam process. The fee is not being changed merely to adjust the existing fee for inflation, or to bring it in line with licensing fees for exams in unrelated fields, but to reflect CBP’s costs of providing the exam. The Office of Personnel Management has informed CBP that it will soon no longer administer the current paper based examination. Instead, the exam will now be electronic and provided at private testing centers. While the PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 29715 automation itself saves money by reducing the time spent preparing and grading the exam, the need to rent testing centers with professional proctors will increase the overall exam costs. The increase in costs over time due to inflation, coupled with the need to change to an all-electronic exam administered at private testing centers, makes it necessary to increase the customs broker exam fee from $200 to $390 for CBP to recover all of its costs to administer the customs broker exam. Comment: Commenters said that an individual’s brokerage does not always reimburse for the cost of the exam and that $390 would be a large expense for individuals. CBP Response: CBP acknowledges that not all brokerages reimburse their employees for the cost of the exam and some only reimburse their employees when they pass the exam. This is consistent with the analysis that indicates only that there is some portion of brokerages who do reimburse their employees and that there are brokers who are sole proprietors. This discussion takes place in the Regulatory Flexibility Act section of this document, which analyzes the impact on small entities. Small entities, as defined by the Regulatory Flexibility Act, includes small businesses but does not include individuals (other than sole proprietors). Therefore, the cost to individuals was not analyzed in this section. For an analysis of the costs of this rule to all parties, see the Executive Orders 13563, 12866, and 13771 and Regulatory Flexibility Act sections in this notice. Comment: Several commenters requested additional information on what costs were covered by the fee. CBP Response: As requested, CBP has revised the administrative costs section in the fee study to include a more detailed description of what is included in the costs for informational purposes. Exam administration costs are the costs associated with administering the customs broker license exam. CBP contracts with the U.S. Office of Personnel Management (OPM) to administer the exam. The contracted services include, but are not limited to: The development of the exam onto an electronic platform, the renting of testing locations, the providing of equipment and proctors, the grading of the exam, the mailing of individual score sheets to each examinee, and the providing to CBP of an array of exam metrics including distractor analysis and frequency distribution. The fee study documenting the proposed fee changes, entitled ‘‘Customs Broker License Examination Fee Study,’’ has E:\FR\FM\30JNR1.SGM 30JNR1 29716 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations been included in the docket of this rulemaking (Docket No. USCBP–2016– 0059). As stated in the fee study, there were two inputs to determining the new examination fee—the costs to both CBP and OPM and the number of examinees. The cost of administering the examination is increasing to $390 because CBP now has to hire professional proctors and rent out formal testing centers instead of using port staff to proctor the exam and port facilities to administer the exam. Comment: Several commenters objected to eliminating the special examination provision, mentioned CBP had applied the provision in 2001, and requested that it remain, in case of extenuating circumstances or unforeseen emergencies. CBP Response: CBP agrees and will retain the special examination provision at 19 CFR 111.13(c) with changes to reflect that the special examination will also be modernized to allow for electronic testing. In addition, CBP changed the provision to require that special examination requests be submitted to the Executive Assistant Commissioner, Office of Trade. Comment: Although no one objected to moving the customs broker’s examination dates later in April and October, several commenters suggested that neither Monday nor Friday were ideal dates for business reasons. CBP Response: CBP agrees that moving the exam administration date to the fourth Wednesday in October and in April would be beneficial. Accordingly, CBP changed the administration date from the fourth Monday to the fourth Wednesday in 19 CFR 111.13(b). mstockstill on DSK30JT082PROD with RULES Conclusion Accordingly, after review of the comments and further consideration, CBP has decided to adopt as final, with the changes discussed above, and grammatical corrections, the proposed rule published in the Federal Register (81 FR 63149) on September 14, 2016. Specifically, the final rule will change the examination dates to the fourth Wednesday in April and October (not the fourth Monday); and, will retain the special examination provision with changes in § 111.13(c) (19 CFR 111.13(c)). Executive Orders 13563, 12866, and 13771 Executive Orders 12866 (‘‘Regulatory Planning and Review’’) and 13563 (‘‘Improving Regulation and Regulatory Review’’) direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Executive Order 13771 (‘‘Reducing Regulation and Controlling Regulatory Costs’’) directs agencies to reduce regulation and control regulatory costs and provides that ‘‘for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.’’ The Office of Management and Budget (OMB) has not designated this rule a significant regulatory action under section 3(f) of Executive Order 12866. Accordingly, OMB has not reviewed it. As this rule is not a significant regulatory action, this rule is exempt from the requirements of Executive Order 13771. See OMB’s Memorandum ‘‘Guidance Implementing Executive Order 13771, Titled ‘Reducing Regulation and Controlling Regulatory Costs’ ’’ (April 5, 2017). 1. Purpose of the Rule Customs brokers are private individuals and/or business entities (partnerships, associations or corporations) that are regulated and empowered by CBP to assist importers and exporters in meeting federal requirements governing imports and exports. Customs brokers have an enormous responsibility to their clients and to CBP that requires them to properly prepare importation and exportation documentation, file these documents timely and accurately, classify and value goods properly, pay duties and fees, and safeguard their clients’ information. CBP currently licenses brokers who meet a certain set criteria. One criterion is that each prospective broker must first pass a broker license exam. CBP’s current paper-based examination method will soon no longer be available and so CBP is shifting to an allelectronic exam. The all-electronic exam has benefits to both CBP and the trade, such as a faster processing time, which lets examinees know their results more quickly and efficiently, and a significant reduction in administrative duties for CBP employees. However, administering this new electronic exam is also more expensive. Additionally, the current $200 fee does not cover the costs of the current paper exam. CBP is therefore increasing the examination fee PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 from $200 to $390 in order to fully cover all of CBP’s costs of administering the broker examination. CBP is also changing the date of the semi-annual customs broker exam from the first Monday in October and April to the fourth Wednesday in October and April for easier administration. 2. Background It is CBP’s responsibility to ensure that only qualified individuals and business entities can perform customs business on another party’s behalf. The first step in meeting the eligibility requirements for a customs broker license requires an individual to pass the customs broker license examination. Currently paper-based, the customs broker examination is an open-book examination consisting of 80 multiplechoice questions. An individual currently must meet the following criteria in order to be eligible to take the customs broker examination: • Be a U.S. citizen at least 18 years of age; 1 • Not be an employee of the U.S. federal government; and • Pay a $200 examination fee. The customs broker examination is offered semi-annually, in April and October, and an examinee has four and a half (4.5) hours to complete it. Based on prior year exams from 2004 to 2013, CBP estimates that there will be approximately 2,600 examinees per year, or 1,300 examinees per session. Currently the broker exam is given at 50 testing locations around the country. CBP anticipates that changing the exam format from paper-based to electronic would result in no change in the number of testing locations in the country; the only change would be the type of testing location. The exam is currently administered at hotels and ports throughout the country. In the future, the exam will instead be held at privately operated formal testing locations. Beginning in October 2017, the current paper testing option will no longer be available and the broker examination will be fully electronic. Despite the higher costs of an electronic exam, it has many favorable features which would benefit both CBP and the examinees, including shorter wait times for examinees to get their test results and a reduction in the time CBP staff 1 Although U.S. citizens at least 18 years old may take the broker license exam, a U.S. citizen must be at least 21 years old to apply to become a licensed customs broker. An individual has three years, from the time the individual takes the customs broker exam, to apply to become a licensed customs broker. E:\FR\FM\30JNR1.SGM 30JNR1 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations mstockstill on DSK30JT082PROD with RULES spends on administrative matters related to the exam, such as arranging facility space for and proctoring the exam, fielding questions from examinees and mailing test result notices. 