Modernization of the Customs Broker Regulations, 63267-63321 [2022-22445]
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Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Rules and Regulations
regulations are provided for by OMB
control number 1651–0034 (CBP
Regulations Pertaining to Customs
Brokers) and by OMB control number
1651–0076 (Recordkeeping
Requirements). This final rule does not
change the burden under these
information collections.
Signing Authority
This regulation is being issued in
accordance with 19 CFR 0.1(a)(1)
pertaining to the Secretary of the
Treasury’s authority (or that of her or
his delegate) to approve regulations
related to certain customs revenue
functions.
Chris Magnus, the Commissioner of
CBP, having reviewed and approved
this document, is delegating the
authority to electronically sign this
document to Robert F. Altneu, who is
the Director of the Regulations and
Disclosure Law Division for CBP, for
purposes of publication in the Federal
Register.
19 CFR Part 24
Accounting, Claims, Exports, Freight,
Harbors, Reporting and recordkeeping
requirements, Taxes.
19 CFR Part 111
Administrative practice and
procedure, Brokers, Penalties, Reporting
and recordkeeping requirements.
Amendments to the CBP Regulations
For the reasons set forth in the
preamble, parts 24 and 111 of title 19 of
the Code of Federal Regulations (19 CFR
parts 24 and 111) are amended as set
forth below.
PART 24—CUSTOMS FINANCIAL AND
ACCOUNTING PROCEDURE
1. The general and specific authority
citations for part 24 continue to read as
follows:
■
Authority: 5 U.S.C. 301; 19 U.S.C. 58a–
58c, 66, 1202 (General Note 3(i), Harmonized
Tariff Schedule of the United States), 1505,
1520, 1624; 26 U.S.C. 4461, 4462; 31 U.S.C.
3717, 9701; Pub. L. 107–296, 116 Stat. 2135
(6 U.S.C. 1 et seq.).
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Section 24.22 also issued under Sec. 892,
Pub. L. 108–357, 118 Stat. 1418 (19 U.S.C.
58c); Sec. 32201, Pub. L. 114–94, 129 Stat.
1312 (19 U.S.C. 58c); Pub. L. 115–271, 132
Stat. 3895 (19 U.S.C. 58c).
§ 24.22
[Amended]
2. In § 24.22:
a. Paragraph (h) is amended by:
i. Removing the phrase ‘‘each district
permit and for’’ in the first sentence;
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PART 111—CUSTOMS BROKERS
3. The general and specific authority
citations for part 111 are revised 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 111.2 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.
4. In § 111.19, revise the section
heading and paragraph (c) to read as
follows:
■
§ 111.19
National permit.
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List of Subjects
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ii. Removing the second sentence; and
iii. Removing the word ‘‘port’’ from
the third sentence and adding in its
place the words ‘‘processing Center (see
§ 111.1)’’; and
■ b. Paragraph (i)(9) is amended by
removing the phrase ‘‘for district
permits, class code 497;’’ from the first
sentence.
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(c) Fees. A national permit issued
under paragraph (a) of this section is
subject to the permit application fee
specified in § 111.96(b) and to the
customs user permit fee specified in
§ 111.96(c). The fees must be paid at the
processing Center (see § 111.1) or
through a CBP-authorized EDI system at
the time the permit application is
submitted.
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■ 5. In § 111.96, revise paragraph (c) to
read as follows:
§ 111.96
Fees.
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(c) Permit user fee. Payment of an
annual permit user fee defined in
§ 24.22(h) of this chapter is required for
a national permit granted to an
individual, partnership, association, or
corporate broker. The permit user fee is
payable with the filing of an application
for a national permit under § 111.19(b),
and for each subsequent calendar year at
the processing Center referred to in
§ 111.19(b). The permit user fee must be
paid by the due date as published
annually in the Federal Register, and
must be remitted in accordance with the
procedures set forth in § 24.22(i) of this
chapter. When a broker submits an
application for a national permit under
§ 111.19(b), the full permit user fee must
be remitted with the application,
regardless of the point during the
calendar year at which the application
is submitted. If a broker fails to pay the
annual permit user fee by the published
due date, the permit is revoked by
operation of law. The processing Center
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will notify the broker in writing of the
failure to pay and the revocation of the
permit.
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Robert F. Altneu,
Director, Regulations & Disclosure Law
Division, Regulations & Rulings, Office of
Trade, U.S. Customs and Border Protection.
Approved:
Thomas C. West, Jr.,
Deputy Assistant Secretary of the Treasury
for Tax Policy.
[FR Doc. 2022–22151 Filed 10–17–22; 8:45 am]
BILLING CODE 9111–14–P
DEPARTMENT OF HOMELAND
SECURITY
U.S. Customs and Border Protection
DEPARTMENT OF THE TREASURY
19 CFR Parts 24 and 111
[USCBP–2020–0009;CBP Dec. 22–21]
RIN 1651–AB16
Modernization of the Customs Broker
Regulations
U.S. Customs and Border
Protection, Department of Homeland
Security, Department of the Treasury.
ACTION: Final rule.
AGENCY:
This document adopts as
final, with changes, proposed
amendments to the U.S. Customs and
Border Protection (CBP) regulations
modernizing the customs broker
regulations. CBP is transitioning all
customs brokers to a single national
permit and expanding the scope of the
national permit authority to allow
national permit holders to conduct any
type of customs business throughout the
customs territory of the United States.
To accomplish this, CBP is eliminating
broker districts and district permits,
which in turn removes the need for the
maintenance of district offices, and
district permit waivers. CBP is also
updating, among other changes, the
responsible supervision and control
oversight framework, ensuring that
customs business is conducted within
the United States, and requiring that a
customs broker have direct
communication with an importer. These
changes are designed to enable customs
brokers to meet the challenges of the
modern operating environment while
maintaining a high level of service in
customs business. Further, CBP is
increasing fees for the broker license
application to recover some of the costs
associated with the review of customs
SUMMARY:
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I. Background
641 authorizes the Secretary of the
Treasury to prescribe rules and
regulations relating to the customs
business of brokers as may be necessary
to protect importers and the revenue of
the United States and to carry out the
provisions of section 641.1
The regulations issued under the
authority of section 641 are set forth in
part 111 of title 19 of the Code of
Federal Regulations (19 CFR part 111)
and provide for, among other things, the
rules for license and permit
requirements; recordkeeping and other
duties and responsibilities of brokers;
the grounds and procedures for the
cancellation, suspension or revocation
of broker licenses and permits, and
monetary penalties in lieu of suspension
or revocation; and, rules pertaining to
the imposition of a monetary penalty,
and fee payment requirements
applicable to brokers under section 641
and 19 U.S.C. 58c(a)(7).
Customs brokers are private
individuals and/or business entities
(partnerships, associations, or
corporations) that are licensed and
regulated by U.S. Customs and Border
Protection (CBP) to assist importers in
conducting customs business. Customs
brokers have an enormous responsibility
to their clients and to CBP, which
requires them to properly prepare
importation documents, file these
documents timely and accurately,
classify and value goods properly, pay
duties, taxes, and fees, safeguard their
clients’ information, and protect their
licenses from misuse.
The existing customs broker
regulations are based on the district
system. A district is the geographic area
covered by a customs broker permit
other than a national permit. Customs
brokers are currently required to
maintain a physical presence within a
district so that the broker is physically
close to the ports of entry within the
district in order to file any paperwork
The Role of Licensed Customs Brokers
in Conducting Customs Business
Section 641 of the Tariff Act of 1930,
as amended (19 U.S.C. 1641), provides
that individuals and business entities
must hold a valid customs broker’s
license and permit to transact customs
business on behalf of others. The statute
also sets forth standards for the issuance
of broker licenses and permits; provides
for disciplinary action against brokers in
the form of suspension or revocation of
such licenses and permits, or
assessment of monetary penalties; and,
provides for the assessment of monetary
penalties against other persons for
conducting customs business without
the required broker’s license. Section
1 The Homeland Security Act of 2002 generally
transferred the functions of the U.S. Customs
Service from the Department of the Treasury to the
Secretary of the Department of Homeland Security
(DHS). See Public Law 107–296, 116 Stat. 2142. The
Act provides that the Secretary of the Treasury
retains the customs revenue functions unless
delegated to the Secretary of DHS. The regulation
of customs brokers is encompassed within the
customs revenue functions set forth in section 412
of the Homeland Security Act. On May 15, 2003,
the Secretary of the Treasury delegated authority
related to the customs revenue functions to the
Secretary of DHS subject to certain exceptions. See
Treasury Order No. 100–16 (Appendix to 19 CFR
part 0). Because the authority to prescribe the rules
and regulations related to customs brokers is not
listed as one of the exceptions, this authority now
resides with the Secretary of DHS. However, the
regulation of user fees is encompassed within the
customs revenue functions set forth in section 412
of the Act. See Appendix to 19 CFR part 0.
broker license applications and the
necessary vetting of individuals and
business entities (i.e., partnerships,
associations, and corporations).
Additionally, CBP is announcing the
deployment of a new online system, the
eCBP Portal, for processing broker
submissions and electronic payments.
Lastly, CBP is publishing a concurrent
final rule document to eliminate all
references to customs broker district
permit user fees (see ‘‘Elimination of
Customs Broker District Permit Fee’’
RIN 1515–AE43) to align with the
changes made in this final rule
document.
DATES: This final rule is effective
December 19, 2022.
FOR FURTHER INFORMATION CONTACT:
Melba Hubbard, Chief, Broker
Management Branch, (202) 325–6986,
melba.hubbard@cbp.dhs.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
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I. Background
II. Discussion of Comments
Subpart A. General Provisions
Subpart B. Procedure to Obtain License or
Permit
Subpart C. Duties and Responsibilities of
Customs Brokers
Subpart D. Cancellation, Suspension, or
Revocation of License or Permit, and
Monetary Penalty in Lieu of Suspension
or Revocation
Subpart E. Monetary Penalty and Payment
of Fees
III. Other Changes
IV. The Benefits of CBP’s New Payment and
Submission System, the eCBP Portal, for
Licensed Customs Brokers
V. Conclusion
VI. Statutory and Regulatory Requirements
A. Executive Orders 13563 and 12866
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
VII. Signing Authority
List of Subjects
Regulatory Amendments
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associated with an entry, entry
summary, or post-summary activity.
Entry, entry summary, and certain postsummary activities are customs business
activities for which a district permit is
required. See 19 CFR 111.1; 111.2(b)(1).
As a rule, all merchandise imported into
the United States is required to be
entered, unless specifically excepted.
The act of entering merchandise
consists of the filing of paper or
electronic data with CBP containing
sufficient information to enable CBP to
determine whether imported
merchandise may be released from CBP
custody. See 19 CFR 141.0a(a).
Additionally, entry summary refers to
documentation that enables CBP to
assess duties, collect statistics on
imported merchandise, and determine
whether other requirements of law or
regulation are met. See 19 CFR
141.0a(b). Pursuant to the existing
regulations, customs business includes
certain post-summary activities such as
the refund, rebate, or drawback of
duties, taxes, or other charges.
The Impact of the Centers of Excellence
and Expertise and the Automated
Commercial Environment on Licensed
Customs Brokers
Two major developments, the
establishment of the Centers of
Excellence and Expertise (Centers) and
the creation of the Automated
Commercial Environment (ACE), have
fundamentally changed the traditional
ways that customs brokers and CBP
interact. After a four-year transition of
operational trade functions from ports of
entry and port directors to Centers and
Center directors, CBP published an
interim final rule in the Federal
Register (81 FR 92978), which codified
the role of the Centers as strategic
locations around the country to focus
CBP’s trade expertise on industryspecific issues and provide tailored
support for importers. This permanent
shift to Centers was made in order to
facilitate trade, reduce transaction costs,
increase compliance with applicable
import laws, and achieve uniformity of
treatment at the ports of entry for the
identified industries. The interim final
rule transferred to the Centers and
Center directors a variety of post-release
trade functions that were handled by
port directors, including decisions and
processing related to entry summaries;
decisions and processing related to all
types of protests; suspension and
extension of liquidations; decisions and
processing concerning free trade
agreements and duty preference
programs; decisions concerning
warehouse withdrawals wherein the
goods are entered into the commerce of
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the United States; all functions and
decisions concerning country of origin
marking issues; functions concerning
informal entries; and, classification and
appraisement of merchandise. With the
transfer of trade functions to the
Centers, a significant portion of these
activities, including entry summary and
post-summary, are now handled directly
by the Centers. The Center structure is
based on subject matter expertise, as
opposed to geographic location, placing
the Centers outside of the district
system. Consequently, the existing
broker regulations based on the district
system do not fully reflect how trade
functions are currently being processed
by CBP.
The other relevant major development
was the creation of ACE. In an effort to
modernize the business processes
essential to securing U.S. borders,
facilitating the flow of legitimate
shipments, and targeting illicit goods
pursuant to the Customs Modernization
Act (Mod Act) (passed as part of the
North American Free Trade Agreement
Implementation Act (NAFTA), Pub. L.
103–182 § 623 (1993)), and the Security
and Accountability for Every (SAFE)
Port Act of 2006 (Pub. L. 109–347, 120
Stat. 1884), CBP developed ACE to
ultimately replace the Automated
Commercial System (ACS) as the CBPauthorized electronic data interchange
(EDI) system.2
2 Pursuant to 19 CFR 143.32(b), an authorized EDI
is defined as any established mechanism approved
by the Commissioner of CBP through which
information can be transferred electronically. In
addition to ACE, which is the system through
which the trade community reports imports and
exports, and the government determines
admissibility, the ACE Secure Data Portal (ACE
Portal), the electronic Customs and Border
Protection (eCBP) portal and the Automated Broker
Interface (ABI) are examples of such authorized
EDIs. The ACE Portal is a web-based entry point for
ACE to connect CBP, trade representatives and
government agencies who are involved in importing
goods into the United States. The eCBP portal,
developed as part of CBP’s Revenue Modernization
(Rev Mod) program, is currently the access point for
a new system for electronic payments of licensed
customs broker fees. When fully implemented, the
eCBP portal will allow for easy collection of many
types of duties, taxes, and fees. Lastly, ABI is a
functionality that allows entry filers to transmit
immediate delivery, entry and entry summary data
electronically to, and receive electronic messaging
from, CBP and receive transmissions from ACE or
any other CBP-authorized EDI system. See 19 CFR
143.32(a). It is a voluntary program available to
brokers, importers, carriers, port authorities and
independent service centers. For additional
information regarding the transmission of entry
summary and cargo release data via an EDI, see the
CBP and Trade Automated Interface Requirements
(CATAIR), specifically the chapter entitled Entry
Summary Create/Update, which is available online
at https://www.cbp.gov/document/technicaldocumentation/entry-summary-createupdate-catair
and the chapter entitled Cargo Release, which is
available online at https://www.cbp.gov/document/
guidance/ace-catair-cargo-release-chapter.
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On October 13, 2015, CBP published
an interim final rule in the Federal
Register (80 FR 61278) that designated
ACE as a CBP-authorized EDI system,
effective November 1, 2015. ACE now
offers the operational capabilities
necessary to enable users to transmit a
harmonized set of import data elements,
via a ‘‘single window,’’ to obtain the
release and clearance of goods. As a
result, the International Trade Data
System (ITDS) eliminates redundant
reporting requirements and facilitates
the transition from paper-based
reporting and other procedures to faster
and more cost-effective electronic
submissions to, and communication
among, government agencies. These
electronic capabilities that allow brokers
to file entry information in ACE reduce
the need for brokers to be physically
close to the ports of entry, as required
under the district permit regulations.
The Availability of a Remote Option for
the Customs Broker License
Examination
On April 21, 2021, the bi-annual
customs broker license exam was
administered at over 120 testing
locations, and for the first time, via
remote proctor delivery. CBP provided
information regarding system
requirements for the remote testing
option, testing room requirements, and
other general exam information on its
website for prospective exam
applicants.3 CBP continues to offer a
remotely proctored exam if the exam
provider is equipped to administer such
type of testing. CBP does want to
emphasize, however, that the
availability of a remote examination is
at CBP’s sole discretion. If a remote
exam is available, applicants who prefer
to take the exam in a remote setting for
convenience or to avoid travel may
select the remote option at the time of
registration for the exam. However, a
remote examination cannot be
requested, a spot might not be assured
due to limited capacity, and the lack of
availability of a remote exam cannot be
appealed. CBP will notify prospective
applicants of whether the remote option
is available at the time the exam is
announced on CBP’s website.
Proposed Rulemaking To Modernize the
Customs Broker Regulations
On June 5, 2020, CBP published a
notice of proposed rulemaking (NPRM)
in the Federal Register (85 FR 34836)
proposing to modernize the customs
3 Information regarding the customs broker
license exam, especially the remotely-proctored
exam, may be found online at https://www.cbp.gov/
trade/programs-administration/customs-brokers/
license-examination-notice-examination.
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broker regulations in part 111 of the
CFR to align with the development of
CBP trade initiatives, including ACE
and the Centers, and reflect the changes
to a more automated commercial
environment for both customs brokers
and importers. Specifically, CBP
proposed to eliminate broker districts
and district permits, and transition all
brokers who hold only a district permit
to a national permit. Further, CBP
proposed to expand the scope of the
national permit authority to allow all
national permit holders to conduct
business throughout the customs
territory of the United States. In
addition, CBP proposed to increase the
license application fee in order to
recover some of CBP’s costs for
reviewing license applications and
vetting applicants. The NPRM provided
for a 60-day comment period, which
ended on August 4, 2020. Concurrently,
CBP published an NPRM in the Federal
Register (85 FR 34549) proposing the
elimination of customs broker district
permit user fees to conform with the
proposed elimination of broker districts
and district permits. CBP received no
comments to the latter NPRM.
II. Discussion of Comments
CBP received 55 documents in
response to the publication of the part
111 NPRM, two of which were duplicate
submissions, and one of which was a
two-part submission by one commenter
discussing the same issue. In effect, 52
different documents were received.
Commenters raised some concerns
about the proposed changes and
recommended changes for
improvement, but overall expressed
support of CBP’s effort to modernize
customs broker regulations, and
welcomed the changes being made to
reflect the reality of a rapidly changing
world of international trade for both
brokers and CBP. Commenters
expressed appreciation for CBP’s
recognizing the broker community’s
needs to have clarity as to their duties
and minimal regulatory burdens to
target the essential needs to protect the
revenue and enforce the relevant laws.
The commenters further acknowledged
CBP’s efforts in providing the least
bureaucratic framework over the years
and collaborating with the broker
community, including the latest effort in
modernizing some of the outdated
reporting requirements. For instance,
one commenter welcomed the addition
of specific language to cover convictions
of committing or conspiring to commit
an act of terrorism in § 111.53 as a
ground for suspension or revocation of
a license or permit. Commenters also
supported the proposed removal of the
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requirement to submit an answer in
duplicate to the charges against the
broker in § 111.62(e) as this change
aligns with the current electronic
business environment.
CBP recognizes a licensed broker’s
vital role in the international trade
environment and in interactions with
clients and CBP. A broker is tasked with
the responsibility to exercise the highest
level of accuracy and knowledge when
filing entries, navigate the complex
nature of international trade, ensure that
the clients’ needs are met timely and
accurately, and facilitate the movement
of legitimate cargo. Brokers need to be
knowledgeable about the governing
rules and regulations as well as any
changes, maintain a good relationship
with clients, and provide a high-quality
service to their clients. CBP determined
that it was important to modernize
customs broker regulations and clarify
existing regulations since the creation of
Centers and the increasingly automated
environment have changed the way
customs business is conducted. Due to
those changes, a broker may need to
make contact with CBP personnel in
parts of the customs territory that are
not within the broker’s district. The
elimination of district permits and
expansion of the scope of activities
allowed under a national permit will
provide brokers with the flexibility to
easily conduct customs business
anywhere within the customs territory
of the United States. In addition, the
elimination of district permits also
eliminates the burden on brokers of
maintaining permits for multiple
districts or appointing subagents in
districts in which they do not have
permits. This change also provides cost
savings for CBP when it comes to the
processing of license and permit
applications.
The changes made to the broker
regulations will increase efficiency and
flexibility as submission requirements
are updated, additional electronic
submission options are provided, and
electronic communication options for
certain submissions are added. This
update of the regulations will further
increase a broker’s professionalism due
to the addition of grounds to justify the
denial of license in § 111.16, the
addition of required information or
arguments in support of an application
during review of the denial of the
application in § 111.19, and a new
reporting requirement in § 111.30 for
inactive brokers.
The submissions received in response
to the NPRM contained comments on
multiple topics regarding the proposed
regulations. The public comments,
together with CBP’s analysis, were
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grouped by topic within a subpart of
part 111, and are set forth below:
Subpart A. General Provisions.
Comment: CBP proposed adding a
new term ‘‘Designated Center’’ for the
submission of applications for a broker’s
license by an individual, partnership,
association, or corporation. Several
commenters expressed concern with the
use of this term as the structure of
Centers is not necessarily conducive to
broker management, nor were the
Centers designed to include brokers
filing entries on a broad range of
commodities. The commenters
requested that CBP maintain a dedicated
Broker Management Division or unit
with offices reporting to CBP
Headquarters, including full-time,
dedicated personnel on a national level,
with each broker assigned to one team
or office for management purposes (as
suggested by Commercial Customs
Operations Advisory Committee (COAC)
recommendation No. 10048 (April 27,
2016)). The commenters reasoned that
this approach would ensure a uniform
and efficient process for both CBP and
brokers, and thus proposed to change
the term ‘‘Designated Center’’ to
‘‘Designated Broker Management
Office’’ to better reflect the structure
that is more suitable for broker matters.
Ideally, according to some commenters,
CBP would create a new Center for
broker licensing and management issues
only or expand the broker management
division in CBP’s Office of Trade.
Response: CBP appreciates the
opportunity to clarify that brokers will
not be assigned to a specific Center, and
CBP will not create a Center solely for
broker licensing and management
issues. Brokers operate within a unique
business model as their clientele have
different Center interests, thus, an
assignment to one specific Center would
not be beneficial to brokers’ business
filings concerning different
commodities. In addition, to prevent
any disruption of dealings with brokers
in case of personnel changes or
workload distributions within Centers,
CBP does not see a benefit to assigning
a broker to a particular Center. Broker
management officers (BMOs), who are
Center personnel at 41 port locations
throughout the U.S. customs territory,
will handle the administration of all
activities conducted under a broker’s
license and permit. Prior to the creation
of Centers, these BMOs were assigned to
a port and managed broker applications
and other submissions. With the
transition of certain trade functions
from ports to Centers, the assignment of
BMOs transitioned as well. Thus, Center
personnel will process new applications
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for licenses and permits and will also
manage submissions provided by
already-licensed brokers. A current
broker will continue to contact the BMO
at a location where the broker’s license
was issued. After the effective date of
this final rule, a BMO will also process
any matters relating to a national permit
of a broker at that same location. A
district permit holder whose permit is
transitioned to a national permit will
continue to contact the BMO at the
location where the broker’s license was
issued. Any new applicant for a permit
or license should contact a BMO in the
geographic area where the applicant is
located and/or intends to do customs
business. CBP has published a chart
with all of the locations and contact
information for BMOs on its website.4
In order to better describe CBP’s
responsibilities for broker licensing and
management issues, CBP changed the
proposed term ‘‘Designated Center’’ to
‘‘Processing Center’’ in this final rule. A
‘‘Processing Center’’ means the broker
management operations of a Center that
processes applications for a license
under § 111.12(a) and applications for a
national permit under § 111.19(b) for an
individual, partnership, association, or
corporation, as well as submissions
required in part 111 by already-licensed
brokers.5 The revision of the proposed
language clarifies that brokers are not
assigned to a specific Center, and that
Center personnel at any of the 41 port
locations may process applications and
submissions, depending on the broker’s
filings and location. All references to
‘‘Designated Center’’ in the proposed
regulations are updated in this final rule
to reference ‘‘Processing Center.’’ In
addition, CBP removed any references
to ‘‘director of’’ a Center throughout part
111 to simply state ‘‘Processing Center’’,
keeping the regulatory language more
general. This change aligns with the
statutory language in 19 U.S.C. 1641
that references ‘‘employees of U.S.
Customs and Border Protection’’ or
‘‘duly accredited officers’’ without
pointing out a specific title or position
within CBP. This change also provides
the agency more flexibility in processing
4 The BMO contact information for the 41 port
locations may be found online at https://
www.cbp.gov/trade/programs-administration/
customs-brokers by clicking on the tab titled
‘‘Broker Management Officer (BMO) Contact
Information’’.
5 In this document, CBP uses ‘‘Processing Center’’
in quotes to denote a replacement of the proposed
term ‘‘Designated Center’’; when the words
‘‘processing Center’’ without quotation marks are
used, CBP is referring to the Center of Excellence
and Expertise that is actually performing a
processing function.
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brokers’ applications and submissions,
without any changes for the brokers.
Comment: Two commenters asked for
clarification as to how brokers would be
assigned to a Center, including contact
information for the designated Center.
Another commenter sought further
clarification on the process that CBP
will use to assign brokers with existing
national permits to a specific Center.
One commenter suggested that a
primary point of contact be assigned for
each of the ten (10) Centers.
Commenters also asked that CBP have
a reporting structure in place to allow
for an escalation process so brokers
could properly address a designated
broker management office. Some
commenters argued that a broker should
also have the opportunity to request a
specific Center to align with the broker’s
business model familiar with the
commodities, transactions and types of
entry processes by the broker.
Additionally, some commenters
suggested that there should be an
avenue for a broker to request reassignment to a specific Center.
Response: As there will be no
designated Centers, there will be no
assignment to a Center by CBP, and
brokers will not have to request an
assignment to a specific Center or a reassignment to another Center. As
mentioned above, BMOs who are
currently managing broker submissions
and questions will continue to do so. If
a broker is unsatisfied with the handling
of a matter by a BMO, a broker may
escalate an issue to the supervisor of the
BMO. The names of the Assistant Center
Directors, who may be contacted for
purposes of escalation, are listed on the
contact information chart mentioned
above.
Comment: One commenter suggested
that ‘‘certain functions,’’ as mentioned
in the NPRM, that were previously
performed by the port director and
transitioned to the Center director,
should be clarified in the ‘‘Broker
Management Handbook’’ and the
‘‘Centers of Excellence and Expertise
Trade Process Document’’ to provide
clear policy direction to CBP and the
trade community in order to assist with
a smooth transition to a Center. The
commenter further stated that CBP must
consider a full transition of all brokers
to a designated Center versus a staged
approach. The commenter
recommended further that the Centers
prepare for the transition and
implement their oversight at the same
time, ensuring a fair and consistent
treatment of brokers. The commenter
also strongly recommended that CBP
consider a broker working group which
would provide feedback to the Centers
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on operational trade and post-summary
functions, mirroring the current working
group in place today.
Response: The ‘‘Centers of Excellence
and Expertise Trade Process Document’’
already includes most of the
information regarding the transition
from ports to Centers. Any updates
made with this final rule will be
communicated to the broker community
on CBP’s website. Additionally, CBP has
created a guidance document containing
operational information regarding the
regulatory changes, as well as general
information on various broker matters.
This document will be published
concurrently with the publication of
this final rule. In time for the
publication of this final rule, CBP will
issue additional specific operational
guidance regarding certain regulatory
changes on CBP’s website.
As mentioned above, current license
and permit holders will continue to
contact the BMO who has been
processing brokers’ licensing and
permitting matters. Center personnel are
ready and able to continue to do so. To
ensure uniformity among Center
personnel and efficiency in handling
broker matters, BMOs at the various
locations will continue to receive
guidance from CBP Headquarters
regarding the implementation of any
updates or changes to current processes.
CBP will continue to exercise oversight
over the BMO locations to ensure that
BMOs apply the same standards, and
process broker submissions and respond
to questions from brokers consistently
and uniformly.
Regarding the request for CBP to
consider a working group, CBP will
continue general broker outreach and
keep the broker community informed of
any changes through various channels,
such as Cargo System Messaging Service
(CSMS) messages, webinars, and
postings on CBP’s website. Accordingly,
a specific working group is not needed
at this time.
Comment: Another commenter
acknowledged the importance of
building a strong connection between
the Centers and brokers but stressed that
it is crucial that CBP avoid severing the
relationship between brokers and port
directors entirely. The commenter stated
that a strong relationship is key in the
efficient facilitation of cargo and
merchandise. As there is no proposed
regulatory language regarding any
administrative actions that include port
directors, the commenter asked that CBP
clarify this point in the final rule.
Response: CBP recognizes the
importance of the relationship between
the brokers and port directors and
assures the trade community that port
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directors will continue to be involved.
Port directors or their designees will
present the brokers’ licenses in locations
where there is no Center director, or
Assistant Center director, and CBP will
ensure that the port and Center
management maintain open
communications regarding local broker
issues. However, ultimately, Center
directors maintain the final authority
over any decisions pertaining to broker
issues. CBP does not believe that the
regulation needs to be amended.
Comment: One commenter agreed that
reliable channels of communication
between CBP and the brokers are
essential but disagreed with the
requirement to designate a primary
location pursuant to the proposed
definition of ‘‘broker’s office of record’’
in § 111.1 for overseeing the
administration of the part 111
provisions. The commenter proposed to
revise the definition to include language
which clarifies that the office of record
is the primary location that acts as the
point of contact (emphasis added) for
the administration of the provisions of
part 111 because businesses may not
always have one location that oversees
all the activities conducted under a
national permit.
Another commenter suggested that
CBP utilize electronic reporting systems
as the method of communication rather
than designating a specific location. The
commenter argued that flexibility of
administration and effective
communication are not dependent on
location.
Response: CBP disagrees with the first
commenter’s request to modify the
definition of the broker’s office of
record. CBP determined that the
proposed definition should be adopted
because the primary office that oversees
the administration of all activities
conducted under a national permit may
be different from the primary office that
acts as the point of contact. The
addition of the words suggested by the
commenter would change CBP’s
intended meaning of this definition. As
district offices will no longer exist, CBP
needs to not only know the point of
contact for the administration of the part
111 regulations, but also the location
that has been identified as the office
overseeing the transactions occurring
under the national permit. This may not
be the only location through which
broker activities occur, but it would be
the primary location to which CBP
would send correspondence and where
CBP would conduct a physical
inspection pursuant to § 111.27.
Moreover, the primary location is also
the address that is provided in the
application for a national permit and
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must be kept up to date for so long as
a broker holds a license and permit.
In response to the second commenter,
CBP is already utilizing electronic
reporting tools, such as ACE and the
eCBP portal, and is using email when
corresponding with a broker. The eCBP
portal is CBP’s new payment and
submission system, streamlining the
payment and submission process for
broker examination applications and
triennial status reports. Additional
reporting capabilities for brokers will
follow, as discussed in more detail
below in Section IV. Despite the
availability of the above-mentioned
electronic reporting tools, a broker has
the responsibility to establish an actual
location for purposes of visits and
audits but is free to determine where to
establish his or her office(s) within the
U.S. customs territory. CBP understands
that flexibility is needed when it comes
to establishing a primary office,
especially during the COVID–19
pandemic, which caused many brokers
to work from home. Thus, CBP
appreciates the opportunity to clarify
that the primary location does not have
to be an office location but can be the
broker’s home as long as there is a
physical location at which the broker
can be reached.
Comment: One commenter suggested
that CBP make a small change in the
definition of ‘‘permit’’ in § 111.1 by
replacing the word ‘‘any’’ with ‘‘a’’ to
clarify that CBP requires only one
permit per business, even if a business
operates a drawback business and a
consulting business, or an entry
business.
Response: CBP agrees with the
commenter. In the NPRM, CBP already
proposed this change, and now finalized
this change to clarify that there is only
one national permit that a broker needs
to hold in order to conduct customs
business within the U.S. customs
territory.
Comment: Several commenters
expressed support for the elimination of
the district permits as it reflects a shift
toward modern practice of working with
the Centers and filing entries in ACE.
However, one commenter requested
clarification of CBP’s statements in the
preamble of the NPRM that the granting
of a national permit to current district
permit holders would be automatic, but
that CBP would, at the same time,
provide guidance regarding the permit
transition upon the adoption of the final
regulations. The commenter stated that
the need to provide further instructions
as to the transition did not seem to make
the transition ‘‘automatic’’. In addition,
the commenter asked whether there
would be a grace period to ensure an
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uninterrupted and smooth transition.
Lastly, the commenter also stated that
the grandfathering rules should be
included in the regulation, and not
merely in the preamble, as they are
critical to a smooth transition.
Response: CBP appreciates the
opportunity to clarify that the transition
for a district permit holder to a national
permit will be automatic, without any
actions to be taken by the brokers. CBP
will use the ACE data that is on file for
each district permit holder who or
which does not already have a national
permit and automatically create a
national permit for each current district
permit holder. In addition, to ensure an
uninterrupted transition, active district
permits will not be cancelled until all
national permits have been issued.
District permit holders will be able to
continue to conduct customs business
without any interruptions or delays.
CBP will notify current district permit
holders by email (if an email address is
on file with CBP) that a new national
permit will be issued; otherwise, CBP
will notify by mail at the permit
holder’s business location on file. The
transition of permits will occur between
the date of publication of this final rule
and the date of effectiveness of the final
regulations, which will be 60 days after
publication. In addition to the
notification of the permit holders by
email or mail, CBP will issue a CSMS
message informing district permit
holders of the transition to national
permits.
With regard to the transition of the
district permits to national permits, it is
a one-time event and, thus, there is no
need for including the transition to
national permits in the regulations. Any
new applicants for a national permit
will apply pursuant to the final
regulations.
Comment: Three commenters
expressed disagreement with CBP’s
proposal to eliminate the district
permits. One commenter argued that
eliminating the district permits would
drastically affect the broker’s ability to
provide optimum responsible
supervision and control over brokerage
operations. Brokers should at least have
one permit holder per district. The
commenter explained that in some
cases, a face-to face meeting with a
national permit holder might be
impossible, so the district permit holder
would be able to have such a meeting.
It would also be more convenient and
more time efficient to resolve questions
quickly with a district permit holder
who is located closer to a CBP office. In
addition, a local expert is more familiar
with the port nuances, staff, and
different hours of operations, to name a
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few. With the proposed elimination, a
district permit holder might consider
not renewing the individual license,
which could lead to the elimination of
hundreds, if not thousands, of licenses,
which in a time when import volumes
are increasing seems unreasonable.
Response: CBP understands that the
transition from a district permit system
requiring multiple local permits to a
single national permit may raise new or
unique concerns for customs brokers in
ensuring proper exercise of responsible
supervision and control over the
customs business they conduct.
However, CBP disagrees with the
commenter that responsible supervision
and control will be more difficult to
maintain because customs brokers will
no longer need to expend time and
resources monitoring several district
offices. Brokers may consolidate
operations and focus on a single
nationally permitted office to ensure
that optimal responsible supervision
and control is maintained. Under the
national permit system, customs brokers
may also choose to continue to operate
locally by liaising with the port where
entries are filed and imports are
released from customs custody, while
conducting customs business and
engaging with clients at a national level.
Regardless of whether a broker decides
to eliminate offices or personnel in a
particular location or continues to
conduct customs business in its current
locations, brokers remain responsible
for the customs business they perform
and over which they have supervision
no matter where that is occurring under
the purview of their license. Existing
responsibilities of a broker do not
disappear simply because district
permits are eliminated. In addition,
prior to the publication of the NPRM,
CBP had conducted outreach to the
broker community through webinars,
port meetings, and broker association
meetings to solicit feedback on
brokerage needs in the modern business
environment. COAC had recommended
that CBP enable brokers to operate
through a single, national permit, in
light of the changes to CBP’s operational
structure and growing technological
capabilities. CBP incorporated the
broker community’s feedback and
COAC’s recommendation in the final
regulations, reflecting the modern
technological and business environment
of customs brokers, and highlighting the
importance of electronic process
advancements to communicate with
local ports, and to submit broker
information and entry filings.
It is CBP’s goal to ensure that the
communication between brokers and
CBP (ports and Centers) is easy and
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efficient. CBP always strives to improve
the dialogue with brokers, as
exemplified by CBP’s ongoing effort to
utilize electronic tools for reporting and
communicating. If in-person meetings
are not possible due to timing or
distance, meetings can be held via video
conferencing to quickly and efficiently
resolve any questions or concerns. A
current district permit holder who does
not hold a national permit prior to the
transition to national permits will
possibly have to familiarize himself or
herself with the nuances of a particular
port, hours of operation and particular
staff. However, the benefits gained from
the elimination of district permits and
the transition to one national permit
will outweigh the initial inconveniences
that some brokers may experience.
Comment: One commenter argued
that because customs business is
generally conducted in connection with
logistics and handling of cargo, both
customs business and logistics would
become more consolidated outside the
ports without any consideration for the
local ports’ interests, including revenue
in connection with those services. In
addition, responsible supervision and
control of customs business would
change and prove much more difficult
in a remote setting. The commenter is of
the opinion that if a broker wishes to
perform customs business in a certain
physical location, he or she should be
required to have a permit issued by that
local port.
Response: CBP does not agree with
the commenter’s concern. When it
comes to logistics and cargo handling,
local ports will still be involved.
Revenue collection will continue to be
carried out at the ports. Supervision
over employees who are not local will
continue to be exercised, especially in
light of the updated responsible
supervision and control standards,
adding, among other factors, the
requirement that brokerage firms
employ a sufficient number of licensed
brokers to satisfy the supervision
standard, and the requirement for new
permit holders to have a supervision
plan in place to ensure that reasonable
supervision and control is exercised
over the customs business conducted
under a national permit. In response to
this comment, CBP further wishes to
emphasize the importance of the
accuracy and completeness of broker
submissions to ensure that CBP has
sufficient information available to
exercise its oversight over broker
operations.
National permits cover local ports
across the U.S. customs territory; thus,
a broker may still perform customs
business in a specific location if the
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broker so chooses. The national permit
allows customs business within the
entire U.S. customs territory and for
brokers to perform any activities
allowed under the permit, thus
providing a broker with the choice of
where to perform customs business and
lessening the burden on a broker to
work within the scope of a district
permit for a geographic area. These
regulatory changes will benefit the
customs broker community without
CBP’s losing oversight over broker
entities responsible for supervising their
employees.
Comment: Several commenters
recommended that CBP define ‘‘customs
business’’ in § 111.3 and explain when
a license is required and when it is not.
One commenter stated that the term
‘‘customs business’’ should be redefined
to reflect the commercial activities and
the roles the individual parties play in
a transaction. The commenter explained
that customs business can mean
something different for different
brokers, depending on what role the
broker plays in a transaction, from the
mere gathering of data for submission to
assisting an importer with the entire
importation process.
Response: CBP disagrees with the
commenters that a revised definition of
customs business is needed, as the
applicable statute and regulations
already provide extensive definitions.
Section 1641(a)(2) of title 19 of the
United States Code defines ‘‘customs
business’’ as those activities involving
transactions with CBP concerning the
entry and admissibility of merchandise,
its classification and valuation, the
payment of duties, taxes, or other
charges assessed or collection by CBP
upon merchandise by reason of its
importation, or the refund, rebate, or
drawback thereof. ‘‘Customs business’’
also includes the preparation, and
activities relating to the preparation, of
documents or forms, the electronic
transmission of such documents,
invoices, bills, or parts thereof, which
are intended to be filed with CBP in
furtherance of such activities. The
regulatory definition in § 111.1 mirrors
the statutory definition in section
1641(a)(2), except for the additional
explanation that ‘‘corporate compliance
activity’’ is not considered customs
business. In addition, CBP issued a
Headquarters Ruling Letter
(Headquarters ruling) H272798 (January
26, 2017), which provided an in-depth
analysis of what customs business
entails in several different scenarios
provided by the ruling requester.6 The
6 The cited Headquarters ruling, and other
Headquarters rulings mentioned in this final rule,
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63273
ruling serves as guidance to other
brokers who encounter the same
scenarios. CBP does not believe that
further explanations or clarifications are
needed.
The commenter correctly pointed out
that the role of a broker in a specific
transaction depends on the broker’s
involvement and knowledge of the facts,
thus, decisions as to what constitutes
customs business are made in a case-bycase analysis to take into account the
specific facts and circumstances. If a
broker is unsure whether a certain
transaction is considered customs
business, he or she can request a ruling
pursuant to 19 CFR 177.1.
Comment: Several commenters raised
concerns with respect to the interaction
of § 111.3, concerning customs business,
and § 111.2(a)(2) concerning
transactions for which a customs
broker’s license is not required. The
commenters stated that the proposed
§ 111.3 only mentions the customs
broker’s location and point of contact,
along with a reference to § 111.1 for the
definition of customs business.
Meanwhile, § 111.2(a)(2) lists
transactions for which a license is not
required, and thus, which fall outside of
the customs business definition. The
commenters suggested that, in order to
avoid any confusion, CBP either state in
§ 111.2(a)(2) that the listed transactions
are not considered customs business or
list the specific transactions in § 111.3
and clarify that because they do not
constitute customs business, they do not
require a license. One commenter
asserted that CBP should make it clear
in § 111.3 that customs business must be
conducted within the U.S. customs
territory, as opposed to the transactions
listed in § 111.2(a)(2), which may be
conducted outside of the U.S. customs
territory.
Response: CBP disagrees with the
commenters’ suggestion to crossreference the two mentioned
regulations. CBP believes that the
regulations, as written, make clear that
a customs broker’s license is required to
conduct customs business, and that
customs business must be conducted
within the U.S. customs territory.
Whether a transaction that is not
specifically mentioned in the statutory
definition of section 1641(a)(2) or in the
regulatory definition in § 111.1 is
considered customs business can be
determined by requesting a ruling, as
mentioned above. CBP cannot
exhaustively list all transactions that are
may be viewed in CBP’s searchable database, the
Customs Rulings Online Search System (CROSS),
which may be found on CBP’s website at https://
rulings.cbp.gov/home.
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(or are not) covered by the customs
business definition. A determination as
to whether a specific activity is
considered customs business is based
on a fact-specific analysis, which is
better addressed in a CBP ruling letter
than a regulation.
Comment: Two commenters
expressed disagreement with the
requirement in § 111.3(b) for a broker’s
designation of a knowledgeable point of
contact to be available to CBP ‘‘outside
of normal operating hours’’. One
commenter argued that this requirement
goes beyond the requirements set forth
in 19 U.S.C. 1641. Another commenter
argued that this requirement should
only pertain to cargo security matters,
such as Customs Trade Partnership
Against Terrorism (CTPAT) matters, and
CBP should clarify that in the
regulation.
Response: CBP disagrees with the
commenters. Due to the shift from
multiple district permits (and multiple
points of contact) to one national permit
(and one point of contact), the one
individual who is a knowledgeable
point of contact for a broker needs to be
available to cover all the ports of entry
where the brokerage enters goods,
which could mean coverage beyond
normal operating hours of any one port
of entry. Although CBP does not require
24-hour availability, CBP does need one
point of contact to cover the operating
hours across all time zones to address
situations where a port may need to
contact an importer regarding the
release of goods. While questions
relating to the CTPAT program may
certainly occur outside of normal
operating hours, those are not the only
situations that are covered.
Comment: One commenter stated that
§ 111.3(a) does not address the use of
offshore resources to assist importers
and/or licensed brokers with the
classification process under the
Harmonized Tariff Schedule of the
United States (HTSUS). The commenter
requested clarification on three
scenarios: (1) whether § 111.3(a)
prohibits the classification of goods
either at the four- or six-digit HTSUS
levels by unlicensed offshore resources
located outside of the customs territory,
if the HTSUS codes will be used for the
purpose of making customs entry
globally, including in the United States
(and whether the answer would be
different if the offshore resources were
employees of a U.S. importer or U.S.
licensed broker); (2) whether § 111.3(a)
prohibits the classification of goods
either at the eight- or ten-digit HTSUS
levels by unlicensed offshore resources/
persons located outside of the customs
territory if a U.S. importer or U.S.
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licensed broker only uses this
classification as a resource to determine
the classification of goods consistent
with Headquarters ruling H272798; 7
and, (3) whether a U.S. licensed broker
is permitted to use acceptable sampling
methods to review the classification
determinations undertaken by its
employees (or unlicensed offshore
resources if scenarios (1) or (2) above are
permissible) to assist with satisfying the
‘‘responsible supervision and control’’
and ‘‘due diligence’’ standards in
§§ 111.28(a) and 111.39(b).
With regard to the third scenario, the
commenter noted that the use of
statistical sampling methods is
explicitly codified in the customs
regulations, for instance, in 19 CFR
162.74(j), with respect to prior
disclosures, and 19 CFR 163.11(c) with
respect to customs audits. Thus, the
regulations in part 111 would benefit
from the inclusion of specific guidance
regarding the acceptability of statistical
sampling methods for the purposes of
satisfying the responsible supervision
and control standard of § 111.28(a) and
the ‘‘due diligence’’ standard of
§ 111.39(b). The commenter further
suggested to add the adequacy of a
satisfying technique as a 16th factor for
responsible supervision and control in
§ 111.28(a) that CBP may consider, and
the final rule should also include
specific guidance addressing the
sampling methods that would be
acceptable to CBP.
Response: CBP has clarified in
Headquarters ruling H045695 (October
15, 2010) that classification at the sixdigit HTSUS level does not constitute
customs business. In addition,
classification at a level lower than six
digits, such as the four-digit HTSUS
level, is not considered customs
business either. Even though CBP
neither regulates non-customs business,
nor whether a domestic importing
company uses foreign staff to conduct
non-customs business, U.S. licensed
brokers are required to exercise special
caution to ensure that any unlicensed
contractor or employee operating on
behalf of the brokerage abroad does not
perform any tasks that may cross the
7 Headquarters ruling H272798 held that a
company would not be unlawfully engaged in the
conduct of ‘‘customs business’’ by creating a tariff
classification database to be used by a licensed
broker in preparing to file an entry so long as the
company issues a disclaimer cautioning clients that
the specific tariff classification to be filed for an
entry of merchandise must be determined by a
licensed customs broker. The disclaimer must also
caution that the opinion of the broker takes priority
over the proposed classification in the database.
Creation of a classification database is permissible
only if the database is used as a resource and will
not direct a client or a licensed customs broker in
the preparation or filing of a specific entry.
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line into conducting customs business.
See Headquarters ruling H302355
(January 29, 2019).
Regarding scenario (2), generally,
classification determinations at the
eight- and ten-digit HTSUS levels are
considered customs business, and
customs business must be conducted by
a licensed broker. The term ‘‘resources’’
used by the commenter is vague and
CBP is not able to fully respond to this
comment as to whether such advice
would constitute impermissible
engagement in customs business. The
commenter should seek a ruling to
determine whether the specific proposal
is permissible. However, in
Headquarters ruling H272798 (January
27, 2018), CBP cautioned a requester,
citing Headquarters ruling H115248
(August 28, 2011), that ‘‘even when
there is a ‘possibility’ that classification
information will end up on an entry, a
broker’s license is required ‘to gather
classification data which will be
reflected on the entry.’ ’’
To respond to the commenter’s third
scenario, in general, the use of sampling
methods is an adequate technique, but
it depends on the circumstances of a
particular situation whether a specific
sampling technique is sufficient to
ensure responsible supervision and
control pursuant to § 111.28(a). The due
diligence standard in revised paragraph
(b) of § 111.39 requires that a broker
ascertain the correctness of any
information which the broker imparts to
a client, thus, certain sampling
techniques may or may not be
appropriate to exercise due diligence,
depending on the facts of the specific
situation.
The commenter points to 19 CFR
162.74(j), which states that a private
party may use statistical sampling to
‘‘disclose the circumstances of a
violation’’ and for calculation of lost
duties, taxes, and fees or lost revenue
for purposes of prior disclosure,
provided that the statistical sampling
satisfies the criteria in 19 CFR
163.11(c)(3). Section 163.11 generally
sets forth the ‘‘audit procedures’’ for
CBP auditors pursuant to 19 U.S.C.
1509(b). CBP believes that those cited
regulations are not geared towards
broker audits; the notable difference
being that the sampling results are
submitted to CBP in a prior disclosure,
whereas the results of a broker’s own
compliance activities (e.g., review of
classification determinations) are not
submitted to CBP. CBP does not have
any obligation to instruct brokers on
how to conduct their own audits, and,
thus, CBP does not agree that the use of
adequate sampling methods be added as
a 16th factor in paragraph § 111.28(a), or
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that CBP provide additional guidance as
to adequate sampling methods.
Comment: One commenter stated that
CBP should confirm that § 111.3(a) does
not require that any activity falling
within the definition of ‘‘corporate
compliance activity’’ in § 111.1,
including potential classification
support by a related business entity, be
conducted within the U.S. customs
territory.
Response: The last sentence of the
‘‘customs business’’ definition in § 111.1
specifically states that ‘‘corporate
compliance activity’’ is not considered
customs business. Section 111.3(a)
states that customs business must be
conducted within the U.S. customs
territory, meaning non-customs business
need not be conducted within the U.S.
customs territory. CBP believes that the
regulations are clear and additional
clarification is not needed.
Subpart B—Procedure To Obtain
License or Permit
Comment: Several commenters
expressed support for the proposed
changes in § 111.12 as they eliminate
certain outdated requirements for broker
license applicants. However, one
commenter recommended changing the
requirement under § 111.12(a) to
provide documentation regarding the
applicant’s authority to use a trade or
fictitious name in one or more states in
which the applicant plans to operate.