3. Costs As discussed above, CBP currently charges a $200 fee for the customs broker license examination. This fee is used to offset the costs associated with providing the services necessary to operate the customs broker license examination. Based on a recently completed fee study entitled, ‘‘Customs Broker License Examination Fee Study,’’ CBP has determined that these fees are no longer sufficient to cover its costs.2 Currently, examinees go to either a port or to a rented event space in a hotel to take the paper exam with a 35-page test booklet and a scannable answer sheet, which must subsequently be collected and graded. The new all-electronic version of the exam will be administered entirely on a computer where the examinees answer the questions directly on the screen and the exam is graded automatically. As the electronic exam uses all private facilities with professional proctors, this automated method will be more expensive than the paper exam. Furthermore, the current fee is not enough to cover even the current costs of administering the exam. Exam administration costs include the development of the exam in an electronic platform, the renting of testing locations, the providing of equipment and proctors, the grading of the exam, the mailing of individual score sheets to each examinee, and the providing to CBP of an array of exam metrics including distractor analysis and frequency distribution. As stated above, the current $200 fee has not been changed since 2000. According to data provided by CBP’s Broker Management Branch, administrative and testing costs have increased since the fee was last changed. This increase in administrative fees coupled with switching to an allelectronic exam administered at private testing centers, makes it necessary to increase the customs broker exam fee from $200 to $390 for CBP to recover all of its costs to administer the customs broker exam. CBP has determined that the fee of $390 is necessary to recover the costs associated with administering the customs broker license examination once the exam is made electronic. The customs broker examination is an 2 The fee study is included in the docket of this rulemaking (Docket No. USCBP–2016–0059). VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 established service provided by CBP that already requires a fee payment. Absent this rule, CBP would be operating the exam at a loss and this fee is intended to offset that loss. As such, a change in the fee is not a net cost to society, but rather a transfer payment from test takers to the government.3 CBP does recognize, however, that the fee change may have a distributional impact on prospective customs brokers. In order to inform stakeholders of all potential effects of the final rule, CBP has analyzed the distributional effects of the final rule in section ‘‘5. Distributional Impact.’’ 4. Benefits As discussed above, CBP is increasing the customs broker license examination fee from $200 to $390. The broker exam fee was last changed in 2000 when it was reduced from $300 to the current fee of $200. The lower cost paper-based examination that is currently being administered is being replaced by an allelectronic exam in an effort to fully modernize the customs broker testing procedure. This fee increase will allow CBP to fully recover all of its costs, including those to provide a fully electronic version of the customs broker examination beginning in October 2017. As discussed above, the fee increase is neither a cost nor a benefit of this rule since the broker exam fee is already an established fee. Thus, the fee increase is considered a transfer payment. As stated above, in order to inform stakeholders of all potential effects of the final rule, CBP has analyzed the distributional effects of the final rule in section ‘‘5. Distributional Impact.’’ In addition to increasing the examination fee, CBP is changing the date the examination is given from the first Monday in October and April to the fourth Wednesday in October and April. Administering the examination on the first Monday in October is administratively difficult because it is too close to the conclusion of the Federal Government’s fiscal year at the end of September. With this rule’s changes, CBP and the examinees will benefit through greater predictability in years where federal budgets are uncertain. 5. Distributional Impact Under the final rule, the customs broker license examination fee will increase from $200 to $390 in order for CBP to fully recover all of its costs to administer the broker examination. As 3 Transfer payments are monetary payments from one group to another that do not affect total resources available to society. See OMB Circular A–4. PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 29717 noted above, these costs are increasing due to a shift in the administration of the exam that will go into effect beginning with the October 2017 exam. The customs broker license examination fee will cost individuals an additional $190 when they register to take the customs broker license examination. As discussed above, CBP estimates that there will be 2,600 examinees per year (1,300 per session) who will take the customs broker license examination. Using this estimate and the additional cost that each examinee will incur, CBP estimates that the fee increase will result in a transfer payment to the government of approximately $494,000 per year (2,600 examinees per year * $190 proposed fee increase = $494,000). Regulatory Flexibility Act This section examines the impact of the rule on small entities as required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as amended by the Small Business Regulatory Enforcement and Fairness Act of 1996 (SBREFA). A small entity may be a small business (defined as any independently owned and operated business not dominant in its field that qualifies as a small business per the Small Business Act); a small notfor-profit organization; or a small governmental jurisdiction (locality with fewer than 50,000 people). The final rule will apply to all prospective brokers who take the broker exam. The fee is paid by the individual taking the broker exam and individuals are not considered small entities under the Regulatory Flexibility Act. However, some of these individuals are sole proprietors or may be reimbursed for this expense by their brokerage, so we consider the impact on these entities. The U.S. Census Bureau categorizes customs brokers (as well as freight forwarders and marine shipping agents) under the North American Industry Classification (NAICS) code 488510. As shown in Exhibit 1 below, approximately 96 percent of business entities in this NAICS code are small. As this rule will affect any prospective broker or his/her employer, regardless of its size, this rule has an impact on a substantial number of small entities. The direct impact of this rule on each individual customs broker examinee, or his/her employer, is the fee increase of $190. To assess whether this is a significant impact, we examine the annual revenue for customs brokers. The U.S. Census Bureau categorizes customs brokers under the NAICS code 488510. In addition to customs brokers, this NAICS code also includes freight E:\FR\FM\30JNR1.SGM 30JNR1 29718 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations forwarders and marine shipping agents.4 The Small Business Administration (SBA) publishes size standards that determine the criteria for being considered a small entity for the purposes of this analysis. The SBA considers a business entity classified under the 488510 NAICS code as small if it has less than $15 million in annual receipts. We obtained the number of firms in each revenue category provided by the U.S. Census Bureau (see Exhibit 1 below). To estimate the average revenue of all firms under this NAICS code, we first assumed that each firm in each revenue category had receipts of the midpoint of the range. For example, we assumed that the 4,354 firms with annual receipts of between $100,000 and $499,000 had average receipts of $300,000. We then used the number of firms in each category to calculate the weighted average revenue across all small firms. Using this method, we estimate that the weighted average revenue for small businesses in this NAICS code is $1,496,197. The $190 increase in the broker exam fee, then, represents 0.01 percent of the weighted average annual revenue for brokers. CBP does not consider 0.01 percent of revenue per exam to be a significant impact. Accordingly, CBP certifies that this rule does not have a significant economic impact on a substantial number of small entities. EXHIBIT 1—BUSINESS ENTITY DATA FOR NAICS CODE 488510 Annual receipts ($) (Midpoint) Number of firms <100,000 (50,000) ........................................................................................................ 100,000–499,999 (300,000) ......................................................................................... 500,000–999,999 (750,000) ......................................................................................... 1,000,000–2,499,999 (1,750,000) ................................................................................ 2,500,000–4,999,999 (3,750,000) ................................................................................ 5,000,000–7,499,999 (6,250,000) ................................................................................ 7,500,000–9,999,999 (8,750,000) ................................................................................ 10,000,000–14,999,999 (12,500,000) .......................................................................... >15,000,000 ................................................................................................................. 1,834 4,354 2,040 2,300 1,087 427 242 233 548 Total ...................................................................................................................... 