The commenter argued that under a
port-based system, where ports lacked
access to a centralized database and
asked for documentation regarding the
applicant’s authority to use a trade or
fictitious name in a state other than the
applicant’s home state, that was a
reasonable request; however, in an
automated world with a single license
and national permit and where the
broker’s filer code is linked to the
broker’s information in ACE, this is no
longer practical or necessary. Other than
with respect to the license and the
broker’s office of record state,
documentation showing that a broker is
operating in additional states
purportedly has no impact on CBP’s
statutory or regulatory authority over
brokers. Therefore, the commenter
proposed to delete the advance notice
requirement with respect to trade names
both with respect to licenses and
permits.
Response: CBP disagrees with the
commenter. If an applicant proposes to
operate under a trade or fictitious name
in one or more states, evidence of the
applicant’s authority to use the name in
each of those states must accompany the
application. CBP needs to know in
which states the applicant is doing
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customs business, along with the name
associated with the applicant’s business.
If the address provided by the broker for
the national permit office is in a
different state from the address
provided for the national license office,
then CBP requires documentation for
both the license and permit. If they are
one and the same and the broker only
operates in one state, then only
documentation for that state is required.
Comment: One commenter raised the
concern that the CBP examination
results letters do not always notify
examinees of their right to appeal the
examination results or mention the 60day deadline to file an appeal, pursuant
to paragraphs (e) and (f) of § 111.13. The
commenter pointed out that the
preamble of the NPRM states that
examinees who wish to appeal the
examination results should submit those
requests in accordance with the
instructions provided in the results
letter. The commenter asked that CBP
make sure that the results letters always
notify applicants of the reasons for the
denial and the right to appeal within 60
days.
The commenter also asked CBP to
clarify in the regulations that applicants
may be represented in their appeals by
an attorney or other agents. The
commenter stated that CBP recently
eliminated language that appeals must
be written in the applicant’s own words;
however, there is still confusion as to
whether an applicant may contract with
an attorney or others to assist with the
appeal.
Response: Regarding the commenter’s
first point, CBP will continue to ensure
that the examination results letters
contain information as to the examinee’s
right to file an appeal, along with
instructions on how to file, and the 60day deadline to submit an appeal. The
results letters contain the examinee’s
score, as well as the minimum passing
score. The results letters for the October
2020 examination also included an
electronic filing option for appeals,
which was proposed in the NPRM, and
has been included in the final
regulation. Additionally, examinees
may find instructions on how to appeal
the exam results on CBP’s website.8
With respect to the ‘‘own words’’
language that the commenter refers to,
results letters still include language that
states that the examinee has to submit
a compelling argument (‘‘in your own
words’’) explaining why the examinee’s
answer is better than CBP’s official
answer, or why the appealed question
8 Instructions on how to appeal may be found
online at https://www.cbp.gov/trade/programsadministration/customs-brokers/how-appeal.
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has no possible correct answer. CBP
continues to use this language in the
results letters because it is expected that
an applicant has the knowledge to draft
the appeal document and provide
arguments that support the appeal for a
particular question. The focus of the
appeal is of course on the articulation of
why the answer provided by the
examinee on the exam should be given
credit. The written examination is a test
of the applicant’s knowledge of the
pertinent material, not someone else’s
knowledge. A third person should not
be the one to write the appeal on behalf
of the examinee; CBP understands,
however, that in some instances a third
person may assist with formulating and/
or submitting the appeal.
Comment: One commenter expressed
support of the scope expansion for the
background investigation in § 111.14 to
include the financial responsibility of
an applicant, and any association with
any individuals or groups that may
present a risk to the security or to the
revenue collection of the United States,
but also noted that the facts to be
investigated under § 111.14 should be
included in the requirements to apply
for a license in § 111.12.
Response: CBP disagrees with the
commenter’s suggestion to include the
non-exhaustive list of factors used in the
background investigation pursuant to
§ 111.14 as requirements for the
application for a license. Section 111.12
describes the formalities of the
application process, which includes the
submission of CBP Form 3124
(Application for Customs Broker
License or Permit), along with the
application fee, and any additional
required documentation pursuant to
paragraph (a). In contrast, § 111.14 lists
facts and circumstances that CBP will
ascertain during the background
investigation to determine whether an
applicant is qualified to hold a license.
The background investigation is a
separate step in the application process
that follows the submission of the
application and fee, and the scope of
each investigation depends on the facts
and circumstances presented by the
applicant and of which CBP becomes
aware during its investigation. Including
all the considerations that are part of
CBP’s background investigation as part
of the general application process would
confuse the requirements for the basic
application process with the
requirements to qualify for a license
after a thorough investigation of more
information by CBP.
Comment: One commenter objected to
the addition of new grounds to justify
the denial of a license in § 111.16(b).
The commenter wrote that no due
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process opportunity is provided to
challenge CBP’s denial of a license.
Response: CBP disagrees with the
commenter. CBP always provides a
reason in the denial notice as to why the
license was not issued; decisions are not
made arbitrarily. Section 111.17 further
provides the applicant the opportunity
to have the denial of the application
reviewed, and upon the affirmation of
the denial of the license, the applicant
has a second opportunity to request an
additional review by the Executive
Assistant Commissioner, Office of
Trade, and a third opportunity to appeal
the decision to the Court of
International Trade. Revised § 111.17(a)
provides greater flexibility to the
applicant and CBP by allowing the
applicant to file additional information
or arguments in support of the license
application, and request to appear in
person, by telephone, or other
acceptable means of communication by
which an applicant may provide further
information to CBP. These avenues
provide sufficient notice and due
process to an applicant under the
regulations.
Comment: Several commenters
expressed concern with the proposed
term ‘‘financial responsibility’’ in
§ 111.16(b)(3) and argued that it should
not be a factor in the determination
whether a license should be denied,
especially during the COVID–19
pandemic. One commenter argued that
CBP could conceivably deny a license
based on a blemish on an applicant’s
credit history, which would be unfair.
One commenter asked CBP to provide a
clear definition of ‘‘pertinent facts’’ in
§ 111.16(b)(5) if CBP wished to penalize
an applicant for the omission of
pertinent facts in the application or
interview. Commenters also expressed
confusion as to what constitutes
‘‘detrimental’’ commercial transactions
in § 111.16(b)(6), especially to whom the
transactions have to be detrimental, and
whether the term could include poor
business decisions that are unrelated to
a brokerage or customs business but are
detrimental to the individual making
the decision. One commenter expressed
great concern with the grounds for
denial of a license in paragraph
§ 111.16(b)(8) that includes ‘‘any other
relevant information uncovered over the
course of the background investigation’’
as it is over-reaching, which the
commenter equated to CBP’s being able
to deny a license for any reason.
Response: CBP appreciates the
opportunity to clarify that the financial
responsibility of a license applicant has
always been an expectation when
determining an applicant’s qualification
to hold a license, as part of the business
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integrity requirement in § 111.16(b)(3).
A business integrity evaluation includes
the provision of financial reports, which
reflect upon the financial responsibility
of an individual. By expressly including
this factor in the final regulation, CBP
confirms that the financial
responsibility of an applicant is part of
the determination whether a license is
issued or denied. Nonetheless, CBP has
always taken into account the personal
circumstances of an applicant when
making a decision. It has been CBP’s
practice to follow up with the applicant
with any questions or concerns that
arise during the review of the provided
information and request additional
information and/or request information
regarding an applicant’s plan to mitigate
any debt or other financial difficulties,
before making the determination to
deny a license.
‘‘Pertinent facts’’ in § 111.16(b)(5) are
those facts that are requested on CBP
Form 3124 when applying for a license,
the facts gathered during the interview
with the applicant, and during the
background investigation. These are the
same pertinent facts about which an
applicant should not make a willful
misstatement under the existing
regulations. Those same facts should not
be omitted, as the omission of those may
be just as significant as a misstatement
of those facts. The addition of the word
‘‘detrimental’’ along with the word
‘‘unfair’’ in § 111.16(b)(6) better reflects
CBP’s intent of including not only
unfair transactions but also those that
would be detrimental, e.g., those that
may cause financial harm, to a client,
CBP, or any other individual or entity
implicated in a commercial transaction.
Whether an applicant’s conduct is
deemed detrimental is determined on a
case-by-case basis, considering the
circumstances surrounding the
commercial transaction.
Lastly, CBP included a catch-all
provision in § 111.16(b)(8) to account
for any other relevant information that
CBP uncovers over the course of the
investigation that may influence CBP’s
decision to accept or deny a license
application, but that is not mentioned in
the non-exhaustive list in § 111.16(b)(1)
through (7). Each application is
reviewed individually, and because
factors (1) through (7) do not cover
every aspect that could lead to a denial
of a license, a provision that covers any
other relevant information is necessary
to assist with CBP’s determination.
Comment: One commenter stated that
the requirement to provide a copy of the
documentation issued by a State or local
government that establishes the legal
status and reserves the business name of
the entity pursuant to § 111.19(b)(3) is
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already on file with respect to the
license. Given that there is now unity
between the scope of the license and
permit, this requirement appears
redundant. Moreover, another
commenter argued that there is no
regulatory reason for other offices
covered by the national permit to
supply such information when the
broker’s office of record is provided.
Therefore, the commenter proposed to
delete this requirement.
Response: While it is true that a
license applicant who proposes to
operate under a trade or fictitious name
in one or more states has to provide
evidence of the applicant’s authority to
use the name in each of those states
pursuant to § 111.12(a), and that
information is already in CBP’s records,
it is possible that a broker has an office
in one state under which the license
application was filed, but then later
applies for a national permit and
provides a different office in a different
state with a different trade or fictitious
name. In this scenario, CBP would not
know about a broker’s second office if
the broker did not provide this
information. Due to the elimination of
district permits and a district permit
holder’s responsibility to provide
information for the local office, CBP
needs to ensure that all the information
regarding the broker’s various offices,
which could be operating in different
states, potentially under different
names, is provided to CBP. Having this
information available enables CBP to
exercise oversight over a broker’s
customs business and verify whether
the broker is exercising responsible
supervision and control in each of the
broker’s customs business locations.
Thus, CBP disagrees with the
elimination of the requirement in
§ 111.19(b)(3).
Comment: More than one commenter
maintained that the proposed
requirement for a supervision plan in
§ 111.19(b)(8) is vague and CBP does not
describe what such a plan would
include. Therefore, CBP should provide
at least minimum criteria for brokers to
be able to determine what such a plan
should look like. Another commenter
stated that it is not clear from the
proposed regulation whether a current
national permit holder is required to
submit a supervision plan, and whether
a current national permit holder is
subject to cancellation of the permit if
CBP deems the supervision plan
unacceptable, or whether there is a
grace period for the broker to adjust the
plan. The commenter also noted that the
NPRM did not state whether single port
or single office brokers are also subject
to filing a supervision plan even though
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effectively they are operating as though
they had a single port permit.
Response: What a supervision plan
should look like depends, among other
things, on the size of a broker entity, the
experience of the employees overseen
by a licensed broker, the complexity of
the customs business, and the types of
transactions that a broker entity
handles. CBP believes it is prudent for
a broker entity to have more
supervision, i.e., more licensed brokers
and/or more training, and guidance for
employees, in place if the broker entity
is large and deals with complex
business transactions. CBP agrees with
the commenters that general guidance
on expectations for a supervision plan is
helpful, and, thus, CBP will provide
such guidance on its website and/or
through other electronic forms of
communication, such as CSMS
messages.
Further, CBP welcomes the
opportunity to clarify that current
national permit holders are not required
to provide a supervision plan pursuant
to the new § 111.19(b)(8), however, CBP
wishes to emphasize that having a
supervision plan in place is highly
encouraged and should be a best
practice for every permit holder. The
same applies to current district permit
holders whose district permit will be
transitioned to a national permit. As for
single port or single office brokers who
currently hold a district permit, or a
national permit, a supervision plan is
not required pursuant to the new
regulations, but will be required of new
permit applicants, even if they only
have a single office or work at a single
port.
Comment: Two commenters stated
that they disagreed with CBP’s proposal
to eliminate the requirement that an
applicant for a license on behalf of an
association or corporation be an officer
(and not only a licensed broker). The
commenters argued that the broker and
CBP are best served when an officer of
an association or corporation
demonstrates knowledge of customs
regulations through its licensed customs
broker designation. The commenters
believe that the current requirement
under § 111.11(c)(2) should remain in
place.
Response: CBP agrees with the
commenter that it is important to have
at least one officer in an association or
corporation, and at least one member in
a partnership who is a licensed broker.
CBP did not propose to eliminate this
requirement in § 111.11(c)(2). CBP
stated in the preamble of the NPRM that
if the application is on behalf of an
association, corporation, or partnership,
then the applicant is not required to be
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an officer but is required to be a
licensed broker. This relaxation of CBP’s
prior practice provides the broker entity
with flexibility as to who may submit
the application for a national permit,
but it does not eliminate the
requirement under § 111.11(c)(2) to have
at least one officer in an association or
corporation, or at least one member in
a partnership under § 111.11(b), who is
a licensed broker. It is further important
to note that the individual applying for
and obtaining the license on behalf of
the entity must be delegated the proper
agency authority to obtain the license
and serve as the license qualifier, thus,
binding the entity with respect to the
customs business it later performs.
Comment: One commenter pointed to
§ 111.16, pursuant to which CBP is
required to specify the reasons for
denial of a license and stated that there
is no comparable requirement to specify
a reason for denial of a permit based
upon the adequacy of a supervision plan
under § 111.19. The commenter
recommended that a permit denial
include a detailed explanation of the
reason(s) for denial, so a broker has
clear direction as to what needs to be
addressed.
Response: CBP includes a reason as to
why a permit application is denied
when issuing a denial letter to an
applicant. CBP does not agree that there
is a need to include language in § 111.19
to state that a reason for the denial will
be provided, merely because of
comparable language in § 111.16.
Comment: Three commenters
suggested that CBP allow brokers to
have multiple national permits if they
maintain separate, although related,
business entities and allow for more
than one licensed broker to qualify for
the permit. The commenters reasoned
that in case of any issues with one
national permit, the broker could
continue to work under a separate
national permit for a related entity.
Response: CBP disagrees with the
commenters. CBP moved from the
district permit system to a national
permit system in order to provide
brokers with the flexibility to conduct
customs business within the entire U.S.
territory with just one license and one
permit. Allowing more than one
national permit for related business
entities defeats the purpose of
eliminating multiple district permits in
favor of one national permit per broker.
The concern that one entity under a
parent company is not exercising
responsible supervision and control and
potentially putting other related entities
at risk, needs to be addressed within the
entity itself. CBP will not provide more
than one national permit to an entity so
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63277
that a broker may have a backup permit
for a related entity in case that entity is
not exercising responsible supervision
and control or not complying with other
laws and requirements.
Additionally, it is CBP’s practice to
send an informed compliance or
warning letter to a broker who is not
complying with regulations. Usually,
CBP provides the broker an opportunity
to address any issues that CBP had
raised as a concern before revoking a
permit. A broker will usually not lose a
permit upon one incident of
noncompliance unless the incident was
so grave that CBP determines that a
broker is no longer qualified to hold a
license to exercise customs business.
Subpart C—Duties and Responsibilities
of Customs Brokers
Comment: Several commenters stated
that the use of the term ‘‘breach’’ in
§ 111.21(b) is vague and overbroad and
should be defined. One commenter
asked whether only breaches that
involve customer data are included in
the regulation. Some commenters stated
that the proposed regulation does not
clarify the types of breaches that are
included, and whether any breaches
need to be reported or only material/
serious breaches. Several commenters
suggested to hold brokers to the CTPAT
cybersecurity standards, and simply
indicate in the regulations regarding
‘‘record of transactions’’ (§ 111.21) and
‘‘responsible supervision and control’’
(§ 111.28) that brokers need to have a
procedure in place to address data
breaches and to report them to CBP as
appropriate. Some commenters also
noted that the proposed regulation is
silent on how a breach should be
reported to CBP.
Response: CBP intends for the
common meaning of ‘breach’ to apply
and does not believe a regulatory
definition is necessary. Some
considerations underlying this new
regulatory provision, however, are
things such as a physical or electronic
intrusion into the broker’s records
whereby any information is
compromised, but particularly
confidential information of the broker’s
clients that might have been viewed,
copied, or used without permission.
Proposed § 111.21(b) specifically states
that records relating to a broker’s
customs business are at issue. The
proposed regulation further states that
‘‘any’’ known breach that affects
customer data, physical or electronic,
will have to be reported. The regulation
does not distinguish between a material/
serious and non-material/non-serious
breach. Pursuant to § 111.21(a),
‘‘records’’ include documents reflecting
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financial transactions as a broker. Any
breach that affects those records that are
maintained in a broker’s customs
business needs to be reported as part of
CBP’s overall risk management to
prevent identity theft.
CBP disagrees with the use of the
CTPAT standard in this context. The
CTPAT standard applies mainly to
importers and cargo carriers who are
partners of the CTPAT program. Very
few brokers are CTPAT partners,
therefore, this standard would not be
applicable to the majority of brokers.
Lastly, CBP wishes to take the
opportunity to clarify that security
incidents, such as a breach discussed
here, that have any effect on the security
posture of CBP must be reported
electronically to the CBP Office of
Information Technology (OIT) Security
Operations Center (CBP SOC) at
cbpsoc@cbp.dhs.gov, and not the
broker’s designated Center, as proposed
in the NPRM. Brokers may call CBP
SOC at 703–921–6507 with questions as
to the reporting of the breach, if any
guidance is needed or if brokers are
unable to send an electronic notification
due to the breach. In addition, CBP
added the email address to § 111.21 as
the method for reporting a breach, and
added the CBP SOC as the appropriate
location for reporting a breach.
Comment: Several commenters
disagreed with the proposed
requirement in § 111.21(b) to provide
notification to CBP within 72 hours of
discovery of any known breach with a
list of all compromised importer
identification numbers as it is
unreasonable. One commenter argued
that if the breach were to happen on a
weekend followed by a holiday, the
broker would already be outside of the
window of time allotted by CBP. Other
commenters pointed out that this
requirement is especially challenging
for brokers who use third-party
information technology (IT) providers.
Such a short time frame may also lead
to incomplete reports. Also, one
commenter argued that the risk of a data
breach seems to be minimal given CBP’s
advance targeting system detecting
anomalies in shipping patterns.
Different commenters suggested
different approaches as an alternative to
the 72-hour requirement, such as an
agreed upon time frame after the initial
reporting of the fact that a breach
occurred; reporting ‘‘as soon as
practicable’’; or, allowing for two weeks
or ten (10) business days for the
investigation and notification of the
breach from the time of discovery.
Another suggestion was to allow for a
process similar to the one set forth in 19
CFR 162.74(b)(4) in the context of prior
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disclosures, providing information
within 30 days of the initial disclosure
date.
Response: As identify theft is a major
concern, CBP requires brokers to
provide any known breach of importer
identification numbers within a short
time frame to CBP. Receiving the
compromised importer identification
numbers soon after the discovery of the
breach will allow for a better targeting
analysis and, thus, enhance CBP’s
overall risk management. However, CBP
understands that 72 hours may in some
instances not be sufficient to provide
CBP with the complete information
regarding the breach. Therefore, CBP
revised the proposed requirement for
brokers to provide electronic
notification of the fact that a breach
occurred and any known compromised
importer identification numbers within
72 hours of discovery. In addition,
within ten (10) business days of the
notification, a broker must
electronically provide an updated list of
any additional known compromised
importer identification numbers. To the
extent that additional information is
discovered, a broker must electronically
provide that information within 72
hours of discovery. The broker is
encouraged to work with CBP to gather
the remaining information as quickly as
possible from the broker’s own system
or a third-party software vendor to
provide a comprehensive report. CBP
believes that the revision of the
proposed language should provide
sufficient time to provide CBP with the
breach information, but also satisfy
CBP’s need to gather and analyze any
breach information soon after its
discovery.
Comment: One commenter stated that
the requirement pursuant to § 111.21(b)
to identify affected records in the
electronic system is far beyond most
brokers’ capability and should instead
be imposed on the software vendors that
CBP certifies. Most brokers use thirdparty software and most smaller brokers
use software hosted by the provider.
The software interfacing with CBP is
approved by CBP and, therefore, CBP
should be requiring these interdiction
tools as part of their certification
requirements. Unless a broker is using
custom software, identification of a
breach and the affected records should
be the responsibility of the CBPapproved software vendor.
Response: CBP agrees that an
agreement between CBP and a CBPapproved software vendor imposes the
requirement on the software vendor to
report any security incidents that have
any effect on the security posture of
CBP. However, a broker has an
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independent responsibility to notify
CBP of any breach that compromised
importer identification numbers, as
discussed above. Also, brokers who do
not engage a CBP-approved software
vendor have the responsibility to
provide the breach information either
from their own server or from a thirdparty software vendor that the broker
employed. Regardless of where the
broker’s information is stored and
maintained, CBP’s revision of the time
frame for the reporting requirement, as
mentioned above, should allow
sufficient time for a broker to provide
the required information.
Comment: One commenter stated that
the notification of the breach to CBP
should be treated as confidential
information because making the breach
public may subject an entity to undue
harm.
Response: CBP treats information
received from brokers as confidential
within the Department of Homeland
Security (DHS), however, information
may be analyzed and possibly released
under the rules pertaining to the
Freedom of Information Act (FOIA), as
amended (5 U.S.C. 552). Section 103.21
of 19 CFR sets forth the procedures with
respect to the production or disclosure
of any documents contained in CBP
files, or any information relating to
material contained in CBP files, in all
federal, state, local and foreign
proceedings when a subpoena, notice of
deposition, order, or demand of a court,
administrative agency or other authority
is issued for such information.
Notifications by brokers of a breach
would be covered under these
provisions.
Comment: One commenter stated that
many companies do not designate one
individual as the party responsible for
brokerage-wide recordkeeping
requirements, as proposed in
§ 111.21(d). In most cases, multiple
individuals are responsible for records
management of policy, legal and
operational matters. Another commenter
stated that CBP should understand that
brokers may provide group mailboxes
and centralized contact information,
monitored by multiple ‘‘knowledgeable’’
persons, which should satisfy the
recordkeeping requirement in
§ 111.21(d).
Response: CBP understands that
within a broker entity, different
individuals may be responsible for
different reporting matters, however,
CBP needs the contact information for
one knowledgeable employee as the
party responsible for brokerage-wide
recordkeeping requirements in case CBP
has any questions or concerns. The
designated individual may contact other
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individuals within the broker entity
who have the knowledge on a particular
recordkeeping matter to address CBP’s
question or concern. Under the new
national permit framework, it will be
especially important to maintain a
current broker point of contact to
facilitate efficient processing of entries
and entry summaries. As to the second
question, a general email address or
group mailbox along with an
individual’s name as the point of
contact is sufficient under § 111.21(d).
Comment: Commenters agree that
paper or hard copy documents, as well
as electronic documents maintained on
a broker’s privately owned, leased, or
controlled server, should be located in
the United States. However, where a
broker uses a public third party to
externally maintain or host the data,
CBP should allow such a party to
maintain or host the data outside of the
United States, so long as that party is an
entity operating and incorporated in the
United States for jurisdictional
purposes. This will provide a broker
with the necessary flexibility to
maintain data, while assuring CBP that
the broker possesses the necessary
authority to obtain such documents,
when necessary. One commenter argued
that so long as the information is kept
securely, it should not matter if the
information is kept within the U.S.
customs territory or not, referring to
Headquarters ruling H292868 (March
10, 2020). Another commenter argued
that software programs exist that allow
a company to file entries and
declarations for multiple countries
while the broker still works in the
United States. The system being used
could be securely accessed using a
website and housed in another country
where the broker entity may have its
corporate entities. Such systems allow
for enhanced corporate reporting and
visibility into their customers’ supply
chains.
Response: A broker’s paper and
electronic records must be stored within
the customs territory of the United
States pursuant to proposed § 111.23(a).
CBP has addressed the particular issue
of maintaining copies and backups of a
U.S. customs broker’s digital records
outside of the U.S. customs territory in
Headquarters ruling H292868 (March
10, 2020). CBP determined in this ruling
that a broker’s electronic records hosted
and maintained by a third-party
software vendor must be maintained on
a server physically located within the
U.S. customs territory. Section 111.23(a)
dictates that a licensed customs broker
may maintain records relating to its
customs transactions ‘‘at any location
within the customs territory of the
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United States’’ in accordance with 19
CFR part 163. It is clear from the
governing statutes (19 U.S.C. 1508,
1509(a)(2)) and regulations that a
broker’s electronic records must be
maintained on a server physically
located within the U.S. customs
territory because this is where CBP has
jurisdiction to issue a summons and
inspect records. Nonetheless, CBP’s
Headquarters ruling also emphasized
that a broker’s duplicate or backup
records may be stored outside of U.S.
customs territory, so long as the
recordkeeping requirements for the
original records are satisfied. However,
to make this position clearer in
§ 111.23(a), CBP added the words
‘‘originals of’’ before the word ‘‘records’’
to clarify that the requirement to
maintain records in the U.S. customs
territory pertains to original records, not
backup records. This clarification does
not change any of the substantive
regulatory requirements and is
consistent with CBP’s prior rulings.