13,065 Small Yes. Yes. Yes. Yes. Yes. Yes. Yes. Yes. No. 96 Percent are Small (12,517/13,065). Source: U.S. Census Bureau. Signing Authority This document is being issued in accordance with 19 CFR 0.2(a), which provides that the authority of the Secretary of the Treasury with respect to CBP regulations that are not related to customs revenue functions was transferred to the Secretary of Homeland Security pursuant to section 403(l) of the Homeland Security Act of 2002. Accordingly, this final rule to amend such regulations may be signed by the Secretary of Homeland Security (or his delegate). List of Subjects in 19 CFR Part 111 Administrative practice and procedure, Brokers, Customs duties and inspection, Penalties, Reporting and recordkeeping requirements. Amendments to the CBP Regulations For the reasons given above, part 111 of title 19 of the Code of Federal Regulations (19 CFR part 111) is amended as set forth below: PART 111—CUSTOMS BROKERS 1. The authority citation for part 111 continue to read as follows: mstockstill on DSK30JT082PROD with RULES ■ Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States), 1624, 1641. Section 111.3 also issued under 19 U.S.C. 1484, 1498; Section 111.96 also issued under 19 U.S.C. 58c, 31 U.S.C. 9701. § 111.11 [Amended] 2. In § 111.11, paragraph (a)(4) is amended by removing the words ‘‘a written’’ and adding in its place the word ‘‘an’’. ■ § 111.12 [Amended] 3. In § 111.12, paragraph (a) is amended by removing the word ‘‘written’’ from the two places that it appears in the fifth and sixth sentences. ■ § 111.13 [Amended] 4. In § 111.13: a. The section heading is revised; ■ b. Paragraph (a) is amended by: ■ 1. Removing the word ‘‘written’’ in the first sentence; ■ 2. Removing the words ‘‘and graded at’’ in the second sentence and adding in their place the word ‘‘by’’; and ■ 3. Removing the phrase ‘‘Headquarters, Washington, DC’’ from the second sentence; ■ c. Paragraphs (b) through (d) and (f) are revised. The revisions read as follows: ■ ■ § 111.13 license. Examination for individual * * * * * (b) Basic requirements, date, and place of examination. In order to be eligible to take the examination, an individual must on the date of examination be a citizen of the United States who has attained the age of 18 years and who is not an officer or employee of the United States Government. CBP will publish a notice announcing each examination on its Web site. Examinations will be given on the fourth Wednesday in April and October unless the regularly scheduled examination date conflicts with a national holiday, religious observance, or other foreseeable event and the agency publishes in the Federal Register an appropriate notice of a change in the examination date. An individual who intends to take the examination must complete the electronic application at least 30 calendar days prior to the scheduled examination date and must remit the $390 examination fee prescribed in § 111.96(a) at that time. CBP will give notice of the exact time and place for the examination. (c) Special examination. If a partnership, association, or corporation loses the required member or officer 4 http://www.census.gov/cgi-bin/sssd/naics/ naicsrch?code=488510&search=2012% 20NAICS%20Search. VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 E:\FR\FM\30JNR1.SGM 30JNR1 mstockstill on DSK30JT082PROD with RULES Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations having an individual broker’s license (see § 111.11(b) and (c)(2)) and its license would be revoked by operation of law under the provisions of 19 U.S.C. 1641(b)(5) and § 111.45(a) before the next scheduled examination, CBP may authorize a special examination for a prospective applicant for an individual license who would serve as the required licensed member or officer. CBP may also authorize a special examination for an individual for purposes of continuing the business of a sole proprietorship broker. A special examination for an individual may also be authorized by CBP if a brokerage firm loses the individual broker who was exercising responsible supervision and control over an office in another district (see § 111.19(d)) and the permit for that additional district would be revoked by operation of law under the provisions of 19 U.S.C. 1641(c)(3) and § 111.45(b) before the next scheduled examination. A request for a special examination must be submitted to the Executive Assistant Commissioner, Office of Trade, in writing and must describe the circumstances giving rise to the need for the examination. If the request is granted, the Executive Assistant Commissioner, Office of Trade or his/ her designee, will notify the prospective examinee of the exact time and place for the examination. If the individual attains a passing grade on the special examination, the application for the license may be submitted in accordance with § 111.12. The examinee will be responsible for all additional costs incurred by CBP in preparing and administering the special examination that exceed the $390 examination fee prescribed in § 111.96(a), and those additional costs must be reimbursed to CBP before the examination is given. (d) Failure to appear for examination. If a prospective examinee advises the Office of Trade at the Headquarters of U.S. Customs and Border Protection, Attn: Broker Management Branch, electronically in a manner specified by CBP at least 2 working days prior to the date of a regularly scheduled examination that he will not appear for the examination, CBP will refund the $390 examination fee referred to in paragraph (b) of this section. No refund of the examination fee or additional reimbursed costs will be made in the case of a special written examination provided for under paragraph (c) of this section. * * * * * (f) Appeal of failing grade on examination. If an examinee fails to attain a passing grade on the examination taken under this section, VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 the examinee may challenge that result by filing a written appeal with the Office of Trade at the Headquarters of U.S. Customs and Border Protection, Attn: Broker Management Branch, within 60 calendar days after the date of the written notice provided for in paragraph (e) of this section. CBP will provide to the examinee written notice of the decision on the appeal. If the CBP decision on the appeal affirms the result of the examination, the examinee may request review of the decision on the appeal by writing to the Executive Assistant Commissioner, Office of Trade, U.S. Customs and Border Protection, within 60 calendar days after the date of the notice on that decision. § 111.96 [Amended] 5. In § 111.96: a. Paragraph (a) is amended by removing the word ‘‘written’’ from the second sentence and removing the phrase ‘‘$200 examination fee’’ in the second sentence and adding in its place the phrase ‘‘$390 examination fee’’; and ■ b. Paragraph (e) is amended by removing the words ‘‘United States Customs Service’’ and adding in their place the words ‘‘U.S. Customs and Border Protection, or paid by other CBPapproved payment method’’. ■ ■ Dated: June 27, 2017. Elaine C. Duke, Deputy Secretary. [FR Doc. 2017–13829 Filed 6–29–17; 8:45 am] BILLING CODE 9111–14–P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9808] RIN 1545–BL17 RIN 1545–BN74 Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment; Correction Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendment. AGENCY: This document contains corrections to final and temporary regulations (TD 9808), which were published in the Federal Register on Friday, January 6, 2017 (82 FR 2046). These regulations are related to SUMMARY: PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 29719 withholding of tax on certain U.S. source income paid to foreign persons, information reporting and backup withholding with respect to payments made to certain U.S. persons, and portfolio interest paid to nonresident alien individuals and foreign corporations. DATES: Effective Date: These corrections are effective June 30, 2017. Applicability Date: The corrections to §§ 1.1441–0; 1.1441–1(b)(7)(ii)(B), (e)(3)(iv)(B) and (C), (e)(4)(ii)(B)(11), (e)(4)(ix)(D), (e)(5)(ii) through (e)(5)(ii)(B), (e)(5)(ii)(D) through (e)(5)(v)(B)(3), (e)(5)(v)(B)(5) through (e)(5)(v)(D), and (f) through (f)(4); 1.1441–1T; 1.1441–3(d)(1); 1.1441–4; 1.6045–1(m)(2)(ii) and (n)(12)(ii); and 1.6049–5(c)(1) through (c)(4) are applicable on January 6, 2017. FOR FURTHER INFORMATION CONTACT: Nancy Lee, (202) 317–6942 (not a tollfree number). SUPPLEMENTARY INFORMATION: Background The final and temporary regulations that are the subject of these corrections are §§ 1.1441–0, 1.1441–1, 1.1441–1T, 1.1441–3, 1.1441–4, 1.6045–1, and 1.6049–5, promulgated under sections 1441, 6045, 6049, and 7805 of the Internal Revenue Code. These regulations affect persons making payments of U.S. source income to foreign persons and persons making payments to certain U.S. persons subject to reporting and backup withholding. Need for Correction As published, the final regulations contain a number of items that need to be corrected or clarified. Several portions of TD 9808 could not be incorporated due to inaccurate amendatory instructions. Most of the correcting amendments to TD 9808 are needed to clarify or correct the results of these inaccurate amendatory instructions. The correcting amendments also include the addition, deletion, or modification of regulatory language to clarify the relevant provisions to meet their intended purposes, specifically to make a conforming change to the entry in the table of contents (§ 1.1441–0) for § 1.1441–1(e)(4)(ix); to correct typographical errors in §§ 1.1441– 1(e)(4)(ix)(D), 1.1441–1T(c)(3)(ii), and 1.1441–3(d)(1); to clarify that allowances for electronic signatures in § 1.1441–1T(e)(4)(i)(B) and use of third party repository in § 1.1441– 1T(e)(4)(iv)(E) are limited to Forms W– 8; to remove an obsolete cross-reference E:\FR\FM\30JNR1.SGM 30JNR1