Comment: One commenter asked CBP
to provide greater clarity as to what
constitutes ‘‘records’’. The commenter
argued that certain commercial
circumstances dictate the disclosure of
information that may not be permissible
under the current proposed language in
§ 111.24, such as collections, banking,
or financial matters. The commenter
claimed that CBP should allow for more
business-friendly flexibility, so that a
broker should not have to obtain a
waiver to perform normal business
activities that are incidental to its
provision of customs business; limiting
disclosable information would possibly
place additional liability on the broker
in an unforeseen manner. Several
commenters suggested that a revision of
the regulation to include certain
information, e.g., necessary for
screening or transportation of a client’s
cargo, would better reflect how data and
information are transmitted and used by
brokers in the commercial environment
and their business dealings. One of the
commenters argued that without such
language, brokers would question
whether they are complying with their
obligation to maintain the
confidentiality of their clients’
information.
Response: The term ‘‘records’’ is used
throughout part 111 to refer to those
records that are kept in a customs
broker’s ordinary course of business and
that pertain to certain activities,
including information required in
connection with any importation,
declaration or entry. A more general
definition of ‘‘records’’ can be found in
19 CFR 163.1(a)(1) and encompasses a
wide range of information that is made
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or normally kept in the ordinary course
of business that pertains to any activity
listed in 19 CFR 163.1(a)(2).
CBP does not agree with expanding
the scope of disclosure of confidential
information to additional scenarios. CBP
cannot give advance authorization for
the disclosure of importer records, as
that authority lies with the client
(importer). A broker is merely an agent
of the importer, and the broker must
obtain a written release from a client
allowing for the sharing of client
information with third parties for
certain purposes, as the scope of client
information to be shared is determined
by the client. Written authorization for
specific disclosures may be granted by
the client to the broker as part of a
power of attorney, or as a separate
release.
Comment: One of the commenters
referred to Headquarters ruling H221355
(November 21, 2012) in which CBP
determined that a broker is prohibited
from disclosing the name and address of
a client to a third party for security
verification purposes. The commenter
asked CBP to revise § 111.24 to provide
that a broker is not precluded from
disclosing client information to other
third parties.
Response: CBP does not agree with
the commenter’s request. CBP continues
its interpretation that, absent client
consent, § 111.24 prevents the sharing of
client contact information with a third
party for security verification or other
purposes, as determined in
Headquarters ruling H221355. Any
authorization for the broker to use client
information must be set forth in the
power of attorney that is agreed upon
between the broker and the client or
obtained in a separate written release.
The confidentiality of a client’s business
information remains a paramount
concern for CBP, but a client can always
authorize the broker in writing to share
information with third parties for
certain purposes.
Comment: Several commenters asked
CBP to consider revising the exemption
that allows brokers to disclose
information to representatives of DHS
and limit the disclosure to
representatives of CBP and U.S.
Immigration and Customs Enforcement
(ICE). The commenters argued that the
agencies most directly involved with the
business of the clients serviced by
brokers are CBP and ICE, and only those
agencies should be specified in the
regulation. The commenters suggested
to add the phrase ‘‘or as requested, in
writing, by employees of other
government agencies as necessary and
appropriate.’’ to include DHS
representatives. Alternatively, other
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DHS agencies could fall under the
catch-all phrase ‘‘other duly accredited
officers or agents of the United States’’
in § 111.24.
One commenter pointed out that the
proposed regulation does not
contemplate that a broker may need to
consult with an outside party, such as
an attorney or consultant, or insurance
underwriter/broker. The broker asserted
that the broker should be able to
discuss, and more importantly, disclose
details of an incident, to an outside
third party in the context of a damages
claim by the client against the broker
due to the broker’s alleged error or
omission.
Response: CBP proposed to replace
the list of specific covered government
employees to whom the broker records
may be disclosed with a general
reference to DHS representatives in
order to include any government entity
within DHS who may be involved in a
broker matter. This language maintains
CBP’s flexibility to involve other entities
within DHS, if deemed necessary. It is
important to note that within DHS, all
agencies are bound by the same
information sharing rules to properly
protect confidential information. Thus,
CBP does not agree with limiting the
general rule of disclosure of client
information to CBP and ICE.
Additionally, DHS representatives are
specifically mentioned in current
§ 111.26, in the context of interference
with the examination of records. By
revising §§ 111.24 and 111.25 and
adding a reference to DHS, CBP is
creating consistency among the
regulations that deal with a broker’s
recordkeeping responsibilities.
Comment: One commenter, who
expressed support for the addition of
exemptions that permit information
sharing, stated that the exemptions do
not extend far enough to meet the needs
of the modern business community. The
commenter argued that many businesses
have separate operating entities under
one parent company that offers a broad
set of services to customers. In a
situation where one company acts as a
broker, it should be allowed to share
customer data within the larger
corporate structure, assuming certain
ownership and control metrics are met.
Another commenter added that, at a
minimum, the regulation should permit
data sharing with a related corporate
entity, such as a transportation provider,
where the related entity originally
provided the customs information to the
broker.
Response: CBP disagrees with the
commenter’s suggestion to expand the
scope of exemptions in § 111.24. Related
entities within a larger corporate
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structure are still separate legal persons
(see Headquarters ruling 116025
(September 29, 2003)), and no
information may be shared among those
related entities without a client’s
consent. As mentioned above, a client
may consent to a broker’s sharing client
information within the larger corporate
structure but consent to share
information with related entities cannot
be assumed, and it cannot be mandated
by CBP.
Comment: One commenter, a surety
association, asked CBP to amend
§ 111.24 to add an affirmative obligation
to provide information to those entities
specifically identified in that section,
i.e., when disclosure is allowed, it
should be compulsory. The commenter
argued that, as the regulation is written,
the broker does not have an affirmative
requirement to provide information to
the client’s surety on a particular entry.
Even though a surety continues to be
named as an exception to a list of
parties to whom disclosure may be
allowed, brokers do not always read that
language as compulsory. The
commenter proposed to add language
indicating that a broker ‘‘must’’ disclose
the contents of the records, or any
information connected with the records
to those clients to the entities listed in
proposed § 111.24, or, in the alternative,
add language to state that information
may be disclosed if an unexpected or
unanticipated matter arises and the
broker considers it necessary to consult,
inform, or engage with third-party
experts.
Response: CBP does not agree with
the commenter’s suggestion and will not
change the regulatory language to reflect
that a broker ‘‘must’’ disclose client
information to a surety. CBP will not
mandate that brokers share confidential
client information with the third parties
listed in § 111.24. CBP maintains that
sureties are third parties, incidental to
the relationship between a broker and
his or her client. Moreover, the surety is
in a contractual relationship with its
own client and should be able to
establish an exchange of information
with that client under the terms of their
business relationship. It is therefore not
appropriate for CBP to authorize in
regulations the transmission of data to
sureties pertaining to relations with
unlicensed persons.
Comment: One commenter stated that
the proposed regulations have not
addressed a significant issue
surrounding § 111.24, namely the
storage of broker client data with cloudbased third-party providers. The
commenter stated that CBP had
addressed this issue with ‘‘service
bureaus’’ in 19 CFR 143.4, but not with
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software service companies to whom
brokers entrust the storage and security
of client data and posed the question of
whether data storage companies are
considered ‘‘service bureaus’’.
Response: Service bureaus are
software providers that provide
communications facilities and data
processing services for brokers and
importers, but which do not engage in
the conduct of customs business,
pursuant to 19 CFR 143.1(a)(3), 143.4.
Service bureaus transmit electronic data
to CBP as part of a service provided to
the broker, and this data is considered
confidential and may not be disclosed to
any persons other than the filer or CBP.
Companies that provide data storage
(whether cloud-based or otherwise)
contract with the broker. In such a
setting, the security requirements are
based on an agreement between the
company and the broker, and CBP is not
involved in this arrangement. Thus, a
third-party data storage company is not
considered a ‘‘service bureau’’ pursuant
to § 143.1, rendering the confidentiality
requirement set forth in § 143.4
inapplicable.
Comment: A few commenters stated
that the proposed standard of making
the records available at a location
specified by DHS in § 111.25(b) is vague
and CBP should provide a clarification.
The commenters suggested that CBP
should specify that a broker shall make
records available at its designated
broker management unit within the
appropriate Center, or at an alternative
location mutually agreed upon by the
broker and CBP. The regulation should
further clarify that either paper or
electronic copies of documents may be
provided to ensure that neither the
broker’s physical presence nor any
travel is necessary.
Response: It is CBP’s current practice
that the location for the inspection of
records is either the broker’s office or a
CBP office, and CBP will continue to
allow those two locations for the
inspection of records. In addition, CBP
welcomes the opportunity to clarify that
CBP accepts both paper and electronic
records for inspection purposes. In fact,
CBP has been accepting electronic
records in cases of audits and otherwise
during the COVID–19 pandemic.
However, CBP reserves the right to
request original versions of documents
if deemed necessary.
Comment: Two commenters stated
that CBP should consider repealing 19
CFR 163.5, which requires advance
written notification of an alternative
storage method for records. In today’s
highly automated and virtual
environment, such a notification should
not be required and is an administrative
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burden for both the trade and CBP. Two
other commenters argued that the final
rule should include the freedom to
allow a broker to maintain electronic
records of its brokerage tasks, as well as
any other related documents, as long as
these documents can be readily
retrieved and are properly backed up to
comply with the time period mandated
under § 163.5, without having to request
written authorization.
Response: CBP disagrees with the first
two commenters’ request to repeal
§ 163.5. Section 111.25(c) refers to part
163, setting forth the provisions for the
maintenance, production, inspection,
and examination of records. Section
163.5 deals with recordkeeping
requirements in general, and applies not
only to brokers, but also owners,
brokers, consignees, entry filers or
agents of those persons mentioned in
§ 163.2. Brokers mentioned in this
section are only one of the groups of
persons to which the recordkeeping
requirements apply. For these reasons,
CBP will not repeal this section.
Part 111 sets forth the specific
recordkeeping requirements applicable
to brokers, and the records that each
customs broker must create and
maintain, and make available for CBP
examination, in addition to the
requirements in part 163. As explained
above, CBP will continue its current
practice of requiring that original
records be maintained within the U.S.
customs territory, in a manner that they
may be readily inspected. The
regulations permit either paper or
electronic storage of original records,
such that any other method is deemed
alternative and requires written
authorization. See § 163.5(a). Backup
records may be kept outside of the U.S.
customs territory because CBP does not
regulate these duplicate records.
Comment: Several commenters stated
that the proposed standard in paragraph
§ 111.28(a) that a sole proprietorship,
partnership, association, or corporation
must employ a sufficient number of
licensed brokers is vague, and a
definition is needed for the term
‘‘sufficient’’. The commenters stated
that CBP should not require a
‘‘sufficient number’’ of brokers as a
factor, but rather set best practices as
guidance for brokers in a revised Broker
Management Handbook. Commenters
stated that best practices would allow
for an administrable and enforceable
standard for brokers and CBP, as it is
unclear under the proposed language
how CBP would evaluate this obligatory
standard (‘‘must employ’’) and how it is
meant to complement the enumerated
factors. A few commenters raised the
same concerns with respect to proposed
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factor (6) in paragraph (a) requiring the
availability of a sufficient number of
individually licensed brokers for
necessary consultation with employees
of the broker. These commenters argued
that the language should be revised with
simpler language to require only the
availability of licensed brokers for
necessary consultation with employees
of the broker.
One commenter recommended to
delete ‘‘sufficient’’ and replace the
language with a standard number that
can be applied to all brokers. For
example, if an office had more than 15
employees conducting customs
business, then an additional broker
would be required to maintain proper
supervision and control. Another
commenter suggested to have a certain
number of brokers per number of
employees conducting customs
business.
Response: CBP does not agree that the
term ‘‘sufficient’’ needs to be revised or
removed. Allowing a broker entity to
determine what is a sufficient number of
licensed brokers gives the entity
flexibility as to how to exercise
responsible supervision and control.
The sufficiency of licensed brokers
employed by a sole proprietorship,
partnership, association, or corporation
is a fact-specific determination. CBP
does not want to mandate a certain
number of licensed brokers or a ratio of
employees to licensed brokers, as the
sufficiency of licensed brokers depends
on multiple factors, such as the size of
the broker entity, the skills and abilities
of the employees and supervising
employees, and the complexity and
similarity of tasks that need to be
completed. Each broker needs to
evaluate his or her own business and
see what is needed to provide high
quality service to the clients. During the
broker’s internal reviews and audits, the
broker entity will assess the sufficient
number of licensed brokers required for
the proper conduct of customs business.
For example, if an entity has a lot of
new employees, more licensed brokers
may be necessary for oversight; a larger
entity with many clients will most
likely need more licensed brokers than
a smaller entity with fewer clients. All
determinations concerning sufficiency
are fact-specific, and CBP does not want
to specify a certain number of brokers
that is required for a certain size of
business. In addition, the Broker
Management Branch at CBP
Headquarters engages with the brokers
to answer questions and resolve any
issues as they arise, and thus, brokers
may contact CBP if there are any
questions. Additionally, with the
inclusion of the ‘‘sufficient number’’
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63281
language in the proposed regulation,
CBP incorporated COAC’s
recommendation to employ an adequate
number of licensed brokers to ensure
responsible supervision and control, as
part of its recommendation to move to
a national permit framework.
Comment: One commenter expressed
the concern that the language ‘‘sufficient
number’’ could be interpreted
differently by different Centers. The
commenter also asked what time frame
would be provided for broker entities to
come into compliance should a Center
determine that the current number of
brokers is not sufficient. Lastly, the
commenter asked whether there would
be ways to challenge a Center’s
decision, or at least challenge the
methodology used to determine, for
example, the adequacy of licensed
brokers to entry writers.
Response: As mentioned above, CBP
Headquarters provides guidance to all
BMOs to ensure that brokers receive
consistent answers to questions. CBP
will continue to do so regarding any
changes brought about by the final
regulations, including the requirement
to have a sufficient number of licensed
brokers. Regarding the time frame for
compliance in case CBP determines that
a broker entity does not employ a
sufficient number of licensed brokers,
CBP will handle this matter in the same
fashion as other broker matters where
CBP might detect an error in entry
filings or other submissions by the
broker. CBP will address the issue (in
this case, the insufficient number of
licensed brokers) with the broker and
state that action needs to be taken by the
broker to correct the issue, such as
additional licensed brokers to exercise
responsible supervision and control.
Then the broker will have an
opportunity to address the issue and
CBP will work with the broker on a plan
of action to resolve the issue. If the
broker does not follow the plan of
action, then CBP will issue a warning.
A decision by the BMO regarding the
sufficiency of licensed brokers may be
challenged by escalating the issue to a
BMO’s supervisor, the Assistant Center
Director. Ultimately, however, the
broker will need to follow the plan of
action determined necessary by CBP.
Continued failure to do so will warrant
escalated CBP remedial actions
including, possibly, a penalty, or
suspension or revocation of a license.
When the processes for a penalty,
suspension, or revocation are invoked,
the broker has the due process
opportunities already afforded by CBP
regulations.
Comment: One commenter stated that
CBP should consider the number of
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employees with a Certified Customs
Specialist designation as a means to
meet the responsible supervision and
control requirement.
Response: CBP disagrees with the
commenter’s suggestion. The privately
offered Certified Customs Specialist
(CCS) certification must be
distinguished from the profession of a
licensed customs broker. To become a
CCS, an individual must take the CCS
course and an exam at the end of the
course, and have at least one year of
customs experience, but is not required
to be a licensed customs broker. A CCS’s
position cannot be elevated to that of a
licensed customs broker, and therefore,
having a certain number of CCSs in a
broker entity will not satisfy the
responsible supervision and control
standard. However, the fact that a broker
entity employs numerous CCSs might
affect CBP’s evaluation of whether the
entity employs a sufficient number of
licensed customs brokers.
Comment: One commenter stated that
CBP must provide guidance as to the
responsible supervision and control
standard for the broker community
since a failure to comply with the
standard could lead to penalties and
suspension or revocation. Any guidance
would encourage brokers to incorporate
these standards into their compliance
programs. The commenter further
recommended that CBP create a
procedure where brokers can get
clearance on whether the number of
licensed brokers is sufficient for a
particular broker entity before any
change in the number of brokers
requirement is imposed, and create a
program, which would permit brokers to
get clearance on this question after the
requirement is imposed.
One commenter stated that the
regulation must be clarified, or
otherwise removed, and added that even
though CBP stated it will be providing
guidance, this guidance would not be
subject to review and comment,
depriving the broker of any input on
this issue.
Response: CBP disagrees with the first
commenter’s request that CBP should
provide prior clearance on the issue of
sufficient number of licensed brokers, or
approval of the number of licensed
brokers after employment of a set
number of brokers. Prior clearance
cannot be given to a broker entity
because it is impossible for CBP to
evaluate beforehand whether a certain
number of licensed brokers will be
sufficient to exercise responsible
supervision and control. Such a
determination depends on specific facts
and circumstances of the individual
broker’s or broker entity’s customs
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business. CBP assesses the sufficiency of
licensed brokers in the context of the
broker’s business dealings; it is not an
abstract decision that can be made.
Further, CBP does not believe that
creating a program to provide prior
approval of a set number of licensed
brokers for a broker entity would be
beneficial. As with prior clearance,
approval after the fact is not feasible
because CBP would not know whether
the broker entity will function properly
and exercise responsible supervision
and control until the entity is in fact
conducting customs business.
Before CBP issues a suspension or
revocation there is usually a history of
a broker’s failure to meet the
supervision standard; in most cases,
CBP does not automatically suspend or
revoke a broker’s license. There will be
communication between the broker and
CBP regarding the broker’s failure to
meet the supervision standard, and
ways to mitigate that failure.
One of the commenters asked that any
regulatory changes based on public
comments be subject to review and
comment by the public for a second
time. CBP disagrees with this request.
Pursuant to the Administrative
Procedure Act (APA) (5 U.S.C. 551 et
seq.), CBP solicited comments from the
public regarding the proposed changes
to part 111 and provided a 60-day
comment period. Any change from the
proposed regulations is either based on
a public comment, a clarification of the
proposed or current regulations, or a
change that results in a benefit or
convenience to the broker community
without detriment to existing rights,
such as additional automation of certain
processes. CBP will not implement any
major changes without seeking public
input first. Thus, CBP does not see the
need to provide a second opportunity
for public comments on any guidance
that CBP will issue before finalizing the
proposed regulations.
Comment: Several commenters
expressed a concern with respect to the
change from the word ‘‘will’’, which
used to be part of the definition of
responsible supervision and control in
§ 111.1, to the word ‘‘may’’ in
§ 111.28(a). The commenters stated that
this change indicates that CBP is no
longer required to take into
consideration all the listed factors when
determining whether a broker exercises
responsible supervision and control,
and thus removes the protection from a
broker by not obligating CBP to consider
broker compliance efforts in their
totality. One mistake could seemingly
result in a broker penalty without regard
to the other factors.
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Several commenters urged CBP to
continue to consider all enumerated
factors in assessing responsible
supervision and control to avoid any
arbitrary and capricious determinations
and prevent inconsistent decisions by
different CBP officers. The commenters
argued that keeping ‘‘will’’ in the
regulation provides transparency and
uniformity for brokers in executing
operations and procedures, as well as
for CBP officers in administering and
enforcing this standard. A change to
‘‘may’’ would allow CBP to focus on
whichever factor it deems appropriate to
the exclusion of additional factors that
are clearly relevant as to whether a
broker is exercising responsible
supervision and control. CBP should be
required to review all factors in order to
ensure that a broker receives a full and
fair evaluation.
Response: CBP disagrees with the
commenters. CBP needs flexibility in
determining whether a broker is
exercising responsible supervision and
control over the customs business that
it conducts, as this is a fact-specific
assessment. It has been CBP’s practice to
give greater weight to the factors that are
implicated in a broker’s exercise of
responsible supervision and control
when making a determination. There
may be instances where one or more
factors will be more relevant than others
in determining whether a broker did or
did not exercise responsible supervision
and control. While it is possible that
CBP’s determination that a customs
broker has failed to exercise responsible
supervision and control may be
predicated on fewer factors, but ones
that CBP considers relevant, this does
not prevent the broker from presenting
in its defense any factors it believes to
be mitigating.
Comment: A few of the commenters
stated that the change from ‘‘will’’ to
‘‘may’’ would be contrary to judicial
precedent, citing a court case, United
States v. UPS Customhouse Brokerage,
Inc., 575 F.3d 1376, 1382 (Fed. Cir.
2009), in which the court decided that
CBP’s failure to consider all ten factors
to determine whether a broker exercised
responsible supervision and control was
improper.9 In addition, a commenter
argued that the proposed language is in
violation of Chevron U.S.A., Inc. v.
NRDC, 467 U.S. 837 (1984), because
agencies cannot implement regulations
that are arbitrary and capricious.
Response: CBP disagrees with the
commenters. CBP may only be bound by
judicial precedent if the same regulatory
language is still in place. If CBP decides
9 The cited court case may be found online at
https://cite.case.law/f3d/575/1376/.
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to change the regulation through a
process allowed by the APA, judicial
precedent no longer binds CBP in
making that change. Further, the
proposed language in § 111.28(a) is not
arbitrary and capricious. CBP proposed
in the NPRM to keep the list of factors
to determine responsible supervision
and control set forth in § 111.1, and
move it to § 111.28(a), along with some
additions and modifications to reflect
the changes brought about by the
transition to a national permit
framework. CBP further proposed to
consider the relevant factors from
among those listed on a case-by-case
basis. No decisions will be made
without a thorough evaluation of the
relevant factors present that apply to an
individual broker.
Comment: Several commenters stated
that the newly proposed factors in
§ 111.28(a)(11) through (15) are vague
and decrease a broker’s certainty in
adopting and executing the necessary
processes to meet the supervision
standard. The commenters suggested
that the factors either be removed or at
least incorporated into one general
factor, for instance into factor (10), as an
indication that an individually licensed
broker has a real interest in the
operations of a broker. In addition,
commenters requested that any
guidance as to the factors be provided
as best practices in the Broker
Management Handbook.
A few commenters suggested to
remove the new factors because the
current ten factors are adequate to
determine that a licensed broker has a
real interest in the operations. One
commenter referred to COAC
recommendation No. 010021 (April 27,
2016), which recommends that CBP
provide guidance to brokers regarding
the ten factors demonstrating
responsible supervision and control,
such as how to properly train
employees, issue appropriate written
instructions and internal controls,
maintain an adequate ratio of employees
to licensed brokers based on certain
factors, and engage in supervisory
contact, audit and review operations.
The commenter is of the opinion that
CBP has not done so in the NPRM.
Response: CBP disagrees with the
comments to either remove or
consolidate the proposed factors (a)(11)
through (15) into existing factor (10).
First, including all proposed factors in
one factor would make the language
complex and difficult to follow and
enforce. Second, CBP added factors that
reflect their importance in the modern
brokerage environment and their
importance in evidencing the proper
transaction of customs business. For
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instance, filing entries late, paying the
government late, or not returning client
or CBP communications, are all
evidence of a broker’s failure to exercise
responsible supervision and control.
CBP provided an explanation as to each
proposed change in the NPRM, and as
mentioned above, has worked with the
broker community in the past and has
taken into account their
recommendations. As mentioned above,
a new guidance document, that will be
published concurrently with the
publication of this final rule, will
include information as to the listed
factors in § 111.28(a). In the meantime,
brokers may find additional information
and guides on CBP’s website at https://
www.cbp.gov/trade/programsadministration/customs-brokers
regarding the broker license exam,
triennial status reporting requirements
for current brokers, as well as additional
information and resources for brokers.
Comment: One commenter raised a
concern regarding proposed factor (11),
i.e., the broker’s timeliness of processing
entries and payments of duty, tax, or
other debts owed to the government.
Two commenters stated that a broker is
not obligated to pay on behalf of an
importer and asked how the timeliness
factor can be judged in such a situation.
Both commenters stated that the term
‘‘timeliness’’ is vague and does not
provide a benchmark to which a broker
can develop and execute processes, nor
can CBP uniformly and transparently
evaluate and enforce the standard. The
same concern as to vagueness was
raised for the term ‘‘responsiveness’’ in
proposed factors (13) and (15).
Lastly, commenters stated that the
term ‘‘communications’’ in proposed
factors (12) (communications between
CBP and the broker) and (14)
(communications between the broker
and its officer(s)) is too broad. One
commenter explained that proposed
factors (12) and (13) (the broker’s
responsiveness and action to
communications, direction, and notices
from CBP) do not explain what type of
communication is covered, and
proposed factors (14) and (15) (the
broker’s responsiveness and action to
communications and direction from its
officer(s)) cover communications
between parties to which CBP would
have no visibility. One commenter
posed the question whether CBP will
regularly make available to customs
brokers examples of communications
relevant for verification and training
purposes.
Response: CBP disagrees that these
proposed terms need to be further
defined in the regulation. The
timeliness factor looks at a broker’s
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repeated failures to timely file entries
and/or duties, taxes or other debts owed
to the government, not just one incident
alone. ‘‘Timely’’ generally means doing
something by the time it is required to
be done in statute or regulation, which
is not a vague concept. If a broker
frequently fails to timely submit entries
and/or payments, CBP will consider the
failure to comply with factor (11) in its
determination as to whether a broker is
exercising responsible supervision and
control.
With respect to the term
‘‘responsiveness’’ in factors (13) and
(15), a broker’s failure to respond to any
communications, direction and notices
from CBP, and to communication and
direction from its officer(s) or member(s)
(i.e., not returning phone calls or emails,
etc.) will reflect negatively on whether
a broker is exercising responsible
supervision and control.
The term ‘‘communications’’ in the
context of responsible supervision and
control is used to assess how well and
timely a broker is communicating with
its officer(s) or member(s), and with
CBP. CBP does not agree that examples
of communications need to be provided
to brokers for verification and training
purposes. Brokers should be able to
determine what, if any, communication
is needed in a particular situation with
CBP and officer(s) or member(s) of the
broker entity.
To make the proposed language in
§ 111.28(a) more concise, CBP combined
factors (12) and (13) into one new factor
(12), which deals with the broker-CBP
relationship, and combined factors (14)
and (15) into one new factor (13),
relating to the broker-officer/member
relationship. In addition, CBP added a
reference to ‘‘member(s)’’ in the new
factor (13) to account for partnerships,
in addition to associations and
corporations as a type of broker entity.
Comment: Several commenters stated
that it is unclear what the terms ‘‘reject
rate’’ and ‘‘various’’ in proposed factor
(4) of § 111.28(a) mean under the new
supervision standard and argued that,
without clarity, this metric is
misleading and could be highly
prejudicial. One commenter stated that
the factor should be eliminated because
it appears to be intended to account for
a broker’s mistakes (versus an importer’s
or other third party’s mistake). Clear
guidelines are necessary as to what CBP
considers an actionable rejection, and
only those instances where the broker is
at fault (and not the third-party
importer) should be taken into
consideration.
Response: CBP does not agree with
the commenters that the terms ‘‘reject
rate’’ and ‘‘various’’ need to be clarified
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in the regulation. The reject rate for the
various customs transactions
historically has been a factor in § 111.1
in the definition of responsible
supervision and control. ‘‘Various’’
means not just one rejection, but
several, over the course of time. CBP
proposed to add language to this factor
when moving it to factor (4) in
§ 111.28(a) to clarify that CBP looks at
the reject rate by comparing the number
of rejections with the broker’s overall
volume of entries. This revised language
provides a better context to evaluate the
quality of responsible supervision and
control as CBP looks at the totality of
the transactions conducted by the
broker to determine whether the broker
is properly filing entries. In addition,
CBP relied on COAC recommendation
No. 010020, which suggested a
clarification of existing factor (4) to state
that the reject rate resulting from entries
or entry summaries be expressed as a
percentage of the broker’s overall
business for the various customs
transactions, when making this change
to the original factor.
CBP agrees with the commenter who
states that this factor is intended to
account for a broker’s mistakes,
however, a broker’s responsibility
includes a duty to verify any
information received from an importer.
The broker must exercise due diligence
and make sure that the data from the
importer is correct, e.g., that the
classification of goods is correct. The
broker must further verify, depending
on the specific facts and circumstances,
whether the importer has experience in
gathering and providing the necessary
information to the broker, whether the
importer is a new client, and may need
more assistance, or whether the client is
experienced in providing the necessary
information. CBP has no way to
determine once a filing is made whether
a mistake (and reject) was due to a
broker’s mistake, or due to incorrect
information provided by the importer.
Moreover, any type of rejection will be
communicated to the broker, and the
broker has the opportunity to make a
clarification.
Comment: Further, several
commenters requested that not all
system rejects in Automated Broker
Interface (ABI) should be considered as
rejects as they are often due to
contributory factors, such as system
outages, delays in HTSUS updates, and
programming changes for Partner
Government Agencies (PGAs) and in the
CBP and Trade Automated Interface
Requirements (CATAIR) with short
deployment time frames and highly
complex filings causing numerous
system rejects. One commenter added
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that ACE is too new and there have been
problems with CBP processing,
especially drawback filings, thus, this
factor (4) in § 111.28(a) is not
appropriate.
Response: In case of system outages or
delays, where the broker is unable to file
in ACE, the broker does not receive a
reject. A reject occurs only if the broker
successfully submitted a filing in ACE,
which is considered filed, and because
of the lack of accuracy of the filing, is
rejected. As to the comment that ACE is
too new, ACE has been the system of
record since November 1, 2015, as
mentioned above. Both CBP and the
trade community have gained extensive
experience over the last several years
working with and in ACE. As to the
commenter’s second point, CBP usually
announces programming changes, either
in a Federal Register notice, or via a
CSMS message, with guidance for the
changes or updates to the process and
provides additional time (usually 30
days) after the publication of a notice as
to when announced changes or updates
become operational. Lastly, drawback
claims have been successfully filed in
ACE since February 2018. The ACE
drawback module has been enhanced
significantly to include expanded filing
capabilities for claimants, refined
validations that reflect current import
practices, and updated bonding policies
for accelerated payments. In addition,
CBP maintains extensive customer
service resources for existing and new
drawback filers.
Comment: Another commenter
requested clarity about census warnings
and asked that they not constitute
rejects. Another commenter stated that
the term ‘‘reject rate’’ lacks specificity
and asked whether the term is the same
as used in Customs Directive 099–3550–
67.10
Response: Census warnings are
informational messages that are part of
the entry validation process. The U.S.
Census Bureau (Census) provides CBP
with specific data ranges at the HTSUS
level that ACE uses to validate a variety
of data elements (e.g., line value,
charge). If a line is transmitted that falls
outside of the Census parameters, ACE
will return a warning message to the
filer. These warnings are described in
the Appendix H of the CATAIR.11 A
Census warning is not a reject, as the
10 The Customs Directive may be found online at
https://www.cbp.gov/sites/default/files/documents/
3550-067_3.pdf.
11 Appendix H provides a detailed resolution on
each warning so that the party receiving the
warning will know what elements are considered to
be ‘‘unlikely’’ to be accurate. The appendix may be
found online at https://www.cbp.gov/document/
technical-documentation/ace-catair-appendix-hcensus-codes.
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entry summary is not incorrect, but the
information provided is unlikely to be
accurate, given Census’ parameters. The
filer is then required to submit the
corrected line data or if the data is
found to be correct as entered, submit
the reason code for a Census ‘‘override.’’
With respect to the second
commenter, the reject rate pursuant to
§ 111.28(a)(4) covers rejections of entry
summaries as discussed in the Customs
Directive mentioned above, even though
some of the items in this Directive have
become obsolete.
Comment: Another commenter
suggested that rejects should only be
counted after a broker has had the
opportunity to agree or provide proof
that the originally filed entry was
correct. Another commenter asked
whether CBP would consider listing
rejected entries in ACE to allow the
broker to review these entries for
verification and training purposes.
Lastly, one commenter stated that
multiple rejects due to one problem
should not be counted as multiple
rejects.
Response: CBP does not agree with
these comments. A filer receives an
error message in ACE if there are any
issues when filing. If the submission is
rejected, comments are provided as to
corrective action that is necessary.
Whether a reject is a system reject or a
manual reject by a CBP employee, the
filer is notified either way as to the
reason for the reject. With system
rejects, an error code is provided, and
the error codes are described in the ACE
CATAIR Error Dictionary 12 for the filer
to refer to and correct the error. For a
manual reject, a CBP employee enters a
message in an ACE user interface
‘‘Notes’’ field describing the error, along
with instructions as to how to retransmit the filing in proper form. This
message is transmitted to the filer in
ACE. For either type of reject, the filer
is given sufficient information to resubmit the correct filing, thus, CBP does
not believe that it is necessary for the
filer to agree or provide proof that the
originally filed entry was correct.
Lastly, if a filer makes multiple
filings, based on the same incorrect
information, the system does count each
instance of filing as a reject. CBP notes
that if a broker makes the same mistake
in several filings and receives the same
error code or message, and the filings
are rejected, the broker should be aware
for future filings as to the error and how
to properly submit an entry.
Additionally, the broker may always
12 The ACE CATAIR Error Dictionary is available
online at https://www.cbp.gov/document/guidance/
ace-catair-error-dictionary.
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contact CBP to ask for clarification as to
a rejected submission, if necessary.
Comment: Some commenters stated
that CBP should adjust the proposed
language in factor (7) (supervisory
visits) and factor (8) (audits and
reviews) for § 111.28(a) to include
virtual options for supervisory visits by
an individually licensed broker of
another office that does not have a
licensed broker, as well as audits and
reviews of the customs transactions that
are handled by an employee of the
broker in order to better reflect today’s
often virtual business environment. In
addition, one commenter stated that
CBP needs to define ‘‘frequency’’,
otherwise, a broker cannot ensure
compliance.
Response: Virtual options for
supervisory visits, and for audits and
reviews, are permissible. The factors, as
written in the proposed regulation, do
not limit supervisory visits, and audits
and reviews, to a physical option. CBP
understands, especially in the changed
environment brought about by the
COVID–19 pandemic, and the move
from district permits to national
permits, that both physical and virtual
presence should be allowed for
supervisory visits, as well as audits and
reviews. However, whether a virtual
supervisory visit or audit and review is
sufficient in any given case to exercise
responsible supervision and control
depends on the specific circumstances
of a broker’s business, such as the size
and complexity of a broker entity or the
type of transactions that are handled by
an employee. In addition, the term
‘‘frequency’’ is a fact-specific
determination. As mentioned above,
whether a broker exercises responsible
supervision and control depends on
how a broker conducts its customs
business, and it is the broker’s
responsibility to determine how
frequent the supervisory visits, audits
and reviews should be. For example,
more supervisory visits, and audits and
reviews, may be necessary for new
employees, or employees tasked with
more complex transactions.
Comment: Several commenters did
not agree with the proposed
requirement in § 111.28(b) that a permit
holder submit a list of the names of
persons currently employed by the
broker as this requirement may be too
burdensome, especially on large
companies. The commenters argued that
CBP should require a list of names only
of those employees who are engaged in
customs business, given that the
regulation specifically relates to
supervision and control over the
transaction of the customs business. For
the same reasons, two commenters
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stated that the term ‘‘broker employees’’
used in paragraphs (a) and (b) of
§ 111.28 should be changed to
‘‘employees who conduct customs
business’’ because the term ‘‘broker
employees’’ could relate to any
employee of the broker, regardless of the
employee’s responsibility, and those
employees should not be included in
the reporting requirement.
Response: CBP does not agree with
the commenters. First, customs brokers
are required to exercise responsible
supervision and control over all of their
employees, and in particular any of
their employees who assist with the
customs business and transactions of
the brokerage. Requiring the customs
broker to identify to CBP all of its
employees contributes to both the
customs brokers’ and CBP’s knowledge
and awareness of the employees’ status.
Second, CBP requires the
comprehensive information for all
persons employed by a broker in order
to be aware of all potential risks that any
employee might present to the revenue
of the United States or the public. Only
by obtaining information on all
employees can CBP properly engage in
a dialogue with the customs broker to
determine that none of the employees of
the broker occupy a position within the
brokerage that presents a risk to the
revenue or the public. It is important to
note that this final rule is not changing
the reporting requirement for brokers.
Brokers already have an obligation to
submit a list of names of persons
employed by a broker, and this
obligation continues with this final rule,
with the only change being that brokers
have to report less information on their
employees pursuant to the final
regulation.
Comment: Two commenters stated
that CBP should enhance ACE to better
facilitate the electronic reporting of
employee information, improve the
reporting of information included in the
triennial reporting process and the
submission of payment of various
broker fees. Specifically, the
commenters suggested the addition of a
section in the ACE portal where updates
can be easily made for new employees,
terminated employees, or a change of
address. Another commenter stated that
the electronic data reporting system
within ACE is cumbersome and CBP
should not adopt the proposed language
in § 111.28(b) regarding the use of a
CBP-authorized EDI in the final rule
until a more modern system and
interface are available, such as
blockchain.
Response: Electronic employee
reporting for new and terminated
employees has been in place within
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63285
ACE for several years. At this time,
brokers have several capabilities in ACE
to add, remove or edit certain
information related to the license and
permit. CBP agrees that the automation
of the broker submission could be
further enhanced, and CBP is
continuing to work on technological
advancements to streamline and
facilitate the processing of broker
submissions. However, it is important to
note that the system is currently
functional to receive employee
information from brokers.
In addition, as mentioned above, CBP
deployed a new portal for the electronic
submission of and payment for the
broker examination application, and the
submission of the triennial report and
payment of the triennial fee. In the case
of the triennial reporting, if a broker
files the status report and pays the
required fee in the eCBP portal, CBP
will send by email a receipt to the
broker (if an email address is on file)
evidencing the completion of the
required reporting. A copy of the receipt
and the filed report is maintained in the
eCBP portal for the broker to access at
any time. To provide all brokers the
ability to receive an electronic receipt of
the completion of the triennial reporting
requirement, CBP added a broker’s
email address as a reporting
requirement in § 111.30. Specifically,
CBP added ‘‘email address’’ in the first
sentence of paragraph (a) and added
parentheses after ‘‘address information’’
in the third sentence to clarify that the
office of record address, mailing address
and email address are all required for
purposes of reporting a change of
address. CBP also added the email
address requirement in paragraphs
(d)(2)(i)(A) and (d)(2)(ii) for individual
brokers, both actively engaged and not
actively engaged. CBP further included
the requirement of an email address for
each licensed member or licensed
officer in case of partnership,
corporation, or association reporting in
paragraph (d)(3)(i).
During the 2020/2021 triennial
reporting period, approximately 90% of
the licensed brokers filed the required
report and paid the required fee through
the new reporting tool. During that
triennial reporting period, a broker had
to choose to either pay online through
the eCBP portal or at the port and had
to submit both the report and the
payment through one of the chosen
options; a broker could not submit the
report online and pay the fee at the port,
or vice versa. For the next triennial
reporting period in 2023/2024, CBP will
continue with the same practice.
A broker who chooses to pay the fee
at a processing Center, i.e., at one of the
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41 BMO locations, may either complete
the status report in the eCBP portal and
print the draft report or complete a
paper copy of the report, and then
submit the report to a processing Center,
along with the payment of the fee. A
BMO at a processing Center will accept
the required report and payment and
provide a cash receipt. The BMO will
manually enter the information on the
report in ACE for the triennial reporting
to be completed.
Comment: One commenter stated that
the 30-calendar day requirement in
§ 111.28(b)(2) to provide the social
security number (SSN) for a new
employee from a foreign country is
difficult to comply with as it typically
takes longer for the new employee to
receive an SSN, and ACE does not
accept any employee data without also
providing the SSN. The commenters
asked CBP to allow the submission of
employee information in ACE without
the SSN if it is not available at the time
of the reporting.
Response: Pursuant to the proposed
regulation in § 111.28(b)(2), a national
permit holder must submit a list of new
employees within thirty (30) calendar
days of the start of employment to a
CBP-authorized EDI system. In the rare
instance, where an SSN is not available
for a new employee at the time of
reporting, the broker must submit the
new employee information to the
processing Center, indicating that the
SSN is still missing and that it will be
reported as soon as it is available.
Comment: Two commenters suggested
to move paragraphs (b) through (e) of
§ 111.28, dealing with the reporting of
employee information and change in
broker ownership, to § 111.30. The
commenters argued that while these
paragraphs indirectly pertain to
supervision and control, their
placement in § 111.28 is confusing as
they represent regulatory requirements
regarding administrative issues more
akin to those set forth in § 111.30.
Response: CBP disagrees with the two
commenters and believes that
paragraphs (b) through (e) fit
appropriately in § 111.28. The aspect of
employee reporting falls under the
responsible supervision and control
standard, as CBP will take into
consideration a broker’s proper
employee reporting when looking at
whether the broker exercises
responsible supervision and control. In
contrast, § 111.30 includes instructions
for how and when to notify and report
to CBP, and what information to include
in the notification and report.
Comment: One commenter stated that
the responsibilities in proposed
§ 111.19(f) and proposed § 111.28(a) are
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not consistent and it is not clear which
individual broker has to comply with
the responsible supervision and control
standard. Proposed § 111.19(f) talks
about ‘‘the individual broker who
qualifies for the national permit’’,
whereas proposed § 111.28(a) talks
about ‘‘every licensed officer’’. In
§ 111.19, the primary responsibility
rests with the individual broker
designated as qualifying for a national
permit, whereas in § 111.28, every
licensed officer is included in the
definition of responsibility. The
commenter suggested to amend § 111.28
to conform with other sections and limit
responsibility to the specifically
designated person as being responsible.
Response: CBP does not agree with
the commenter. A license holder and a
national permit holder could be two
different individuals conducting
customs business, meaning that the
license holder is bound by § 111.28(a),
whereas a national permit holder is held
to the responsibility stated in
§ 111.19(f). Both requirements are
applicable to different designated
individuals. If the license holder is the
same individual as the national permit
holder, then that individual is bound by
the standard in § 111.19(f), which also
refers to § 111.28(a) and includes the
same standard. This cross-reference
would not cause such an individual to
have two types of responsibilities.
Comment: One commenter asked CBP
to define the phrases ‘‘physical
proximity of subordinates’’ and
‘‘abilities and skills’’ of employees and
managers’’ set forth in § 111.28(a). The
commenter explained that the pandemic
has resulted in many licensed brokers
working from home, so the physical
proximity of subordinates was not
always feasible. Another commenter
stated that there should be full
alignment of the modernization efforts
under the national permit framework,
meaning that CBP should remove the
requirement for a sole proprietorship,
partnership, association, or corporation,
to employ licensed brokers relative to
the physical proximity of subordinates
under the responsible supervision and
control standard in § 111.28(a).
Response: CBP disagrees with the
commenters. Both phrases, ‘‘physical
proximity of subordinates’’ and
‘‘abilities and skills of employees’’, help
a broker entity determine how many
licensed brokers are needed to exercise
responsible supervision and control.
Physical proximity pertains to the
aspect of an employee being physically
located in the same or different office
close to a broker entity to ensure proper
supervision of a subordinate. The level
of supervision and the number of
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supervising employees depends on the
ability and skill level of each employee
within a broker entity. To comply with
the responsible supervision and control
standard, a broker entity must take into
consideration the experience, training,
and skills of an employee to make the
determination as to how many licensed
brokers are needed. This determination
is fact-specific and takes into account
the various factors listed in paragraph
(a) of § 111.28.
Comment: One commenter noted that
§ 111.28(e) does not set forth any time
frames for CBP to make a decision as to
whether CBP wishes to investigate a
new principal or render a decision as to
the acceptability of the new principal
and notification of the transferring
broker. Without set time frames, a legal
transfer of ownership of a brokerage
business could be voided. The
commenter added that if the sale is to
another broker or to an employee that
CBP had previous notice of, there
should not be an investigation.
Response: CBP will not add a time
frame for completing a background
investigation pursuant to § 111.28(e),
just as there is no time frame for the
background investigation for a license
application pursuant to § 111.14(a). CBP
reserves the right to conduct a
background investigation on a new
principal, if deemed necessary. That
said, if the new principal is a current
employee of the broker and CBP had
recently completed a background
investigation on that particular
individual, then CBP may not complete
another investigation, but it is in CBP’s
discretion to make that decision. It is
important to note that the new principal
does not have to wait to conduct
customs business until CBP completes
the background investigation and
renders a decision as to whether the
new principal is approved. The new
principal may start conducting customs
business as soon as the change of
ownership is completed. If CBP finds a
problem during the background
investigation, CBP will address it with
the new principal.
Comment: Several commenters asked
that CBP change the deadline in
§ 111.30(a) for reporting of a broker’s
address to ten (10) business days,
instead of only ten (10) calendar days,
to provide flexibility with weekends
and holidays, or simply unavailability
of a party that provides such
information. One commenter suggested
that thirty (30) calendar days would be
preferable to align with the requirement
in § 111.28(b).
Response: CBP disagrees with the
commenters and will keep the time
frame for reporting an address change at
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ten (10) calendar days. CBP believes that
a broker would know at least ten (10)
calendar days in advance when a
business address is changing. Moreover,
CBP already added flexibility by
changing the requirement from an
immediate written notice to ten (10)
calendar days to inform CBP. CBP
believes that this is a sufficient time
frame.
Comment: One commenter stated that
when a broker changes his or her name,
pursuant to § 111.30(c), the notice of the
name change can be provided to CBP
after the fact, but a broker must notify
CBP in advance when he or she
proposes to use a trade name in one or
more states. The commenter argued that
providing this information in advance
was helpful when there were port
licenses and manual records maintained
at individual ports because the port had
no way of knowing that a trade name
was the pseudonym for a licensed
entity. However, today, the filer code in
ACE represents the licensed entity, thus
making this requirement unnecessary.
The commenter recommended that to
the extent that CBP asserts that this
documentation is still required, the
regulation should be amended to be
more consistent by requiring submission
of both the name change and fictitious
name authorization after the fact, rather
than prior to use, and the requirement
should apply only to the licensee’s state
of incorporation and office of record.
Response: It is CBP’s practice to
require proof of a broker’s name change
or proposed trade name change prior to
issuing a new license reflecting the new
name. While it is true that in many
instances, an individual broker does not
provide evidence of a name change (e.g.,
due to marriage, divorce, etc.) prior to
the actual name change, CBP believes
that a broker entity who is planning on
using a trade or fictitious name for
conducting business in one or more
states will know in advance what the
new trade or fictitious name will be,
thus, reporting to CBP in advance, along
with documentation to be filed in those
states, is not an unreasonable request.
That said, in both instances (the broker’s
name change and the proposed trade
name change), the broker will not be
able to practice under the new name or
trade name until the license reflecting
the new name is issued to the broker. As
mentioned in response to a comment
above, CBP needs to know in what
state(s) a broker is conducting customs
business to be able to maintain oversight
over the broker’s business.
Comment: One commenter stated that
the failure to file the triennial report and
pay the status report fee pursuant to
§ 111.30(d)(4) should not result in
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forfeiture of the right to conduct
customs business, absent an opportunity
to cure the failure. The commenter
argued that filing the triennial report is
essentially a ministerial activity with
limited impact on CBP operations or
revenue, yet the failure to timely file the
report and/or pay seems to have the
same effect of terminating a broker’s
ability to conduct business, even if only
temporarily. In the case of a violation of
a more substantive regulatory provision,
the broker is given an opportunity to
address the violation before the
imposition of a penalty, suspension or
revocation, however, the same
opportunity is not afforded to the broker
who failed to complete the triennial
reporting requirement.
Response: The suspension of a license
by operation of law for failure to timely
file the status report in the month of
February of the reporting year pursuant
to § 111.30(d)(4) is prescribed by statute.
Section 1641 of 19 U.S.C. states that if
a license holder fails to file the required
report by March 1 of the reporting year,
the license is suspended, and may be
thereafter revoked under certain
circumstances. Therefore, CBP cannot
modify the regulation to allow brokers
an opportunity to address the failure to
timely fulfill the status reporting
requirements before a suspension is
issued.
Comment: Some commenters stated
that the proposed requirement in
§ 111.32 that a broker must not give, or
solicit, or procure the giving of, any
information or testimony that the broker
knew or should have known was false
or misleading in any matter pending
before DHS is a very subjective standard
and provides CBP with too much
discretion. The commenters asked that
CBP provide some criteria to determine
what the broker should have known,
what is considered misleading, and
whether a misunderstanding qualifies.
Response: CBP cannot provide a
comprehensive list of facts and
circumstances that a broker should have
known. What a broker should have
known is based on a reasonable person
standard. Based on a broker’s customs
business, and the information the broker
has before him or her, the broker should
be able to make the assessment whether
certain information is false or
misleading and whether the broker
should have known. ‘‘Misleading’’
information is information that could be
deceptive, confusing, misrepresentative
or just false. Whether a
misunderstanding qualifies as the
broker’s having filed, solicited, or
procured the giving of false or
misleading information depends on the
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facts and circumstances of a broker’s
knowledge, expertise, and actions.
Comment: One commenter asked
whether a broker must report to CBP
under § 111.32 the mere fact of a
separation from or cancellation of
representation of a client as a result of
the determination that the client is
intentionally attempting to defraud or
otherwise commit any criminal act
against the U.S. Government, or also
provide details of the suspected or
known wrongdoing by the client. The
commenter argued that this proposed
language goes against the goal of
encouraging confidential
communication and effective
collaboration with the client, and
improved compliance. Secondly, the
commenter asked whether this
notification would be confidential.