Agencies

[Federal Register Volume 82, Number 125 (Friday, June 30, 2017)]
[Rules and Regulations]
[Pages 29714-29719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13829]


=======================================================================
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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

19 CFR Part 111

[Docket No. USCBP-2016-0059; CBP Dec. No. 17-05]
RIN 1651-AB07


Modernization of the Customs Brokers Examination

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document adopts as a final rule, with changes, the 
amendments proposed to the U.S. Customs and Border Protection (CBP) 
regulations concerning the customs broker's examination provisions. 
Specifically, this rule transitions the examination to a computer 
automated customs broker examination, adjusts the dates of the 
examination to account for the fiscal year transition period and 
payment schedule requirements, and increases the examination fee to 
cover the cost of delivering the exam.

DATES: Effective July 31, 2017.

FOR FURTHER INFORMATION CONTACT: Julia Peterson, Chief, Broker 
Management Branch, Office of Trade, U.S. Customs and Border Protection, 
(202) 863-6601, julia.peterson@cbp.dhs.gov.

SUPPLEMENTARY INFORMATION:

Background

    Section 641 of the Tariff Act of 1930, as amended (19 U.S.C. 1641), 
provides, among other things, that a person (an individual, 
corporation, association, or partnership) must hold a valid customs 
broker's license and permit in order to transact customs business on 
behalf of others, sets forth standards for the issuance of a broker's 
license and permit, and provides for disciplinary action against 
brokers that have engaged in specific infractions. This section also 
provides that an examination may be conducted to assess an applicant's 
qualifications for a license.
    The regulations issued under the authority of section 641 are set 
forth in title 19 of the Code of Federal Regulations, part 111 (19 CFR 
part 111). Part 111 sets forth the regulations regarding, among other 
things, the licensing of, and granting of permits to, persons desiring 
to transact customs business as customs brokers. These regulations also 
include the qualifications required of applicants and the procedures 
for applying for licenses and permits, including examination procedures 
and requirements.
    Currently, a customs broker's examination consists of a paper test 
booklet and a scannable answer sheet which is administered by the 
Office of Personnel Management (OPM). CBP supplements OPM's resources 
by providing CBP officials to proctor the examination and space to 
conduct the examination. There is a $200 fee to take the examination. 
This fee, which has not changed since 2000, currently does not cover 
the administrative costs of the paper-based examination as the costs of 
administering the examination have increased. At the same time that CBP 
is looking to update its fee to reflect the costs of administering the 
exam, OPM has informed CBP that it will no longer administer the paper-
based examination and it is shifting all the examinations it 
administers to an electronic format.
    On September 14, 2016, CBP published a document in the Federal 
Register (81 FR 63149) proposing to amend title 19 of the Code of 
Federal Regulations (``19 CFR'') to modernize the customs broker's 
examination provisions. Specifically, CBP proposed amending the customs 
broker's examination provisions, which are contained in 19 CFR part 
111, to permit automation of the examination. CBP proposed removing 
references to the ``written'' examination to accommodate the transition 
from the paper and pencil format to an electronic format; and proposed 
removing the requirement that CBP grade the examinations to permit 
officials at the Office of Personnel Management (OPM) or OPM 
contractors to grade the examinations. CBP proposed removing the 
reference to ``Headquarters'' to allow CBP offices nationwide to assist 
in preparing the examination. CBP also proposed moving the examination 
dates to the fourth Monday in April and October to allow more time 
between the start of the federal fiscal year and the October 
examination date. To cover the costs of administering the examination, 
plus the cost of automating the examination, CBP proposed to increase 
the fee. CBP proposed removing the special examination provision 
because it was unnecessary. Finally, to better reflect CBP's 
organizational structure, CBP proposed updating the information on whom 
to contact when an applicant either would miss an examination, or would 
file an appeal of examination results. CBP proposed these changes to 
benefit both applicants and CBP. For applicants, automation would 
standardize the testing environment and equipment for all examinations, 
and provide earlier notification of test scores. For CBP, automation 
would provide for a more efficient use of CBP staff and administrative 
resources. The notice of proposed rulemaking requested public comments. 
The public comment period closed on November 14, 2016.

Discussion of Comments

    Eight comments were received in response to the notice of proposed 
rulemaking.
    Comment: Six commenters sought clarification about the transition 
from a paper and pencil format to computer automated examinations as 
described in

[[Page 29715]]

the proposed rule. Three of them requested an additional explanation of 
how the removal of ``written'' from the description of the examination 
in the proposed regulations determined the examination format. One 
commenter suggested replacing ``written'' with another term, such as 
``multiple choice,'' to describe the exact examination format in the 
regulations.
    CBP Response: CBP disagrees that the regulations need to define a 
specific form of examination. CBP is removing the term ``written'' to 
describe the examination from the regulation to provide flexibility in 
the transition from the paper and pen format to delivering the 
examination via computer. For that reason, CBP is not limiting the 
examination format by including specific parameters, such as ``multiple 
choice.'' CBP understands the applicants' desire for transparency on 
the type of question (e.g. multiple choice, true/false, essay) that 
will appear on the examination; therefore, CBP will provide guidance to 
the public on CBP.gov prior to the administration of the electronic 
examination.
    Comment: Several commenters raised specific questions about the 
process of taking the new electronic examination. Commenters asked 
whether applicants could choose a testing site; whether applicants 
could bring electronic reference materials to the site, and, if not, 
whether they would have sufficient space to use their paper reference 
materials and receive scrap paper for solving problems; whether they 
could change their answers during the allotted time; whether they could 
skip questions and return to them later; and whether the computer 
program would track skipped questions for the examinee. Commenters also 
asked whether CBP would have a contingency plan for technical 
difficulties, whether CBP was going to test the automated examination 
program before requiring it nationwide, whether it would provide a 
practice test, when it would provide the answer key, and when it would 
provide the results to the applicants.
    CBP Response: CBP understands the concerns about a new examination 
format; thus CBP will provide guidance to the public on CBP.gov prior 
to the administration of the electronic examination.
    The selection of an examination location depends on the information 
in the application. Applicants select their business port when they 
register for the customs broker's examination; CBP assigns the 
applicants to the exam locations closest to their selected port. With 
the examination location notification, CBP will provide the applicant 
with contingency plans for system failures, power outages, and other 
site-related breakdowns or emergencies. The examination sites 
themselves will offer ample room for hard copies of reference material, 
and the guidance on CBP.gov will describe the permitted reference 
materials. Applicants will receive scrap paper at examination sites. 
The examination sites, however, will provide access to only one 
computer monitor per examinee: Applicants will not have access to a 
second monitor or be permitted to access reference materials on-line.
    The electronic examination itself will allow applicants to skip 
answers, to return to skipped or completed answers, and to change their 
answers during the examination period. After the broker's examination 
development team completes its testing of the electronic examination, 
CBP will provide a link to a sample practice examination so that 
applicants can familiarize themselves with the format and how to 
navigate within the examination. The guidance CBP will provide on 
CBP.gov will include information on how and when CBP anticipates it 
will provide a copy of the examination and its answer key. CBP will 
post the examination online at CBP.gov after the completion of all the 
examinations at all examination locations. CBP will post the 
examination answer key on CBP.gov after it vets the examination 
results.
    Comment: Several commenters questioned the examination fee increase 
to $390, or requested more information about the basis for the increase 
in the fee. They compared the new fee to other licensing fees, and the 
increase in the examination fee to increases resulting from inflation 
or changes in the cost of living since 2000; and stated that the fee 
would be expensive for individuals beginning their trade careers. Com 
ment ers questioned how automation could be so expensive when it would 
save administrative resources.
    CBP Response: CBP appreciates that the fee may be expensive for 
some individuals but CBP disagrees that its examination fee increase is 
too high as it is set to cover CBP's costs to provide the exam under 
the new exam process. The fee is not being changed merely to adjust the 
existing fee for inflation, or to bring it in line with licensing fees 
for exams in unrelated fields, but to reflect CBP's costs of providing 
the exam. The Office of Personnel Management has informed CBP that it 
will soon no longer administer the current paper based examination. 
Instead, the exam will now be electronic and provided at private 
testing centers. While the automation itself saves money by reducing 
the time spent preparing and grading the exam, the need to rent testing 
centers with professional proctors will increase the overall exam 
costs. The increase in costs over time due to inflation, coupled with 
the need to change to an all-electronic exam administered at private 
testing centers, makes it necessary to increase the customs broker exam 
fee from $200 to $390 for CBP to recover all of its costs to administer 
the customs broker exam.
    Comment: Commenters said that an individual's brokerage does not 
always reimburse for the cost of the exam and that $390 would be a 
large expense for individuals.
    CBP Response: CBP acknowledges that not all brokerages reimburse 
their employees for the cost of the exam and some only reimburse their 
employees when they pass the exam. This is consistent with the analysis 
that indicates only that there is some portion of brokerages who do 
reimburse their employees and that there are brokers who are sole 
proprietors. This discussion takes place in the Regulatory Flexibility 
Act section of this document, which analyzes the impact on small 
entities. Small entities, as defined by the Regulatory Flexibility Act, 
includes small businesses but does not include individuals (other than 
sole proprietors). Therefore, the cost to individuals was not analyzed 
in this section. For an analysis of the costs of this rule to all 
parties, see the Executive Orders 13563, 12866, and 13771 and 
Regulatory Flexibility Act sections in this notice.
    Comment: Several commenters requested additional information on 
what costs were covered by the fee.
    CBP Response: As requested, CBP has revised the administrative 
costs section in the fee study to include a more detailed description 
of what is included in the costs for informational purposes. Exam 
administration costs are the costs associated with administering the 
customs broker license exam. CBP contracts with the U.S. Office of 
Personnel Management (OPM) to administer the exam. The contracted 
services include, but are not limited to: The development of the exam 
onto an electronic platform, the renting of testing locations, the 
providing of equipment and proctors, the grading of the exam, the 
mailing of individual score sheets to each examinee, and the providing 
to CBP of an array of exam metrics including distractor analysis and 
frequency distribution. The fee study documenting the proposed fee 
changes, entitled ``Customs Broker License Examination Fee Study,'' has