Response: CBP needs to not only
know the fact that a separation from or
cancellation of representation of the
client occurred, but also the client
name, date of separation or cancellation,
and the reason(s) for the separation or
cancellation, so CBP can exercise its due
diligence and perform an investigation
of the importer’s dealings. Accordingly,
CBP amended § 111.32 to require this
information in the report. CBP proposed
the change in § 111.32 to ensure that a
broker not only advise a client after
discovery that the client has not
complied with the law or made errors or
omissions in documents, but also
document and report to CBP when a
broker terminates the representation of
the client who directs the broker to
continue the noncompliance, error, or
omission. In addition, pursuant to
paragraph (f) of section 1641, CBP has
the ability to fill in gaps in the
regulations that CBP considers
necessary to protect the revenue of the
United States, specifically, regulations
relating to documents and
correspondence, and the furnishing by
customs brokers of any other
information relating to their customs
business to CBP. As to the second
question, information submitted to CBP
is kept confidential within DHS, and all
the components within DHS follow the
same information-sharing rules. CBP
will not put information received from
brokers on its website or otherwise
publicize it without lawful authority to
do so. As mentioned above, the FOIA
rules apply when it comes to disclosure
of such information under certain
circumstances.
Comment: A few commenters asked
whether a broker’s duty to report under
§ 111.32 would deprive an importer of
the ability to file a prior disclosure
pursuant to 19 U.S.C. 1592(d). One
commenter stated that a broker already
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has the responsibility to advise a client
as to any errors and how they must be
corrected, thus, this new requirement
goes beyond 19 U.S.C. 1641.
Response: If an importer discloses the
circumstances of a violation under 19
U.S.C. 1592(a) before, or without
knowledge of, the commencement of a
formal investigation of such violation
(which could be triggered by a broker’s
report), then full benefits of prior
disclosure treatment will be afforded.
As to the second commenter, a broker
has a general duty to disclose any
information that he or she has learned
while exercising customs business
which indicates that a client is
attempting to defraud the government. If
a broker learns of any noncompliance or
errors, then the broker must not keep
this information to himself or herself
but must report it to CBP, which will
assist in combating fraud and other
schemes against the government.
Comment: One commenter referred to
section 3.5 (‘Termination of Client
Relationship’) of the economic analysis
in the NPRM, where CBP stated that it
is expected that in many cases the
report by the broker under § 111.32
would be drafted by an attorney. The
commenter argued that CBP is
recognizing that this process is
characteristic of an ad hoc legal
proceeding, evidencing that this
reporting responsibility is more of a
legal one and should not be enforced by
a broker. Another commenter stated that
the requirement would add a burden
essentially requiring brokers to
adjudicate an importer’s actions, which
is not the responsibility of a broker.
Response: CBP does not agree with
the commenter’s reasoning. Brokers
should be knowledgeable enough to
identify when a client is attempting to
defraud the government or otherwise
commit a criminal act against the
government. CBP is not asking brokers
to adjudicate a client’s actions, but if
brokers see any wrongdoing on the part
of their clients, and they separate from
or cancel representation of their clients
as a result of having identified any
wrongdoing, then brokers must alert
CBP. As discussed in the economic
analysis further below, the reporting
requirement will cause a minor increase
in the burden on brokers.
Comment: One commenter suggested
that the e-Allegations portal on CBP.gov
be used for reporting potential
violations of law instead of imposing a
requirement on the broker.
Response: Submitting an allegation
online through the e-Allegations portal
is one way of reporting a trade violation,
but it is not the best reporting tool in the
broker context. Also, the option to
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submit an allegation online does not
relieve a broker of the responsibility to
report any information or a client’s
actions if the broker determines that the
client is attempting to violate the
customs laws and regulations. Brokers
should report any attempted violation of
customs laws and regulations to a
supervisory point of contact at the
importer’s/client’s assigned Center as
the assigned Center handles all
processes associated with an assigned
importer.
Comment: Another commenter stated
that the proposed revisions to § 111.32
appear to exclude civil or non-criminal
violations, and if that was CBP’s intent,
CBP should clarify the regulation. Also,
CBP should include ‘‘customs laws’’ in
the regulatory text of § 111.32 to make
it clear that the documenting
requirement does not include all
Federal law (such as tax law, security
laws etc.), but only those laws with
which a broker can be expected to be
familiar.
Response: The proposed language of
§ 111.32 includes civil actions, such as
fraud, as well as criminal acts against
the U.S. Government. To clarify CBP’s
intent, CBP modified the third sentence
to state that the broker has the duty to
document and report if the broker
determines that the client intentionally
attempted to use the broker ‘‘to defraud
the U.S. Government or commit any
criminal act against the U.S.
Government’’.
CBP disagrees with the commenter’s
second request to limit a broker’s
responsibility to customs laws and
exclude any other laws. A broker must
be knowledgeable as to international
trade laws, customs laws and
regulations, and general customs
practices that concern entry filings,
admissibility, classification, valuation of
merchandise, as well as duty rates for
imported merchandise, and excise tax,
among other areas of expertise. In
conducting its business, the customs
broker might become aware of the
attempted importation of illegal
merchandise or perhaps import/export
schemes violating certain laws, that
reach beyond what might traditionally
be thought of as ‘customs’ laws.
Comment: Two commenters stated
that the proposed change in
§ 111.36(c)(3) to require a power of
attorney directly from the importer or
drawback claimant, and not via a freight
forwarder, is unreasonable. The
commenters argued that a lot of brokers
use their forwarding divisions to break
down language barriers for non-resident
importers or delivery duty paid
shipments.
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Response: CBP does not prohibit a
broker from working with the
forwarding division of a broker entity.
The proposed regulation precludes a
broker from obtaining a power of
attorney from someone other than an
importer or drawback claimant. The
intent of this proposed provision is to
clarify that a freight forwarder cannot
serve as a barrier to communications
between the broker and importer or
drawback claimant, to address issues of
identity theft, supply chain security, fee
transparency, and to help ensure that an
unlicensed person is not benefitting
from the customs business conducted by
the broker. However, a freight forwarder
may be included as a third party in a
power of attorney between the broker
and the importer or drawback claimant.
CBP does not regulate whether a broker
uses foreign agents to perform work that
is not customs business, but CBP does
strictly ensure that persons not actually
employed or supervised by a broker do
not get paid a portion of the fee derived
from customs business services; such
persons may instead be paid by a flat
fee.
Comment: One commenter supported
the change to require a power of
attorney directly from the importer but
asked that the language in
§ 111.36(c)(2)(i) and (ii) align with the
proposed language in (c)(3) for power of
attorneys by including the drawback
filer in (c)(2).
Response: CBP does not agree that the
language in paragraph (c)(2) needs to be
amended to include drawback
claimants. Drawback claimants are
included in the phrase ‘‘or other party
in interest’’. The term ‘‘drawback
claimant’’ was specifically included in
the proposed sentence in (c)(3) to
emphasize that a broker must execute
and obtain a power of attorney directly
from either the importer of record or
drawback claimant, and not a freight
forwarder or other third party that is not
part of the broker-importer/drawback
claimant relationship.
Comment: Another commenter, a
surety association, stated that when an
importer fails to file an entry summary
or reconciliation entry or fails to redeliver goods, the surety is held
responsible; but, the surety is not
authorized to take action to bring the
defaulting bond principal into
compliance. Thus, the regulation should
allow for a surety to complete an action
initiated by, but also abandoned by, its
bond principal. The commenter
recommended to identify sureties, along
with importers and exporters, as parties
authorized to file on their own account
under § 111.2(a)(2)(i), and as one of the
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parties from whom brokers may obtain
powers of attorney (§ 111.36).
Response: CBP does not agree with
the commenter’s request to include
sureties in § 111.2(a)(2)(i) as a party to
file on their own account, or in § 111.36
as a party from whom brokers may
obtain a power of attorney. It appears
from the commenter’s reference to
§ 111.1(a)(2)(i) that the commenter
believes that a surety is acting on behalf
of a principal (importer), akin to an
importer’s authorized employee/officer,
but that is legally not the case. A surety
and importer have rights against each
other on a bond. Therefore, sureties may
not be included in § 111.2(a)(2)(i) as a
party to file on their own account.
Although CBP regulates the general
requirements applicable to bonds,
which must be met by either the bond
principal or the surety, CBP does not
regulate the terms of the relationship
between the bond principal and the
surety, and thus a surety is not included
as a party from whom a broker may
obtain a power of attorney under
§ 111.36. The function of the bond
regulations is to protect the revenue and
ensure compliance with the laws and
relevant regulations. The contractual
terms agreed upon by a surety and the
bond principal, which relate to matters
other than bond coverage, bond
conditions etc., are beyond the purview
of CBP. Information sharing between
bond principals and sureties, and their
rights against each other over a
particular entry, are thus to be decided
by contract, and not by the terms of
customs regulations pertaining to bonds
(part 113) or brokers (part 111).
Comment: One commenter stated that
CBP should clarify that in a case where
an importer directly provides a broker
with a power of attorney, the broker
would not be precluded, in turn, to
assign that power of attorney to another
broker in accordance with the original
power of attorney. One of the
commenters pointed to the ‘‘Broker ABroker B’’ process described in the
Broker Management Handbook.
Response: A power of attorney must
be executed between the importer of
record or drawback claimant and the
broker. A power of attorney cannot be
executed between the importer of record
or drawback claimant and the freight
forwarder who in turn assigns the power
of attorney to a broker. The reason
behind CBP’s proposed language in
§ 111.36(c)(3) is the addition of
paragraph (i) in section 1641, based on
section 116 of the Trade Facilitation and
Trade Enforcement Act of 2015
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(TFTEA),13 for CBP to promulgate
regulations to require brokers to verify
the identity of the client, and the notion
that a broker should know his or her
client. However, the proposed language
does not exclude the assignment of a
power of attorney from one broker to
another broker. Assignments of powers
of attorney are permissible as long as the
original power of attorney is executed
between the importer of record or
drawback claimant and the broker, and
Broker A designates Broker B to act on
behalf of the client (importer or
drawback claimant) in accordance with
the terms of the original power of
attorney. In other words, a designation
by Broker A of Broker B is permitted so
long as the client consented to this
designation in the original power of
attorney. Pursuant to § 141.46, a power
of attorney must be in place before a
broker acts on behalf of the client.
Accordingly, to clarify CBP’s intent,
paragraph (c)(3) was slightly modified
by removing the word ‘‘obtain’’ and
replacing it with ‘‘execute’’ in the first
sentence.
Comment: One commenter asked CBP
to confirm that electronic signatures are
permissible on powers of attorney.
Response: CBP recently issued
Headquarters ruling H297978 (July 16,
2021), responding to a requester on this
same question. CBP determined that
whether an electronic signature is
permitted for use on a customs broker
power of attorney is determined by the
applicable state’s law governing the
execution of powers of attorney. In
addition, CBP stated in the
Headquarters ruling that neither the
applicable customs statute nor
regulations prohibit the use of an
electronic signature on a power of
attorney, provided that it otherwise
constitutes a valid power of attorney
between the broker and client and may
be produced upon CBP’s request.
Comment: One commenter supported
the changes in § 111.36(c)(3) but asked
for additional changes in paragraphs (a),
(b), and (c). The commenter asked CBP
to add language in paragraph (a) that
sets forth that the broker and importer
or drawback claimant come to an
agreement as to how documents will be
transmitted to the importer or drawback
claimant, and as to how payments will
be made for services and other
expenses, and to add a sentence at the
end of paragraph (b) stating that nothing
in the regulation would prohibit brokers
from compensating sales representatives
in a manner that is agreeable to both.
The commenter further suggested to
13 Public Law 114–125, 130 Stat. 122 (February
24, 2016).
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revise paragraph (c)(2) to state that the
broker shall transmit directly to the
importer or drawback claimant a copy of
the power of attorney and terms and
conditions to be signed and returned to
the broker, and to revise paragraph (c)(3)
to provide that the broker, freight
forwarder, and importer or drawback
claimant, shall make arrangements as to
how documents and payments will be
made for services and other expenses.
Response: CBP does not agree with
the commenter’s suggestion to change
paragraph (a). This paragraph sets forth
an affirmative obligation for the broker
to provide a detailed statement to the
importer of the services rendered. This
obligation is in place to prevent
misfeasance and fraud. CBP further does
not agree with an additional sentence in
paragraph (b) to allow for the
compensation of sales representatives
who are unlicensed in a manner that is
agreeable to both. Such an arrangement
would prevent transparency of the
billing of services rendered and goes
against the overarching principle that
brokers must not share fees generated
from customs business with unlicensed
parties.
In addition, CBP does not agree with
the suggested revisions to paragraph
(c)(2). Existing paragraphs (c)(2)(i) and
(ii) set forth minimum requirements for
a broker to communicate certain
information to an importer or other
party in interest to allow for transparent
billing. These requirements may be
included in an agreement between the
parties involved in a transaction, but
also need to be spelled out in the
regulation to emphasize that the
conditions regarding the compensation
of a freight forwarder for referring a
brokerage business need to be made
known and available to the importer.
Lastly, CBP does not agree with the
revision in paragraph (c)(3) for the
reasons mentioned above. Brokers must
fulfill the requirements in the
regulations; the conditions as to
document submission and payments to
the broker may be spelled out in an
agreement between the parties, but it is
important to have regulatory
requirements that bind parties.
Comment: One commenter stated that
the fee-splitting requirements are
antiquated, unclear and unrealistic. CBP
should consider revoking the feesplitting prohibitions in (b) and the
conditions under (c), but at the very
least create an additional carveout to (b)
for ‘‘unlicensed related business entities
of the broker whether located in the
United States or a foreign country’’.
Response: CBP does not agree with
the commenter. Brokers are prohibited
from creating fee arrangements whereby
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the fees or other benefits resulting from
the customs business services rendered
by a broker will directly benefit an
unlicensed person or entity. Thus,
agreements wherein unlicensed persons
acting as independent agents receive a
commission for marketing or selling
customs services on behalf of a
brokerage company are generally
prohibited. However, in Headquarters
ruling H302355 (January 29, 2019), CBP
had carved out a distinction between a
commission paid to unlicensed
independent agents contracted by a
broker, and the unlicensed employees of
a broker. The function of this distinction
is to preserve the regulation’s
underlying policy concern of preventing
unlicensed persons from improperly
benefitting from the transaction of
customs business. Commission
payments to an employee are permitted,
but not to independent agents who may
or may not be operating outside of the
United States. Instead, a flat fee, not tied
to a particular transaction, would be
permissible to compensate third-party
agents for selling customs services.
Comment: One commenter pointed
out that according to language in the
preamble of the NPRM, a broker is
required to have direct communication
with the importer. The commenter
hoped that CBP understands that, at
times, clients/importers designate third
parties, e.g., attorneys and consultants,
to engage with the brokers. As such,
brokers may communicate directly with
third parties that represent the importer
and such circumstances, controlled by
the importer’s preference, should be
compliant and sufficient.
Response: CBP wants to clarify that
there is no prohibition on the
communication between the broker and
third parties that the client has
designated, but there is a prohibition on
brokers executing a power of attorney
with a third party acting as an
intermediary instead of directly with the
client. As mentioned above, CBP
clarified the distinction between clients/
brokers and third parties/brokers and
replaced the word ‘‘obtain’’ with the
word ‘‘execute’’. In addition, to provide
more clarity, CBP added a reference to
‘‘other third party’’ after ‘‘and not via a
freight forwarder’’.
Comment: One commenter stated that
the proposed change in § 111.39(c) to
require the broker to advise the client on
a proper corrective action and retain a
record of the communication with the
client, in addition to the existing duty
to advise the client if the broker knows
that the client has not complied with
the law or has made an error, is a shift
of responsibility from the importer to
the broker who does not possess the
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same information that the importer
does. Another commenter stated that the
proposed language in § 111.39(c) greatly
increases a broker’s responsibilities in
an area that should be the domain of the
importer and pointed to 19 U.S.C. 1484
and 19 CFR 141.1(b) that place the
responsibility for corrective action and
liability for duties and other debt on the
importer. Accordingly, the commenter
is of the opinion that the proposed
regulation is in conflict with the cited
law and regulation, and, thus, should be
removed.
Response: CBP does not agree that the
proposed regulation imposes an
additional burden on brokers. Brokers
have an existing duty pursuant to
§ 111.39(b) to advise a client promptly
of noncompliance, an error or an
omission of which the broker has
knowledge. If a broker continues to
engage in customs business which then
repeats such noncompliance, error or
omission, then a broker is violating
§ 111.32 because a broker is now filing
documents with CBP that the broker
knows contain false information. In
addition, brokers should already have a
good practice in place for documenting
any communication with a client, and
specifically any advice provided to a
client on a corrective action. Adding
this proposed language in the regulation
is merely clarifying and codifying this
responsibility.
Comment: Several commenters asked
for clarification as to what type of
record must be retained as evidence of
a corrective action, what should be
included in the ‘‘communication’’ with
the client, and what constitutes
‘‘corrective action.’’ The commenters
suggested to add a sentence to
paragraph (c) to state that a copy of a
corrected entry demonstrating and/or
communication explaining specific
corrective action(s) shall serve as an
adequate record of such
communication.
Response: CBP disagrees with the
suggested sentence that a copy of a
corrected entry or communication could
be sufficient to show that the broker has
advised its client of a corrective action.
CBP does not want to limit the types of
records that qualify as evidence that the
broker advised the client of a corrective
action. The record could be an email or
letter sent by the broker, or a written
note summarizing a phone call between
the broker and client, to name a few.
CBP is open to accepting any record that
the broker thinks would be sufficient in
evidencing the communication that took
place between the broker and client.
Corrective action is the action that the
broker took to remediate the
noncompliance or error; an action that
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the broker in his or her good judgment
understands needs to be taken.
Comment: One commenter referenced
a statement in the economic analysis in
the NPRM (page 34848, 1st row in the
table listing § 111.39), which stated that
the change in § 111.39(c) is considered
neutral as it reflects CBP’s current
practice. The commenter disagreed with
that statement, noting that current part
111 does not explicitly require customs
brokers to provide clients with
corrective action measures reflective of
the client’s errors/violations.
Response: CBP believes that the
statement in the economic analysis is
correct. A broker has an existing
responsibility to advise the client of any
noncompliance and errors and suggest a
corrective action, even though it has not
been stated expressly in the regulation.
Advising a client and documenting such
advice should be a broker’s good
practice, to protect the client’s as well
as the broker’s interests, in case of any
litigation or complaint by the client.
Further, a broker has the responsibility
pursuant to § 111.21(a) to document any
correspondence with the client, which
includes the documentation of any
corrective action(s) that the broker
advised the client to take. CBP wishes
to take the opportunity to make clear
that this communication from the broker
to the client is a record under § 111.21.
Thus, CBP considers this responsibility
a current practice, and determined that
the proposed language in § 111.39(c) is
deemed neutral in the economic
analysis.
Comment: Two commenters stated
that brokers frequently refer clients to
consultants or attorneys for a proper
course of action, and CBP should
recognize that a referral to a more
qualified expert may be the proper
corrective action and should reflect that
in the regulation.
Response: CBP understands that part
of a broker’s normal business practice,
in some situations where corrective
action is needed, could be a referral to
a more qualified expert with regard to
certain corrective actions. However, that
does not mean that a referral is the only
proper course of action. It is a
reasonable person standard that the
broker must employ to determine what
type of corrective action is appropriate
in a specific situation.
Comment: One commenter stated that
the requirement that a broker document
the advice to a client under § 111.39(c)
serves no purpose to CBP. If CBP has a
concern with a broker’s performance,
then CBP should conduct an audit. The
commenter requested that CBP create a
standard reporting requirement and
advise the importing community of its
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intention of collecting data and how the
benefits of the data collection do not
cause the broker or importer to act
without conflict in its importing
partnership with the importer of record.
Response: CBP disagrees with the
commenter. The documentation
requirement does serve a purpose,
which is evidencing that the broker
provided advice to the client, and that
documentation is considered a record
pursuant to § 111.21. The second
sentence of § 111.21(a) states that a
broker must keep and maintain on file
copies of all of his or her
correspondence and other records
relating to the customs business. This is
a recordkeeping requirement for all
brokers; the requirement in proposed
paragraph (c) of § 111.39 is merely
reiterating that a broker must keep a
record of communication with the client
regarding the advice on a corrective
action. To make this existing
requirement clearer, CBP included a
reference to § 111.21 in addition to the
reference to § 111.23 in paragraph (c) of
§ 111.39. Since there are recordkeeping
requirements in place, CBP believes that
there is no need for an additional
reporting requirement.
Comment: Several commenters stated
that CBP should allow for an extension
of time, extenuating circumstances, or
an opportunity to mitigate pursuant to
§ 111.45 if the broker can show a good
faith effort to prevent the revocation of
the license and permit. The commenters
argued that the effect of losing a single
national permit is much more
detrimental than losing a district permit.
The commenters suggested language to
add at the end of the first two sentences
of paragraph (a), preventing a
suspension or revocation if a broker
demonstrates good cause or commits to
corrective action, warranting an
extension of time.
Response: The statutory requirements
in paragraphs (b)(5) and (c)(3) of section
1641 set forth the reasons for a lapse of
a broker’s license and permit. If a broker
entity that is licensed as a corporation,
association or partnership fails to have,
for any continuous period of 120 days,
at least one licensed officer of the
corporation or association, or at least
one licensed member of the partnership,
the entity’s license will be revoked by
operation of law under paragraph (b)(5).
If a broker who was granted a permit
fails to employ, for any continuous
period of 180 days, at least one
individual who is licensed, the permit
will be revoked by operation of law
under paragraph (c)(3). Neither
paragraph in the statute provides for a
good cause exception. Thus, the
regulation, which mirrors the language
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in the statute and mandates a revocation
by operation of law, cannot be changed
to include such an exception. Moreover,
CBP already provides for the possibility
for reinstatement of a license once the
triennial status report and associated fee
are filed as required, as well as for
reinstatement of a permit. Moreover,
there is no prejudice to a broker if a
license or permit is suspended or
revoked by operation of law; brokers are
not barred from reapplying.
Comment: Other commenters
suggested that there be an
administrative process prior to revoking
a license and permit, such as providing
prior notice in case of a failure to pay
the annual broker permit fee in
§ 111.45(b). Such process would allow
for a less burdensome resolution if the
failure to pay was due to an
administrative or clerical mistake.
Response: The broker permit user fee
is an annual fee that brokers must pay
for each permit they hold. CBP issues a
Federal Register notice to announce the
amount of the fee, as well as the
deadline to pay the fee, on an annual
basis. CBP also posts this information
on its website. CBP believes that there
is sufficient notice for a broker to timely
pay the permit user fee. In addition,
with the effectiveness of the final rule,
there will be only one permit user fee
to pay per year for a broker’s national
permit. Thus, CBP does not believe that
the timely payment of the fee is
burdensome.
Subpart D—Cancellation, Suspension,
or Revocation of License or Permit, and
Monetary Penalty in Lieu of Suspension
or Revocation
CBP received supporting comments
regarding the proposed changes to
subpart D of part 111. Specifically, one
commenter supported the proposal in
§ 111.53 to add a new paragraph (g) to
provide an additional ground for the
suspension or revocation of a license or
permit to cover convictions of
committing or conspiring to commit an
act of terrorism as described in section
2332b of title 18 of the United States
Code (see 19 U.S.C. 1641(d)(1)(G)).
Another commenter supported the
proposal in § 111.62(e) to remove the
requirement for the broker to file his or
her verified answer in duplicate prior to
a suspension or revocation hearing as it
better reflects the current electronic
business environment. In addition, a
commenter supported the proposal in
§ 111.76 to remove the requirement for
a broker to file an application to CBP to
reopen a case in writing and in
duplicate, if an appeal is not filed, and
instead to allow for electronic
communication.
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Subpart E—Monetary Penalty and
Payment of Fees
Comment: One commenter voiced the
concern that the increase of the license
application fee will deter individuals
from applying for a broker’s license.
Response: CBP conducted a fee study
on the costs associated with the broker
license application, and CBP
determined that the current fees are no
longer sufficient to cover the costs of
servicing brokers. The fee study showed
that a fee of $463 for individuals and
$815 for business entities would be
necessary to recover the costs associated
with the review of the license
application and the necessary vetting for
individuals and business entities.
However, to minimize the financial
burden on prospective brokers and not
disincentivize those who are pursuing a
career as a broker, while also recovering
some of the increasing costs, CBP
proposed to not increase the fees to the
level of cost needed, but to increase the
application fee to $300 for individuals
and $500 for business entities. The
economic analysis explains the reasons
for the increase of the application fee
and emphasizes the cost savings as a
result of eliminating the district permit
requirement and other changes to part
111. Once the final regulations are
effective, a national permit applicant
has to pay for only one permit
application to be able to conduct
customs business throughout the U.S.
customs territory, in addition to the
annual permit user fee for only one
national permit.
Comment: One commenter expressed
disagreement with the increase of the
permit fee, pointing to CBP’s ACE
system and other electronic platforms
used for receiving payments and
submissions of information and argued
that the use of those tools should reduce
costs. In addition, the commenter noted
that the automatic transition from
district permits to national permits
should not cause any additional cost.