[[Page 29716]]

been included in the docket of this rulemaking (Docket No. USCBP-2016-
0059). As stated in the fee study, there were two inputs to determining 
the new examination fee--the costs to both CBP and OPM and the number 
of examinees. The cost of administering the examination is increasing 
to $390 because CBP now has to hire professional proctors and rent out 
formal testing centers instead of using port staff to proctor the exam 
and port facilities to administer the exam.
    Comment: Several commenters objected to eliminating the special 
examination provision, mentioned CBP had applied the provision in 2001, 
and requested that it remain, in case of extenuating circumstances or 
unforeseen emergencies.
    CBP Response: CBP agrees and will retain the special examination 
provision at 19 CFR 111.13(c) with changes to reflect that the special 
examination will also be modernized to allow for electronic testing. In 
addition, CBP changed the provision to require that special examination 
requests be submitted to the Executive Assistant Commissioner, Office 
of Trade.
    Comment: Although no one objected to moving the customs broker's 
examination dates later in April and October, several commenters 
suggested that neither Monday nor Friday were ideal dates for business 
reasons.
    CBP Response: CBP agrees that moving the exam administration date 
to the fourth Wednesday in October and in April would be beneficial. 
Accordingly, CBP changed the administration date from the fourth Monday 
to the fourth Wednesday in 19 CFR 111.13(b).

Conclusion

    Accordingly, after review of the comments and further 
consideration, CBP has decided to adopt as final, with the changes 
discussed above, and grammatical corrections, the proposed rule 
published in the Federal Register (81 FR 63149) on September 14, 2016. 
Specifically, the final rule will change the examination dates to the 
fourth Wednesday in April and October (not the fourth Monday); and, 
will retain the special examination provision with changes in Sec.  
111.13(c) (19 CFR 111.13(c)).

Executive Orders 13563, 12866, and 13771

    Executive Orders 12866 (``Regulatory Planning and Review'') and 
13563 (``Improving Regulation and Regulatory Review'') direct agencies 
to assess the costs and benefits of available regulatory alternatives 
and, if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. Executive Order 13771 (``Reducing Regulation and 
Controlling Regulatory Costs'') directs agencies to reduce regulation 
and control regulatory costs and provides that ``for every one new 
regulation issued, at least two prior regulations be identified for 
elimination, and that the cost of planned regulations be prudently 
managed and controlled through a budgeting process.''
    The Office of Management and Budget (OMB) has not designated this 
rule a significant regulatory action under section 3(f) of Executive 
Order 12866. Accordingly, OMB has not reviewed it. As this rule is not 
a significant regulatory action, this rule is exempt from the 
requirements of Executive Order 13771. See OMB's Memorandum ``Guidance 
Implementing Executive Order 13771, Titled `Reducing Regulation and 
Controlling Regulatory Costs' '' (April 5, 2017).

1. Purpose of the Rule

    Customs brokers are private individuals and/or business entities 
(partnerships, associations or corporations) that are regulated and 
empowered by CBP to assist importers and exporters in meeting federal 
requirements governing imports and exports. Customs brokers have an 
enormous responsibility to their clients and to CBP that requires them 
to properly prepare importation and exportation documentation, file 
these documents timely and accurately, classify and value goods 
properly, pay duties and fees, and safeguard their clients' 
information.
    CBP currently licenses brokers who meet a certain set criteria. One 
criterion is that each prospective broker must first pass a broker 
license exam. CBP's current paper-based examination method will soon no 
longer be available and so CBP is shifting to an all-electronic exam. 
The all-electronic exam has benefits to both CBP and the trade, such as 
a faster processing time, which lets examinees know their results more 
quickly and efficiently, and a significant reduction in administrative 
duties for CBP employees. However, administering this new electronic 
exam is also more expensive. Additionally, the current $200 fee does 
not cover the costs of the current paper exam. CBP is therefore 
increasing the examination fee from $200 to $390 in order to fully 
cover all of CBP's costs of administering the broker examination.
    CBP is also changing the date of the semi-annual customs broker 
exam from the first Monday in October and April to the fourth Wednesday 
in October and April for easier administration.

2. Background

    It is CBP's responsibility to ensure that only qualified 
individuals and business entities can perform customs business on 
another party's behalf. The first step in meeting the eligibility 
requirements for a customs broker license requires an individual to 
pass the customs broker license examination. Currently paper-based, the 
customs broker examination is an open-book examination consisting of 80 
multiple-choice questions.
    An individual currently must meet the following criteria in order 
to be eligible to take the customs broker examination:
     Be a U.S. citizen at least 18 years of age; \1\
---------------------------------------------------------------------------

    \1\ Although U.S. citizens at least 18 years old may take the 
broker license exam, a U.S. citizen must be at least 21 years old to 
apply to become a licensed customs broker. An individual has three 
years, from the time the individual takes the customs broker exam, 
to apply to become a licensed customs broker.
---------------------------------------------------------------------------

     Not be an employee of the U.S. federal government; and
     Pay a $200 examination fee.
    The customs broker examination is offered semi-annually, in April 
and October, and an examinee has four and a half (4.5) hours to 
complete it. Based on prior year exams from 2004 to 2013, CBP estimates 
that there will be approximately 2,600 examinees per year, or 1,300 
examinees per session. Currently the broker exam is given at 50 testing 
locations around the country. CBP anticipates that changing the exam 
format from paper-based to electronic would result in no change in the 
number of testing locations in the country; the only change would be 
the type of testing location. The exam is currently administered at 
hotels and ports throughout the country. In the future, the exam will 
instead be held at privately operated formal testing locations.
    Beginning in October 2017, the current paper testing option will no 
longer be available and the broker examination will be fully 
electronic. Despite the higher costs of an electronic exam, it has many 
favorable features which would benefit both CBP and the examinees, 
including shorter wait times for examinees to get their test results 
and a reduction in the time CBP staff

[[Page 29717]]

spends on administrative matters related to the exam, such as arranging 
facility space for and proctoring the exam, fielding questions from 
examinees and mailing test result notices.

3. Costs

    As discussed above, CBP currently charges a $200 fee for the 
customs broker license examination. This fee is used to offset the 
costs associated with providing the services necessary to operate the 
customs broker license examination. Based on a recently completed fee 
study entitled, ``Customs Broker License Examination Fee Study,'' CBP 
has determined that these fees are no longer sufficient to cover its 
costs.\2\ Currently, examinees go to either a port or to a rented event 
space in a hotel to take the paper exam with a 35-page test booklet and 
a scannable answer sheet, which must subsequently be collected and 
graded. The new all-electronic version of the exam will be administered 
entirely on a computer where the examinees answer the questions 
directly on the screen and the exam is graded automatically. As the 
electronic exam uses all private facilities with professional proctors, 
this automated method will be more expensive than the paper exam. 
Furthermore, the current fee is not enough to cover even the current 
costs of administering the exam. Exam administration costs include the 
development of the exam in an electronic platform, the renting of 
testing locations, the providing of equipment and proctors, the grading 
of the exam, the mailing of individual score sheets to each examinee, 
and the providing to CBP of an array of exam metrics including 
distractor analysis and frequency distribution. As stated above, the 
current $200 fee has not been changed since 2000. According to data 
provided by CBP's Broker Management Branch, administrative and testing 
costs have increased since the fee was last changed. This increase in 
administrative fees coupled with switching to an all-electronic exam 
administered at private testing centers, makes it necessary to increase 
the customs broker exam fee from $200 to $390 for CBP to recover all of 
its costs to administer the customs broker exam.
---------------------------------------------------------------------------

    \2\ The fee study is included in the docket of this rulemaking 
(Docket No. USCBP-2016-0059).
---------------------------------------------------------------------------

    CBP has determined that the fee of $390 is necessary to recover the 
costs associated with administering the customs broker license 
examination once the exam is made electronic. The customs broker 
examination is an established service provided by CBP that already 
requires a fee payment. Absent this rule, CBP would be operating the 
exam at a loss and this fee is intended to offset that loss. As such, a 
change in the fee is not a net cost to society, but rather a transfer 
payment from test takers to the government.\3\ CBP does recognize, 
however, that the fee change may have a distributional impact on 
prospective customs brokers. In order to inform stakeholders of all 
potential effects of the final rule, CBP has analyzed the 
distributional effects of the final rule in section ``5. Dis tribu 
tional Impact.''
---------------------------------------------------------------------------

    \3\ Transfer payments are monetary payments from one group to 
another that do not affect total resources available to society. See 
OMB Circular A-4.
---------------------------------------------------------------------------

4. Benefits

    As discussed above, CBP is increasing the customs broker license 
examination fee from $200 to $390. The broker exam fee was last changed 
in 2000 when it was reduced from $300 to the current fee of $200. The 
lower cost paper-based examination that is currently being administered 
is being replaced by an all-electronic exam in an effort to fully 
modernize the customs broker testing procedure. This fee increase will 
allow CBP to fully recover all of its costs, including those to provide 
a fully electronic version of the customs broker examination beginning 
in October 2017. As discussed above, the fee increase is neither a cost 
nor a benefit of this rule since the broker exam fee is already an 
established fee. Thus, the fee increase is considered a transfer 
payment. As stated above, in order to inform stakeholders of all 
potential effects of the final rule, CBP has analyzed the 
distributional effects of the final rule in section ``5. Dis tribu 
tional Impact.''
    In addition to increasing the examination fee, CBP is changing the 
date the examination is given from the first Monday in October and 
April to the fourth Wednesday in October and April. Administering the 
examination on the first Monday in October is administratively 
difficult because it is too close to the conclusion of the Federal 
Government's fiscal year at the end of September. With this rule's 
changes, CBP and the examinees will benefit through greater 
predictability in years where federal budgets are uncertain.

5. Distributional Impact

    Under the final rule, the customs broker license examination fee 
will increase from $200 to $390 in order for CBP to fully recover all 
of its costs to administer the broker examination. As noted above, 
these costs are increasing due to a shift in the administration of the 
exam that will go into effect beginning with the October 2017 exam.
    The customs broker license examination fee will cost individuals an 
additional $190 when they register to take the customs broker license 
examination. As discussed above, CBP estimates that there will be 2,600 
examinees per year (1,300 per session) who will take the customs broker 
license examination. Using this estimate and the additional cost that 
each examinee will incur, CBP estimates that the fee increase will 
result in a transfer payment to the government of approximately 
$494,000 per year (2,600 examinees per year * $190 proposed fee 
increase = $494,000).

Regulatory Flexibility Act

    This section examines the impact of the rule on small entities as 
required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as 
amended by the Small Business Regulatory Enforcement and Fairness Act 
of 1996 (SBREFA). A small entity may be a small business (defined as 
any independently owned and operated business not dominant in its field 
that qualifies as a small business per the Small Business Act); a small 
not-for-profit organization; or a small governmental jurisdiction 
(locality with fewer than 50,000 people).
    The final rule will apply to all prospective brokers who take the 
broker exam. The fee is paid by the individual taking the broker exam 
and individuals are not considered small entities under the Regulatory 
Flexibility Act. However, some of these individuals are sole 
proprietors or may be reimbursed for this expense by their brokerage, 
so we consider the impact on these entities. The U.S. Census Bureau 
categorizes customs brokers (as well as freight forwarders and marine 
shipping agents) under the North American Industry Classification 
(NAICS) code 488510. As shown in Exhibit 1 below, approximately 96 
percent of business entities in this NAICS code are small. As this rule 
will affect any prospective broker or his/her employer, regardless of 
its size, this rule has an impact on a substantial number of small 
entities.
    The direct impact of this rule on each individual customs broker 
examinee, or his/her employer, is the fee increase of $190. To assess 
whether this is a significant impact, we examine the annual revenue for 
customs brokers. The U.S. Census Bureau categorizes customs brokers 
under the NAICS code 488510. In addition to customs brokers, this NAICS 
code also includes freight

[[Page 29718]]

forwarders and marine shipping agents.\4\ The Small Business 
Administration (SBA) publishes size standards that determine the 
criteria for being considered a small entity for the purposes of this 
analysis. The SBA considers a business entity classified under the 
488510 NAICS code as small if it has less than $15 million in annual 
receipts. We obtained the number of firms in each revenue category 
provided by the U.S. Census Bureau (see Exhibit 1 below). To estimate 
the average revenue of all firms under this NAICS code, we first 
assumed that each firm in each revenue category had receipts of the 
midpoint of the range. For example, we assumed that the 4,354 firms 
with annual receipts of between $100,000 and $499,000 had average 
receipts of $300,000. We then used the number of firms in each category 
to calculate the weighted average revenue across all small firms. Using 
this method, we estimate that the weighted average revenue for small 
businesses in this NAICS code is $1,496,197. The $190 increase in the 
broker exam fee, then, represents 0.01 percent of the weighted average 
annual revenue for brokers. CBP does not consider 0.01 percent of 
revenue per exam to be a significant impact. Accordingly, CBP certifies 
that this rule does not have a significant economic impact on a 
substantial number of small entities.
---------------------------------------------------------------------------

    \4\ http://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=488510&search=2012%20NAICS%20Search.