Response: As mentioned above, CBP
proposed to increase the license
application fee to cover expenses related
to the review of license applications and
vetting of applicants. CBP did not
propose to change the amount of the
permit fee, and this final rule is not
changing the fee of $100 for a broker to
apply for a national permit. In response
to the second comment, CBP is
transitioning the district permits to
national permits at no cost to brokers.
Comment: One commenter stated that
CBP should consider automating the fee
collection and management functions,
and charge a set fee per port, not
district. The commenter further noted
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that ‘‘district’’ is a term used by CBP,
which is not as relevant for brokers
filing entries, thus, districts should be
disregarded when charging fees.
Response: CBP did not propose to
change the current fee structure for
filing entries, moreover, the
commenter’s suggestion is not
considered a natural outgrowth of the
NPRM’s proposals. Therefore, CBP is
not adopting a new fee structure based
on port activity.
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Other General Comments
Comment: One commenter stated that
CBP did not provide sufficient notice of
the proposed amendments as they were
not mentioned on CBP’s website, but
only announced in the Federal Register.
The commenter further maintained that
the NPRM did not mention whether
CBP had reached out to the trade for
input on specific issues. In addition, the
commenter asked that CBP provide a
fuller explanation of the proposed
changes and provide further
opportunities for public comment before
finalizing the regulations. Another
commenter suggested to issue a revised
NPRM, or, at least, hold a public hearing
to discuss the proposed changes.
Response: Pursuant to the APA, CBP
published the NPRM to propose changes
in an effort to modernize the customs
broker regulations. The NPRM provided
60 days for public comment, in
compliance with the APA. In addition,
CBP announced the publication of the
NPRM (as well as the concurrent NPRM
proposing the elimination of broker
district permit user fees) on CBP’s
website.14 Moreover, CBP had been
socializing the proposed changes to part
111 for numerous years at many public
forums, including COAC meetings and
various broker association meetings. As
mentioned in the preamble of the
NPRM, CBP had conducted outreach to
the broker community through
webinars, port meetings and broker
association meetings to solicit feedback
on various broker matters and the
modern business environment. The
trade community had many
opportunities to share their opinions,
throughout the outreach as well as
during the 60-day public comment
period. CBP does not believe that there
is a need for a public hearing or a
revised NPRM to provide a fuller
explanation of the proposed changes,
14 The announcement of the NPRMs, as well as
COAC’s recommendations regarding the
modernization, may be found online on CBP’s
website at https://www.cbp.gov/trade/programsadministration/customs-brokers by clicking on the
tab titled ‘‘Modernization of the Customs Broker
Regulations’’.
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other than the explanations included in
this final rule.
Comment: One commenter
recommended a minimum percentage of
U.S. ownership in a brokerage. The
commenter explained that CBP Form
3124 does require the notation of all
officers who are licensed, as well as
other officers and principals with
controlling interest who are not
licensed.
Response: CBP thanks the commenter
for its contribution but believes that this
comment is outside of the scope of this
final rule as there is no U.S. ownership
requirement in 19 U.S.C. 1641 or the
corresponding regulations in 19 CFR
part 111.
Comment: One commenter strongly
recommended that CBP establish a
dedicated, independent ombudsmantype position with the Office of Trade
Relations to ensure that customs brokers
are treated the same as CBP employees
would be treated for similar types of
mistakes. The commenter argued that
this would be especially important
considering the increased level of
responsibility continually being
transferred from CBP to customs
brokers.
Response: CBP does not believe that
the creation of an ombudsman-type
position is necessary. CBP disagrees that
a broker’s mistake should be treated in
the same fashion as a CBP official’s
mistake. Brokers are not Federal
employees, so different paths are
available for brokers and CBP officials to
take in case of mistakes. Brokers have
the opportunity to appeal certain
decisions by CBP if brokers are of the
opinion that those decisions are
erroneous, such as the rejection of a
license or permit, the suspension/
revocation of a license or permit, or the
imposition of a penalty. Other
applicable avenues are in place for
Federal employees.
Comment: Three commenters urged
CBP, especially in light of Executive
Order 13924 (May 19, 2020), which
instructed the government to provide
regulatory relief and flexibility on a
temporary, as well as, permanent basis,
where appropriate, and due to the
current challenges businesses are facing
during the pandemic, to grant the
brokerage industry at least one year, and
upon showing of need, additional time
beyond the one-year period to comply
with the new regulations. The
commenters argued that brokers will
need time to adjust, and in some cases,
restructure their businesses, to the new
national permit framework and the new
criteria for responsible supervision and
control.
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Response: CBP does not believe that
one year is necessary to implement the
final regulations to allow a broker to
adjust, and maybe even restructure, its
business. A lot of the changes that are
being implemented with this final rule
are simplifying processes or updating or
clarifying regulations. For instance, the
updated supervision framework is
simply codifying what brokers should
have already been doing, such as the
employment of sufficient licensed
brokers, broker’s responsiveness to
CBP’s communications and notices, as
well as to the partner’s or member’s
communication and direction, and
updated recordkeeping requirements.
None of these changes is significant in
the sense that it would require brokers
to re-structure their businesses. A lot of
the requirements that are being codified
in the regulations should have been best
practices already for brokers to provide
high quality service to their clients.
However, CBP does agree that a 60day delayed effective date is beneficial
for both the brokers to make any needed
changes to the business, and for CBP to
transition all district permit holders to
a national permit and to ensure that CBP
personnel are aware of and ready to
work with the new changes imposed by
the final rule.
In the NPRM, CBP proposed to revise
§ 111.2(b) by removing the four
exceptions to the district permit
requirement in order to transition to a
national permit system. As part of the
proposed revision, CBP will remove the
cross-reference in § 111.2(b)(2)(i)(C) to
subpart B of part 143 of the CBP
regulations, which sets forth the
regulations regarding remote location
filing (RLF). No comments were
submitted by the public regarding these
proposed changes, whereby the use of a
national permit would obviate the need
for standalone RLF regulations. It
should be noted that the RLF
requirements that are mandated by 19
U.S.C. 1414 are captured in the
proposed transition to national permits
for all licensed brokers, as the national
permit framework includes the
expansion of the scope of a national
permit to all customs business within
the United States and would allow
filings to be made electronically from
anywhere in the United States. Once the
final rule becomes effective, customs
brokers will not be subject to the RLF
regulations and, in a future rulemaking,
CBP will propose amending the
standalone RLF regulations in subpart B
of part 143 to remove those provisions
which have become moot and make any
other changes that may be needed.
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III. Technical Changes and
Clarifications to the Existing
Regulations
In reviewing the proposed changes to
the regulations, as well as existing
regulations, CBP identified certain
technical changes that would provide
more flexibility to the brokers, clarify
CBP’s intent of certain regulatory
language, and improve the electronic
submission process, which are set forth
below.
In § 111.12(a), CBP added the option
for electronic submission of license
applications. CBP is in the process of
developing the capability for the
submission of license applications to
the eCBP portal and wants the
regulatory language to accommodate
this future change. In addition, CBP
added the option for electronic
submission of withdrawals of license
applications in redesignated paragraph
(b) as an alternative to the current
method of submission to the processing
Center. As soon as CBP deploys this
additional capability, applicants will
have two options for the submission of
application withdrawals.
To reflect in the regulation the option
of a remote exam, as explained above,
CBP modified the language in the last
sentence of § 111.13(b) to state that CBP
will give notice of the exact time and
place for the examination, including
whether alternatives to on-site testing
will be available. In § 111.14(a)(3), CBP
corrected a minor error that occurred in
the published NPRM in the phrase
‘‘(including a member or a partnership
or an officer of an association or
corporation)’’. With this final rule, CBP
replaced the first instance of ‘‘or’’ in the
above phrase with the word ‘‘of’’ to
accurately reflect the meaning of the
phrase.
In § 111.17(c), CBP slightly modified
the language for clarity and replaced
‘‘the date of entry of the Executive
Assistant Commissioner’s decision’’
with ‘‘the decision date by the Executive
Assistant Commissioner’’. This
technical change does not change the
meaning or substance of the sentence.
CBP slightly modified the language in
the fifth sentence of § 111.19(b) to
clarify that a broker has two options for
submitting the permit application, by
submitting a letter either to the
processing Center or electronically
through a CBP-approved EDI system.
In the first sentence of § 111.19(e)(1),
CBP replaced the phrase ‘‘in support of
the denied application’’ with the phrase
‘‘in support of the application’’,
removing the word ‘‘denied.’’ This
technical change does not change the
meaning or substance of the sentence.
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Moreover, this change better aligns the
regulatory language in § 111.19(e)(1)
with (e)(2). The proposed term ‘‘denied
application’’ is not used anywhere else
in the regulation, thus, it is replaced for
clarity purposes.
Further, in § 111.19(e)(2), CBP slightly
modified the language for clarity at the
end of the sentence and replaced ‘‘the
date of entry of the decision’’ by the
Executive Assistant Commissioner with
‘‘the decision date’’ by the Executive
Assistant Commissioner. This technical
change does not change the meaning or
substance of the sentence.
In § 111.19(d), CBP added the phrase
‘‘the application’’ after ‘‘will review’’ to
further clarify that the processing Center
that receives the application will review
the application to determine whether
the applicant meets the eligibility
requirements for a national permit to be
issued. This clarification does not
change the meaning or substance of the
sentence.
In § 111.28 (responsible supervision
and control), CBP revised the language
in (a)(3) and (5) to provide more clarity.
Factor (3) is revised to read as ‘‘The
volume and type of business conducted
by the broker’’, and factor (5) is revised
to read as ‘‘The level of access a broker’s
employees have to current editions of
CBP regulations, the Harmonized Tariff
Schedule of the United States, and CBP
issuances.’’ There is no change to any of
the substantive regulatory requirements
for customs brokers. In addition, CBP
replaced the word ‘‘broker’’ with
‘‘brokerage’’ at the end of the sentences
in (a)(9) and (a)(10) to better reflect the
meaning of the factors.
In § 111.28(b)(2) and (3), CBP replaced
the word ‘‘employees’’ with
‘‘employee(s)’’, where appropriate, for
consistency throughout the two
paragraphs. This technical change does
not change any of the substantive
reporting requirements for customs
brokers.
Further, in § 111.30(d)(1), CBP
removed the proposed language
‘‘accompanied by payment or valid
proof of payment of the triennial status
report fee prescribed in § 111.96(d).’’
and replaced it with simpler language
that reflects the current and future
process of submissions of triennial
status reports to CBP, i.e., the status
report must be filed through a CBPauthorized EDI system. There is no
option for a broker to attach valid proof
of payment in the eCBP portal, or when
submitting the report at one of the 41
BMO locations. Further, CBP added
clarifying language that the status report
is not considered received by CBP until
payment of the triennial status report
fee prescribed in § 111.96(d) is received.
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This is not a new requirement; CBP
always required the submission of both
the triennial status report and the
triennial status fee, as evidenced by the
existing regulatory language ‘‘the report
must be accompanied by the fee.’’ A
similar message as the one in the final
regulation is displayed in the eCBP
portal when submitting the triennial
report, alerting the broker that the filing
is not completed until payment of the
fee has been submitted.
In addition, CBP did not adopt the
proposed language of ‘‘submits payment
or proof of payment of’’ in the third
sentence of § 111.30(d)(4) but kept the
existing language of ‘‘pays’’ as it better
reflects CBP’s practice, as explained
above. CBP added ‘‘and pay the required
fee’’ in the fourth sentence of
§ 111.30(d)(4) to align the language with
the language in the prior sentence that
talks about filing the required report and
paying the required fee for the license
to be reinstated. The fourth sentence
sets forth the consequence of revocation
by operation of law if the broker does
not file the required report and pay the
required fee.
CBP also amended the first sentence
of § 111.30(e) and added phone number
and email address to the already
required information of name and
address for the individual who has legal
custody of the records after the
termination of the brokerage business.
Adding the email address and telephone
number to the methods for
communicating with CBP will expedite
communication and facilitate resolution
of any questions. Communication in
current times is typically conducted by
phone or email, thus, adding these two
options will benefit both CBP and the
recordkeeping individual. Moreover, an
email address and telephone number are
often already included when brokers
provide information to CBP, as those are
preferred methods of communication.
In § 111.39(a), covering advice to a
client, in the first sentence, CBP added
the phrase ‘‘it conducts on behalf of’’ for
clarification, but this change will not
have an impact on the substantive
regulatory requirement for customs
brokers to not withhold any information
relative to the customs business that the
broker is conducting on behalf of a
client.
In addition, CBP revised the last
sentence of paragraph (a) of § 111.96
and removed references to a CBP
fingerprint processing fee since this is
not a fee that CBP collects. The only fee
that is collected for the processing of
fingerprints is one charged by the
Federal Bureau of Investigation.
CBP simplified the proposed language
in § 111.96(d) regarding the triennial
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status report fee to state that a fee of
$100 is required to defray the costs of
administering the status reporting
requirement prescribed in
§ 111.30(d)(1). The method of
submission by a CBP-authorized EDI
system is already mentioned in
§ 111.30(d)(1), thus, it is sufficient that
paragraph (d) of § 111.96 simply deals
with the fee payment.
Finally, while the general topic of this
rulemaking covers customs revenue
functions delegated to the Secretary of
Homeland Security by the Secretary of
the Treasury, this document also
includes certain fees over which the
Secretary of the Treasury retains
authority, as provided for in 19 CFR
0.1(a) and paragraph 1(a)(i) of Treasury
Department Order 100–16. Accordingly,
this final rule is also being signed by the
Secretary of the Treasury (or his or her
delegate).
IV. The Benefits of CBP’s New Payment
and Submission System, the eCBP
Portal, for Licensed Customs Brokers
In addition to finalizing the proposed
regulations, CBP announces in this final
rule the deployment of a new payment
and submission system, the eCBP portal.
The development of the eCBP portal is
part of CBP’s Electronic Payment
Options (ePO) effort that addresses the
revenue collections capability gaps of
limited payment options, inefficient
manual processes, and disparate
revenue systems. This effort’s goal is to
eliminate manual processes and
standardize processes, reduce cash and
check collections at ports of entry and
provide more online payment options,
integrate data with cargo systems,
reduce wait times at ports of entry, and
provide better and more accessible data,
all of which aligns with
recommendations by COAC and other
trade stakeholders.
This new payment and submission
system streamlines and validates data,
which in turn reduces errors and
provides data to support security-related
decision making by CBP personnel.
Using the eCBP portal means fewer cash
transactions, which means lower risk of
cash losses. Additionally, this
technological advancement enhances
CBP revenue collection capability and
permits greater focus on law
enforcement and trade facilitation.
The eCBP portal’s electronic
submission and payment options offer
brokers the flexibility and convenience
to easily and efficiently manage their
reporting responsibilities. Currently, the
eCBP portal is being used for the
submission and payment of broker
examination applications and triennial
status reports. Additional
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enhancements, such as the electronic
submission of and payment for broker
license applications and permit
applications, and the payment of annual
user permit fees, will follow, and CBP
will announce those additional eCBP
functionalities in the Federal Register,
as needed.
CBP deployed eCBP’s functionality to
receive broker examination applications
on August 19, 2019. CBP announced
this new payment system through CSMS
messages, on CBP’s website, through
tweets, and in webinars offered to the
broker community. This new payment
portal was well received by the broker
community, and by the end of fiscal
year 2019, CBP had successfully
processed more than 1,300 broker
examination applications in the eCBP
portal, resulting in a significant
reduction of personnel hours in CBP
Headquarters and at ports processing
applications and withdrawals of
applications.
After a successful testing phase
between December 2017 and May 2018,
on December 15, 2020, CBP deployed
the capability to file the triennial status
report in the eCBP portal by completing
the online form and submitting the
triennial fee. Approximately 90% of the
status reports for the 2020/2021
reporting period were submitted
electronically. It is important to note
that with this new functionality,
customs brokers now have two options
to file the triennial report and fee: they
may use the new portal or submit the
report and fee at a location where their
broker license was issued. An additional
current functionality of the new eCBP
portal is the automatic processing of
license suspensions and revocations for
unpaid triennial status reports, which
was deployed to the portal in February
2021. However, even though this is an
automatic process, the list of unpaid
reports is manually validated by CBP
personnel prior to suspension or
revocation. As the eCBP portal is tied to
ACE, this new interface also allows ACE
to receive the triennial report data and
apply any updates regarding the
triennial report information and
payment information to the broker
account in ACE.
Customs brokers who want to use the
eCBP portal, found on CBP’s website,
must create a Login.gov account as a
first-time user.15 Instructions and
training resources, such as user and
quick reference guides, for brokers on
how to create a Login.gov account and
15 The link to the eCBP portal may be found
online at https://e.cbp.dhs.gov/brokers/#/home.
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use the eCBP portal can be found on
CBP’s website.16
V. Conclusion
Based on the analysis of the
comments received and further
consideration, CBP has decided to adopt
as final the proposed regulations
published in the Federal Register (85
FR 34836) on June 5, 2020, as modified
by the changes noted in the discussion
of the comments section above.
VI. Statutory and Regulatory
Requirements
A. Executive Orders 13563 and 12866
Executive Orders 13563 and 12866
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. This rule is
not a ‘‘significant regulatory action’’
under section 3(f) of Executive Order
12866. Accordingly, the Office of
Management and Budget (OMB) has not
reviewed this regulation.
This rule will result in costs to
licensed customs brokers in the form of
additional fees and reporting
requirements. CBP estimates that these
costs total $88,850. This rule will also
result in benefits to licensed customs
brokers in the form of reduced fees and
reduced time burdens. CBP will also
benefit from time savings. CBP estimates
that the monetized savings of the rule
total $1,277,116. The five-year total
monetized net benefit of the rule ranges
from $973,616 discounted at 7 percent
to $1,088,308 discounted at 3 percent.
In addition, unmonetized benefits
include increased professionalism of the
broker industry, greater clarity for
brokers in understanding the rules and
regulations by which they must abide,
better data security, and better reporting
of potential fraud to CBP.
As mentioned above, CBP published
the proposed rule titled,
‘‘Modernization of the Customs Brokers
Regulations,’’ on June 5, 2020, and
received 55 comments from the
public.17 CBP adopts the regulatory
16 Resources for brokers on how to use the eCBP
portal are available online at https://www.cbp.gov/
trade/ecbp.
17 Both the NPRM (85 FR 34836) and the public
comments in response to the NPRM may be found
online at https://www.regulations.gov/document/
USCBP-2020-0009-0001.
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Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Rules and Regulations
amendments specified in the proposed
rule with some changes, outlined below.
With the adoption of the proposed
regulatory amendments, CBP applies the
2020 NPRM’s economic analysis
approach to this rule, updating the data
as necessary and making certain
changes in accordance with the public
comments.
63295
CBP has prepared the following
analysis to help inform stakeholders of
the impacts of this rule.
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TABLE 1—SUMMARY OF CHANGES AS A RESULT OF THE RULE
Provision
Section
Change
Cost/benefit
111.1 ..................
Subpart A .........
111.2 ..................
Subpart A .........
Neutral—changes reflect current practice and statutory changes.
$122,000 annualized net benefit. See section 3.11.
111.3 ..................
Subpart A .........
111.11 ................
Subpart A .........
111.12(a) ...........
Subpart B .........
111.12(b) ...........
111.13 ................
Subpart B .........
Subpart B .........
111.14 ................
Subpart B .........
111.16 ................
Subpart B .........
111.17 ................
Subpart B .........
111.18 ................
Subpart B .........
Update/eliminate definitions; change primary point
of contact to processing Center.
Eliminate district permits and require national permits.
Requires customs business to be conducted within
the customs territory of the US; brokers must
maintain a point of contact.
Adds that the processing Center may reject an incomplete application.
Update the place of submission for applications and
allows for electronic submission or withdrawal;
removes requirement that applications are submitted under oath.
Remove requirement to post notice of applications
Revisions to reflect new national permit system;
written and electronic notification of examination
results; remote exam option.
Clarifies that CBP may use information from the
interview in background investigation.
Expansion of the grounds to justify the denial of a
license.
Adds new method to communicate further information to CBP for appeal of an application denial.
Requires applicants to provide new or corrected information when re-applying.
111.19 ................
111.19(b) ...........
Subpart B .........
Subpart B .........
111.19(c) ............
Subpart B .........
111.19(d) ...........
Subpart B .........
111.19(e) ...........
Subpart B .........
111.19(g) ...........
Subpart B .........
111.21 ................
Subpart C .........
111.23 ................
Subpart C .........
111.24 ................
111.25 ................
Subpart C .........
Subpart C .........
111.27 ................
Subpart C .........
111.28 ................
Subpart C .........
111.30 ................
Subpart C .........
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18:04 Oct 17, 2022
Replacing district permits with national permits .......
Revision of the procedures to apply for a permit to
account for the switch from district to national
permits.
Revision of permit fees .............................................
Elimination of the requirement to maintain a place
of business in each port where a district permit is
held.
Language updates to reflect the change to national
permits and processing Centers.
Clarifies applicants must provide additional information or arguments in support of a denied application; allows information to be provided through
various communication methods.
Requires brokers to notify CBP of any electronic
records breach and to provide CBP a designated
point of contact for recordkeeping in addition to
the current contact provided for financial queries.
Requires that electronic records be stored within
the U.S. customs territory 18.
Clarifies disclosure rules ...........................................
Revises guidelines for CBP inspection of broker
records with the elimination of broker districts.
Update of language to reflect the transition of responsibilities from Treasury to DHS following the
creation of DHS.
Clarifies requirements in relation to responsible supervision and control and allows for electronic
submission of employee lists.
Modification to the timing requirement for when a
broker notifies CBP of information changes, including a new requirement for inactive brokers to
provide CBP with up-to-date contact information.
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Neutral—clarifies current regulations and reflects
current practice.
Benefit—increases efficiency.
Benefit—increases efficiency and reduces the burden on applicants.
Benefit—reduces the burden on CBP.
Neutral—the costs of the new fee system are addressed in section 3.11.
Neutral—reflects current practice.
Benefit—increases professionalism.
Benefit—greater flexibility.
Benefit—fewer application appeals will be rejected
for lack of new information.
Cost—applicants will need to expend time in collecting and submitting information.
$122,000 annualized net benefit. See section 3.11.
Neutral—the process is very similar, but with a national permit.
See ‘‘Elimination of Customs Broker District Permit
Fee’’ RIN 1515–AE43.
Benefit—allows for greater flexibility and efficiency
for brokers and CBP.
See above.
Benefit—increases professionalism and decreases
time spent by CBP acquiring information.
Cost—requires applicants to expend time in providing additional information.
Benefit—enhances CBP’s risk management approach. See section 3.3/section 3.7.2.
Benefit—increases security. See section 3.3.
Benefit reduces confusion. See section 3.7.3.
Neutral—see section 3.4.
Neutral—reflects the current environment.
Benefit—increases flexibility. See section 3.7.4.
Benefit—increases professionalism, keeps CBP
better informed, and allows greater efficiency for
broker’s changing status.
Cost—inactive brokers will expend time to submit
their information.
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TABLE 1—SUMMARY OF CHANGES AS A RESULT OF THE RULE—Continued
Provision
Section
Change
Cost/benefit
111.32 ................
Subpart C .........
Cost—$8,185 annually.
Benefit—improves CBP’s awareness of potential illegal activity. See section 3.5.
111.36 ................
Subpart C .........
111.39 ................
Subpart C .........
111.45 ................
111.53 ................
Subpart C .........
Subpart D .........
111.55 ................
Subpart D .........
111.56 ................
Subpart D .........
111.62 ................
Subpart D .........
111.63 ................
Subpart D .........
111.67 ................
Subpart D .........
111.74 ................
Subpart D .........
111.76 ................
Subpart D .........
111.77 ................
Subpart D .........
111.81 ................
Subpart D .........
111.96 ................
Subpart E .........
Places an affirmative burden on the broker to report
to CBP when a broker terminates a client relationship as a result of determining that the client
is attempting to defraud the U.S. Government.
Modifies the requirements for brokers when dealing
with freight forwarders.
Guidelines for how brokers may behave with clients; requires brokers to advise clients of corrective actions and maintain communication records.
Updates to reflect the change to national permits ...
Adds conviction of committing or conspiring to commit an act of terrorism to the grounds for suspension or revocation of a license or permit.
Updates to reflect the current practice of not referring all complaints to a special agent.
Updates to reflect current practice in the investigation of a complaint.
Updates to requirements for notification of charges
to reflect new electronic options.
Removes the requirement that a return card be
signed solely by the addressee; permits CBP to
rely upon the mailing address provided by the
broker.
Updates to reflect the current practice of Office of
Chief Counsel representing the Government.
Eliminates the requirement to publish suspension,
revocation, or penalty notices in the Customs
Bulletin.
Allows for electronic communication when filing an
appeal.
Eliminates the requirement that CBP provide notice
of a vacated or modified order in the Customs
Bulletin.
Updates to the signing requirement for a settlement
to reflect delegation of authorities.
Updates to the user application fee ..........................