          Exhibit 1--Business Entity Data for NAICS Code 488510
------------------------------------------------------------------------
                                       Number of
 Annual receipts  ($)  (Midpoint)        firms              Small
------------------------------------------------------------------------
<100,000 (50,000).................           1,834  Yes.
100,000-499,999 (300,000).........           4,354  Yes.
500,000-999,999 (750,000).........           2,040  Yes.
1,000,000-2,499,999 (1,750,000)...           2,300  Yes.
2,500,000-4,999,999 (3,750,000)...           1,087  Yes.
5,000,000-7,499,999 (6,250,000)...             427  Yes.
7,500,000-9,999,999 (8,750,000)...             242  Yes.
10,000,000-14,999,999 (12,500,000)             233  Yes.
>15,000,000.......................             548  No.
                                   -------------------------------------
    Total.........................          13,065  96 Percent are Small
                                                     (12,517/13,065).
------------------------------------------------------------------------
Source: U.S. Census Bureau.

Signing Authority

    This document is being issued in accordance with 19 CFR 0.2(a), 
which provides that the authority of the Secretary of the Treasury with 
respect to CBP regulations that are not related to customs revenue 
functions was transferred to the Secretary of Homeland Security 
pursuant to section 403(l) of the Homeland Security Act of 2002. 
Accordingly, this final rule to amend such regulations may be signed by 
the Secretary of Homeland Security (or his delegate).

List of Subjects in 19 CFR Part 111

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

Amendments to the CBP Regulations

    For the reasons given above, part 111 of title 19 of the Code of 
Federal Regulations (19 CFR part 111) is amended as set forth below:

PART 111--CUSTOMS BROKERS

0
1. The authority citation for part 111 continue to read as follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized 
Tariff Schedule of the United States), 1624, 1641.
    Section 111.3 also issued under 19 U.S.C. 1484, 1498;
    Section 111.96 also issued under 19 U.S.C. 58c, 31 U.S.C. 9701.


Sec.  111.11  [Amended]

0
2. In Sec.  111.11, paragraph (a)(4) is amended by removing the words 
``a written'' and adding in its place the word ``an''.


Sec.  111.12  [Amended]

0
3. In Sec.  111.12, paragraph (a) is amended by removing the word 
``written'' from the two places that it appears in the fifth and sixth 
sentences.


Sec.  111.13  [Amended]

0
4. In Sec.  111.13:
0
a. The section heading is revised;
0
b. Paragraph (a) is amended by:
0
1. Removing the word ``written'' in the first sentence;
0
2. Removing the words ``and graded at'' in the second sentence and 
adding in their place the word ``by''; and
0
3. Removing the phrase ``Headquarters, Washington, DC'' from the second 
sentence;
0
c. Paragraphs (b) through (d) and (f) are revised.
    The revisions read as follows:


Sec.  111.13  Examination for individual license.

* * * * *
    (b) Basic requirements, date, and place of examination. In order to 
be eligible to take the examination, an individual must on the date of 
examination be a citizen of the United States who has attained the age 
of 18 years and who is not an officer or employee of the United States 
Government. CBP will publish a notice announcing each examination on 
its Web site. Examinations will be given on the fourth Wednesday in 
April and October unless the regularly scheduled examination date 
conflicts with a national holiday, religious observance, or other 
foreseeable event and the agency publishes in the Federal Register an 
appropriate notice of a change in the examination date. An individual 
who intends to take the examination must complete the electronic 
application at least 30 calendar days prior to the scheduled 
examination date and must remit the $390 examination fee prescribed in 
Sec.  111.96(a) at that time. CBP will give notice of the exact time 
and place for the examination.
    (c) Special examination. If a partnership, association, or 
corporation loses the required member or officer

[[Page 29719]]

having an individual broker's license (see Sec.  111.11(b) and (c)(2)) 
and its license would be revoked by operation of law under the 
provisions of 19 U.S.C. 1641(b)(5) and Sec.  111.45(a) before the next 
scheduled examination, CBP may authorize a special examination for a 
prospective applicant for an individual license who would serve as the 
required licensed member or officer. CBP may also authorize a special 
examination for an individual for purposes of continuing the business 
of a sole proprietorship broker. A special examination for an 
individual may also be authorized by CBP if a brokerage firm loses the 
individual broker who was exercising responsible supervision and 
control over an office in another district (see Sec.  111.19(d)) and 
the permit for that additional district would be revoked by operation 
of law under the provisions of 19 U.S.C. 1641(c)(3) and Sec.  111.45(b) 
before the next scheduled examination. A request for a special 
examination must be submitted to the Executive Assistant Commissioner, 
Office of Trade, in writing and must describe the circumstances giving 
rise to the need for the examination. If the request is granted, the 
Executive Assistant Commissioner, Office of Trade or his/her designee, 
will notify the prospective examinee of the exact time and place for 
the examination. If the individual attains a passing grade on the 
special examination, the application for the license may be submitted 
in accordance with Sec.  111.12. The examinee will be responsible for 
all additional costs incurred by CBP in preparing and administering the 
special examination that exceed the $390 examination fee prescribed in 
Sec.  111.96(a), and those additional costs must be reimbursed to CBP 
before the examination is given.
    (d) Failure to appear for examination. If a prospective examinee 
advises the Office of Trade at the Headquarters of U.S. Customs and 
Border Protection, Attn: Broker Management Branch, electronically in a 
manner specified by CBP at least 2 working days prior to the date of a 
regularly scheduled examination that he will not appear for the 
examination, CBP will refund the $390 examination fee referred to in 
paragraph (b) of this section. No refund of the examination fee or 
additional reimbursed costs will be made in the case of a special 
written examination provided for under paragraph (c) of this section.
* * * * *
    (f) Appeal of failing grade on examination. If an examinee fails to 
attain a passing grade on the examination taken under this section, the 
examinee may challenge that result by filing a written appeal with the 
Office of Trade at the Headquarters of U.S. Customs and Border 
Protection, Attn: Broker Management Branch, within 60 calendar days 
after the date of the written notice provided for in paragraph (e) of 
this section. CBP will provide to the examinee written notice of the 
decision on the appeal. If the CBP decision on the appeal affirms the 
result of the examination, the examinee may request review of the 
decision on the appeal by writing to the Executive Assistant 
Commissioner, Office of Trade, U.S. Customs and Border Protection, 
within 60 calendar days after the date of the notice on that decision.


Sec.  111.96  [Amended]

0
5. In Sec.  111.96:
0
a. Paragraph (a) is amended by removing the word ``written'' from the 
second sentence and removing the phrase ``$200 examination fee'' in the 
second sentence and adding in its place the phrase ``$390 examination 
fee''; and
0
b. Paragraph (e) is amended by removing the words ``United States 
Customs Service'' and adding in their place the words ``U.S. Customs 
and Border Protection, or paid by other CBP-approved payment method''.

    Dated: June 27, 2017.
Elaine C. Duke,
Deputy Secretary.
[FR Doc. 2017-13829 Filed 6-29-17; 8:45 am]
 BILLING CODE 9111-14-P