As stated above in Section II,
Discussion of Comments, one
commenter disagreed with CBP’s
assessment that the change to
§ 111.39(c) has a neutral effect on cost,
as it reflects current practice. CBP
believes that this assessment is correct.
A broker has an existing responsibility
to advise the client of any
noncompliance and errors and suggest a
corrective action, even though it has not
been stated expressly in the regulation.
Advising a client and documenting such
advice should be a broker’s good
practice, to protect the client’s as well
as the broker’s interests, in case of any
litigation or complaint by the client.
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1. Need and Purpose of Rule
The primary purpose of this final rule
is to formalize recent changes in the
permitting of licensed customs brokers.
To take advantage of new technologies
and reflect a changing trade
environment, CBP is switching from a
18 Duplicate or backup records may be stored
outside the U.S. customs territory so long as the
recordkeeping requirements for the original records
are met. See CBP’s Headquarters ruling H292868.
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Neutral—time spent does not change. See section
3.6.
Neutral—reflects current practice. See section
3.7.4.
Neutral—specifies national permit.
Benefit—increases professionalism.
Neutral—reflects current practice.
Neutral—reflects current practice.
Neutral—reflects improved technology.
Benefit—increases efficiency.
Neutral—reflects current practice.
Neutral—such announcements are published in the
Federal Register and automatically included in
the Customs Bulletin.
Benefit—increases efficiency.
Neutral—such announcements are published in the
Federal Register and automatically included in
the Customs Bulletin.
Neutral—reflects delegation of existing authority.
See above.
district permit system to a national
permit system. Licensed brokers who
have traditionally been required to
apply for and operate under a permit for
each district in which they do business
may now work under a single, national
permit.
The rule also finalizes changes in the
license application fee charged by CBP,
which CBP will increase to cover a
greater portion of the costs CBP has
always faced. Because these costs are
being moved from CBP to brokers, they
are considered a transfer. The rule
contains several provisions meant to
professionalize the broker industry,
formalize current practices into
regulations, and adapt regulations to
reflect technological advancements.
Finally, in this final rule, CBP
announces the deployment of a new
payment and submission system, the
eCBP portal.19 Testing initially began in
2017 and continued into 2020. The
eCBP portal allows applicants and
brokers to electronically submit the
19 See The Benefits of CBP’s New Payment and
Submission System, the eCBP Portal, for Licensed
Customs Brokers above.
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broker exam application, the triennial
status report and associated fees, with
additional enhancements to be
announced in the Federal Register as
needed. The majority of brokers already
follow many of the practices described
above, like storing records electronically
within the customs territory of the
United States and reporting clients the
broker knows have attempted to commit
fraud. Furthermore, 80 percent of
applicants and 90 percent of brokers
have already adopted the eCBP portal.
This rule provides better and more
concrete guidance in these matters, at
little or no cost to CBP or customs
brokers.
In this final rule, CBP is making
several changes to address comments
received from the public in response to
the NPRM, as well as clarifying existing
regulatory language. These include:
• Changing the definition of
‘‘Designated Center’’ by changing the
name to ‘‘Processing Center;’’ and
explaining that processing Center means
the broker management operations of a
Center;
• Removing references to a
‘‘director,’’ to reflect the fact that other
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Center employees may process broker
submissions;
• Updating § 111.12 to allow the
electronic submission and withdrawal
of the customs broker license
application;
• Updating § 111.13 to account for a
remote option for the customs broker
exam;
• Updating § 111.21 to require
brokers to report a breach as well as any
known compromised importer
identification numbers within 72 hours,
in addition to requiring submission of
any additional known compromised
importer identification numbers within
10 business days;
• Consolidation of proposed
responsible supervision and control
factors 12 and 13 in § 111.28(a) into a
single factor (12), and factors 14 and 15
into a single factor (13);
• Addition of an email address
requirement to § 111.30.
Monetized costs for customs brokers
will result from no longer receiving a
first district permit concurrent with a
broker’s license, and the requirement for
brokers to notify CBP when separating
from a client relationship due to
attempted fraud or criminal acts.
Customs brokers who do not
concurrently receive their first district
permit with their broker’s license will
save the cost of district permit fees.
Additionally, CBP and customs brokers
will save time applying for and
reviewing district permit applications
and waivers. The five-year total
monetized net benefit of the rule ranges
from $973,616 discounted at seven
percent to $1,088,308 discounted at
three percent. The annualized cost is
approximately $237,500 using both
three and seven percent.
Customs brokers are private
individuals and/or business entities
(partnerships, associations, or
corporations) licensed and regulated by
CBP to assist importers in conducting
customs business. Customs brokers have
an enormous responsibility to their
clients and to CBP, requiring them to
properly prepare importation
documentation, file documents
accurately and on-time, correctly
classify and value goods, pay duties,
taxes, and fees, safeguard their clients’
information, and protect their licenses
from misuse.
In an effort to perform these duties
efficiently, customs brokers have
embraced recent technological advances
such as making the programming and
business process changes necessary to
use ACE, thus providing a single,
centralized access point to connect CBP
and the trade community. Through
ACE, manual processes are streamlined
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and automated, and the international
trade community is able to more easily
and efficiently comply with U.S. laws
and regulations.
CBP has also endeavored to embrace
these technological advances to not only
more efficiently perform its duties of
facilitating legitimate trade while
making sure that proper revenue is
collected, but also to provide more
efficient tools for customs brokers to file
and monitor the information
submissions necessary for a timely and
accurate entry filing. One of the central
developments that will allow CBP to
perform its operational trade functions
more effectively is the transition to the
Centers.
Beginning in 2012, CBP developed a
test to incrementally transition the
operational trade functions that
traditionally reside with port directors
to the Centers. The Centers were
established in strategic locations around
the country to focus CBP’s trade
expertise on industry-specific issues
and provide tailored support for
importers. CBP established these
Centers to facilitate trade, reduce
transaction costs, increase compliance
with applicable import laws, and
achieve uniformity of treatment at the
ports of entry for the identified
industries. On December 20, 2016, CBP
published an interim final rule in the
Federal Register (81 FR 92978) ending
the Centers test and establishing the
Centers as a permanent organizational
component of CBP.
Current broker regulations are based
on a district system in which entry,
entry summary, and post-summary
activity are all handled by the ports
within a permit district. With the
transfer of trade functions to the
Centers, a significant portion of these
activities, including entry summary and
post-summary, are now handled directly
by the Centers. The Center structure is
based on subject matter expertise, as
opposed to geographic location, placing
them outside of the district system as it
currently exists. With this rule, CBP will
modernize the regulations governing
customs brokers to better reflect the
current work environment and
streamline the customs broker
permitting process.
2. Background
It is the responsibility of CBP to
ensure that only qualified individuals
and business entities can perform
customs business on behalf of others.
CBP accomplishes this task by only
issuing broker licenses to individuals
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63297
and business entities that meet the
below criteria: 20
• Must submit a customs broker
license application within three years of
taking and passing the customs broker
license examination;
• Must be a U.S. citizen and attain the
age of 21 prior to submitting the license
application;
• Must possess good moral character;
and
• Must pay the requisite fee.
Business entity customs broker
license eligibility:
Partnerships
• Must have at least one member of
the partnership who is a licensed
customs broker; and
• Must pay the requisite fee.
Associations and Corporations
• Must have at least one officer who
is a licensed customs broker;
• Must be empowered under its
articles of association or articles of
incorporation to transact customs
business as a broker; and
• Must pay the requisite fee.
Currently, CBP requires all
prospective brokers, both individuals
and business entities, to submit CBP
Form 3124: Application for Customs
Broker License to the port of entry at
which they intend to conduct customs
business. CBP Form 3124 is used to
verify that prospective customs brokers
satisfy the requirements for receiving a
customs broker’s license.
The customs territory of the United
States is divided into seven customs
regions. Within each region, the
customs territory of the United States is
further divided into districts; there are
currently approximately 40 customs
districts.21 Currently, a district permit is
required for each district in which a
customs broker intends to conduct
customs business. Each district permit
requires a one-time permit fee of $100
and an annual user fee.22 A customs
20 See
19 CFR part 111.
districts are not evenly divided
amongst the seven customs regions (one region may
have more or fewer customs districts than another).
In addition to the 40 geographically defined
customs districts, there are three special districts
that are responsible for specific types of imported
merchandise. According to the Broker Management
Branch, these special districts include districts 60,
70 and 80. District 60 refers to entries made by
vessels under their own power. District 70 refers to
shipments with a value under $800. District 80
refers to mail shipments. These three special
districts do not require the use of a licensed broker
with a specific district permit and as a result are
not affected by this provision.
22 The annual user fee payable for calendar year
2022 is $153.19 (86 FR 66573). Information on the
fee can be found in 19 CFR 24.22(h). The user fee
is subject to adjustment based on inflation.
Amendments to the regulatory provisions regarding
21 Customs
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broker has the option of receiving his/
her first district permit concurrently
with the receipt of the customs broker
license, in which case the $100 permit
fee is waived. Even if this option is
used, the customs broker is still
responsible for the annual user fee.
However, this option is not exercised
often for individual customs broker
license holders. Currently, according to
a CBP Broker Management Branch
estimate, approximately two percent of
individual customs broker license
holders get their first district permit
concurrently issued with the receipt of
their broker’s license. The majority of
individuals do not take advantage of
this benefit. Most licensed brokers file
exclusively under a corporate permit
and do not need to get an individual
permit, saving them the annual user fee.
On the other hand, according to CBP’s
Broker Management Branch, 100
percent of current corporate license
holders get their first district permit
concurrently issued with their customs
broker license.
A broker who intends to conduct
customs business at a port within a
district for which the broker does not
have a permit must submit an
application for a district permit in a
letter to the director of the port at which
the broker intends to conduct customs
business. Each application for a district
permit must set forth or attach the
following:
• The applicant’s broker license
number and date of issuance;
• The address where the applicant’s
office will be located within the district
and the email address and telephone
number of that office;
• A copy of a document which
reserves the applicant’s business name
with the State or local government;
• The name, broker license number,
office address(es), telephone number,
and email address of the individual
broker who will exercise responsible
supervision and control over the
customs business transacted in the
district;
• A list of all other districts for which
the applicant has a permit to transact
customs business;
• The place where the applicant’s
brokerage records will be retained and
the name of the applicant’s designated
recordkeeping contact; and
• A list of all persons who the
applicant knows will be employed in
the district with all the required
employee information.
the district permit user fee are found in the
companion Department of the Treasury final rule
entitled, ‘‘Elimination of Customs Broker District
Permit Fee.’’ RIN 1515–AE43.
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The applicant for the district permit
must have a place of business at the port
where the application is filed or must
have made firm arrangements
satisfactory to the port director to
establish a place of business and must
exercise responsible supervision and
control of that place of business once
the permit is granted. Instead of a
customs broker getting multiple district
permits, he or she could also apply for
a national permit for the purpose of
transacting customs business in all
districts within the customs territory of
the United States as defined in 19 CFR
101.1. The national permit application
may be submitted concurrently with or
after the submission of an application
for a broker’s license.
CBP first introduced national permits
in 2000 to allow a broker to conduct a
limited set of activities in districts for
which the broker does not have a
district permit. When it was first
introduced, a national permit allowed
licensed brokers to place an employee
in the facility of a client for whom the
broker is conducting customs business;
file electronic drawback claims;
participate in remote location filing; and
make representations after the entry
summary has been accepted. In the
years since the national permit was
introduced, and with the full
implementation of ACE, almost every
activity performed under a district
permit was added to the national
permit. Only those activities, such as
the filing of paper entries and certain
payment submissions that require
physical presence at a port, currently
require a district permit instead of a
national permit. With the national
permit system, these restrictions will no
longer apply. This rule will allow a
national permit holder to conduct any
type of customs business in all districts
within the customs territory of the
United States. This represents a full
expansion of the activities allowed
under a national permit. CBP has
determined that in the increasingly
automated environment brokers may
need to make contact with CBP
personnel across the customs territory
and there is no longer a reason to
restrict national permit holders.
Currently, an applicant for a national
permit must submit payment of the
application fee and user fee to the port
where the license was issued, and then
submit the national permit application
in the form of a letter, including
evidence of payment, to the Broker
Management Branch.23 An applicant
has to further include the following:
23 In the published NPRM, CBP incorrectly stated
the current submission process of a national permit
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• The applicant’s broker license
number and date of issuance;
• If the applicant is a partnership,
association, or corporation, the name
and title of the national permit qualifier;
• The address, telephone number,
and email address of the office
designated by the applicant as the
broker’s office of record; that office will
be noted in the national permit when
issued;
• A copy of a document which
reserves the applicant’s business name
with the State or local government;
• The name, telephone number, and
email address of the licensed broker or
knowledgeable employee to be available
to CBP to respond to issues related to
the transaction of customs business;
• The name, broker license number (if
designated), office address, telephone
number, and email address of each
individual broker who will exercise
responsible supervision and control
over the customs business of the
applicant under the national permit;
• A supervision plan describing how
the broker will exercise responsible
supervision and control, including
compliance with § 111.28 (see 19 CFR
111.28);
• The place where the applicant’s
brokerage records relating to customs
business conducted under the national
permit will be retained and the name of
the applicant’s designated
recordkeeping contact (see 19 CFR
111.22 and 111.23);
• The name, telephone number, and
email address of the knowledgeable
employee responsible for broker-wide
records maintenance and financial
recordkeeping requirements;
• A list of all employees of the broker,
together with the specific employee
information prescribed in § 111.28(b) for
each of those employees (19 CFR
111.28(b)); and
• A receipt or other evidence showing
that the fees specified in § 111.96(b) and
(c) have been paid (19 CFR 111.96(b)
and (c)).
In an effort to modernize the
permitting process for customs brokers,
this rule eliminates the district
permitting process and automatically
grants each current district permit
holder a national permit.24 Upon
adoption of this final rule, the transition
for a district permit holder to become a
national permit will be a one-time,
automatic process, without any actions
application (submission to the director of the
designated Center), but this technical error did not
have an impact on the outcome of the economic
analysis. See the published NPRM (85 FR 34836),
at page 34850.
24 For more information, see the clarification
above in Subpart A. General Provisions.
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to be taken by the permit holders. Using
data from ACE, CBP will automatically
create a national permit for each broker
currently holding a district permit and
not yet holding a national permit,
though CBP will not cancel active
district permits until all national
permits are issued. Permit holders will
be notified via email, or mail, that a new
national permit will be issued. These
notifications will be part of the day-today work of the Broker Management
Branch and will not add to the cost of
the rule.
Currently, customs brokers who do
not have a national permit must
maintain an office and have a separate
district permit for each district in which
the broker wants to conduct customs
business. For some brokers, this means
having many small offices across the
country. This rule removes the
requirement to have a separate local
office in each district in which customs
brokers do business. Since, under a
national permitting structure, customs
brokers are no longer required to have
a representative in each district in
which they conduct customs business,
brokers could organize themselves to
better suit their specific business needs.
While some brokers may consolidate
their office locations and save on
overhead costs, which may also involve
laying off local staff, others may expand
their business operations or staffing
needs as they will now be able to serve
more ports without needing a local
office. CBP cannot predict whether
customs brokers as whole would
experience net savings as a result of
these changes. For the purposes of this
analysis, CBP does not believe that
brokers will greatly expand or contract
their holdings as a result of the rule. In
the case that some brokers do ultimately
close offices, they will likely experience
cost savings and the net benefit
estimated in this analysis would
increase. Since national permits were
first issued, there has not been a
noticeable change in the number of
brokers hired as a result of national
permits, so CBP does not believe there
will be a significant change due to this
rule.
In response to the NPRM, one
commenter predicted that a national
permit system would lead to reduced
competition and lost revenue at ports.
However, because this rule will not
reduce the volume of trade, and goods
63299
must still physically arrive at various
ports, CBP does not believe this to be
the case. Another commenter noted that
a national permit system would devalue
the broker license and force small
businesses to close. CBP disagrees with
this assertion. In fact, small businesses
may benefit more from a national
permit, allowing them to work in ports
across the country and in which they
could not previously afford to maintain
a physical presence. Brokers who find
they are more competitive with a
physical presence at a given port may
still maintain a local office.
Projection of Customs Broker Licenses
and Permits
CBP’s Broker Management Branch
provided historical data from 2015–
2021. As of January 2022, there are
15,226 active, licensed customs brokers.
CBP also issued new broker licenses
each year to both individuals and
corporations.25 From 2015 to 2019, the
annual number of licenses issued has
declined by one percent for corporate
licenses while from 2017 to 2021, the
annual number of licenses declined by
four percent for individual licenses (see
Table 2).26
TABLE 2—HISTORICAL LICENSING
Total licenses
issued
Year
2015
2016
2017
2018
2019
2020
2021
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
As of January 2022, there are 2,365
permitted brokers holding a combined
total of 3,345 active district permits.
These 2,365 brokers represent about
15.5 percent of all brokers, as the
majority of brokers never apply for their
own permit and work under the
auspices of a corporate permit.
Approximately two percent of brokers
hold a corporate permit, meaning 13.5
percent of brokers hold individual
permits. The brokers who do hold
permits average approximately 1.4
district permits per permit holder. Using
these figures and historic rates of
decline, we can project how many
Corporate
licenses
770
653
580
558
464
187
496
Individual
licenses
16
21
16
27
15
7
31
754
632
564
531
449
180
465
licenses and district permits licensed
brokers will be issued over the period of
the analysis, under the baseline
condition (i.e., if this rule is not
promulgated). This is shown in Table 3
below.
TABLE 3—PROJECTION OF NEW INDIVIDUAL AND CORPORATE PERMITS
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Year
2022 .........................................................................................
25 A partnership or association may also hold a
corporate permit. At least one member of the
licensed organization must hold an individual
broker license.
26 The closures and delays related to the COVID–
19 pandemic resulted in anomalous data for
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New corporate
permits
(100% of new
corporate licenses
* 1.4)
New corporate
licenses issued
(1% annual
decline)
I
15
I
corporate licenses in 2020 and 2021. The number
of licenses issued in 2020 was significantly smaller
than previous trends, while 2021 represented a
catch-up year and saw an inordinately high number
of corporate licenses issued. Therefore, to calculate
the corporate license growth rate, CBP used data
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New individual
licenses
(4% decline)
21
447
Individual permits
(13.5% of individual licenses *
1.4)
86
from 2015–2019, which we believe more accurately
reflects future growth. Individual licenses, while
also affected by the COVID–19 pandemic, returned
to previous trends in 2021, allowing CBP to use a
standard 5-year period from 2017–2021.
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TABLE 3—PROJECTION OF NEW INDIVIDUAL AND CORPORATE PERMITS—Continued
New corporate
licenses issued
(1% annual
decline)
Year
2023
2024
2025
2026
New corporate
permits
(100% of new
corporate licenses
* 1.4)
New individual
licenses
(4% decline)
Individual permits
(13.5% of individual licenses *
1.4)
.........................................................................................
.........................................................................................
.........................................................................................
.........................................................................................
15
15
15
15
21
21
21
21
430
414
398
383
82
79
76
73
Total ..................................................................................
75
105
2,072
396
Note: Values may not sum to total due to rounding.
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3. Rule Amendments: Costs, Benefits,
and Transfer Payments
In this rule, CBP is finalizing
regulatory changes that include:
increasing fees for the customs broker
license application; eliminating district
permits so each customs broker only
needs one national permit to conduct
customs business; mandating that each
broker must provide notification to CBP
of any known breach of records within
72 hours of discovery; 27 requiring that
upon request by CBP to examine
records, brokers make all records
available to CBP within thirty (30)
calendar days at the location specified
by CBP; requiring that customs brokers
obtain a customs power of attorney
directly from the importer of record or
drawback claimant—not a freight
forwarder or other third party—to
transact customs business for that
importer or drawback claimant; and
requiring that a broker document and
report to CBP when the broker separates
from or cancels a client as a result of the
broker’s determination that the client is
intentionally attempting to use the
services of the broker to defraud or
otherwise commit any criminal act
against the U.S. Government. Finally,
this rule allows CBP to make numerous
non-substantive changes and
conforming edits in an effort to
modernize the regulations governing
customs brokers and to clarify existing
language in the regulations to better
reflect what is already occurring.
3.1 Broker License Fee
CBP currently charges $200 fees per
individual or business entity for the
broker license application. These fees
are used to offset the costs associated
with servicing the brokers. Based on a
fee study, entitled ‘‘Customs Broker
27 Additionally, within ten (10) business days, a
broker must provide an updated list of any
additional known compromised importer
identification numbers. To the extent that
additional information is discovered, a broker must
provide that information within 72 hours of
discovery.
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License Application Fee Study,’’ CBP
has determined that these fees are no
longer sufficient to cover its costs.28
The study found that fees of $463 and
$815 are necessary to recover the costs
associated with reviewing the customs
broker license application for
individuals and business entities,
respectively. These fees, however, are
significantly higher than the current fees
of $200 for both individuals and
business entities and, if implemented,
these fee rates could become an
economic disincentive to those pursuing
a career as a customs broker. Therefore,
in an effort to minimize the financial
burden to prospective customs brokers
while also recovering a larger portion of
the costs associated with reviewing and
vetting the license application, CBP has
decided to limit the license application
fee to $300 for individuals and $500 for
business entities; the remainder of the
costs would continue to be covered by
appropriated funds. In response to the
NPRM, one commenter expressed
concern that raising application fees
would reduce the number of qualified
candidates applying for broker licenses.
CBP has considered this factor in
deciding to limit the amount by which
the fee will increase in order to cover
more of CBP’s costs and account for
inflation without adding too much to
the cost burden for brokers. CBP
considers this increase in the fee to be
a reasonable compromise position
between not raising the fee at all and
raising it to a level necessary to recover
the full costs.
In response to the NPRM, one
commenter noted that automation and
improved technology should obviate the
need for a fee increase. The fee increase
is necessary, however, because CBP has
not been covering costs for many years.
Technology improvements and
automation also require initial
investments and ongoing maintenance
costs for computer systems and
28 The fee study is included in the docket of this
rulemaking (docket number USCBP–2020–0009).
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databases, which were included in
CBP’s estimation of appropriate fees.
Another commenter suggested that fees
should be charged on port activity, not
district. As discussed above in Section
II, Discussion of Comments, CBP
disagrees with the commenter’s
suggestion, as the fees as currently
outlined are independent of broker size
or location. Although these fee increases
represent an increased expense for
prospective customs brokers, these fee
increases do not increase overall costs to
society as these costs are already being
paid by CBP’s appropriated funds.
When assessing costs of final rules,
agencies must take care to not include
transfer payments in their cost analysis.
As described in OMB Circular A–4,
transfer payments occur when ‘‘. . .
monetary payments from one group [are
made] to another [group] that do not
affect total resources available to
society.’’ Examples of transfer payments
include payments for insurance and fees
paid to a government agency for services
that an agency already provides. CBP’s
processing of the customs broker license
application is an established service that
already requires a fee payment. As such,
adjustments to the fee associated with
providing each service is considered a
transfer payment. Currently, any costs
not covered by fees are paid via funds
appropriated to and expended by CBP.
The increased fees paid by brokers
would replace appropriated funds. CBP
recognizes that the fee changes 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
rule in section ‘‘3.12 Distributional
Impacts.’’
3.2 Permit Application Fee
Currently, brokers are required to pay
a $100 permit application fee in
connection with each permit
application by either an individual or
corporation. The applicant has the
option of concurrently receiving its first
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district permit with its customs broker’s
license and therefore forgoing the $100
permit application fee for its first
district permit. However, some brokers
do not request an initial district permit
at the time they get their license. When
this is the case and the broker later
applies for a district permit, or if brokers
make a request to obtain a permit for
additional districts, then they must
submit the following information to CBP
as set forth in § 111.19(b):
(1) The applicant’s broker license
number and date of issuance;
(2) The address where the applicant’s
office will be located within the district
and the telephone number of that office;
(3) A copy of a document which
reserves the applicant’s business name
with the State or local government;
(4) The name of the individual broker
who will exercise responsible
supervision and control over the
customs business transacted in the
district;
(5) A list of all other districts for
which the applicant has a permit to
transact customs business;
(6) The place where the applicant’s
brokerage records will be retained and
the name of the applicant’s designated
recordkeeping contact; and
(7) A list of all persons who the
applicant knows will be employed in
the district, together with the specific
employee information for each of those
prospective employees.
As a result of this rule, the options
above pertaining to district permits will
no longer exist and all permitted brokers
will have to get a single national permit
to conduct customs business. That
means that brokers will pay the $100
permit application fee and receive a
single national permit; brokers who,
absent this rule, paid to hold multiple
district permits will save the $100
district permit fee for each additional
permit. This is considered a cost
savings, and not the elimination of a
transfer payment, because the $100
district permit fee reflects the economic
activity undertaken by CBP to issue
those permits. The elimination of the fee
represents a savings both to the
individual brokers as well as to society
as a whole as the underlying work to
process the additional district permits is
eliminated.
As shown in Table 3 above, absent
this rule, there would be 2,147 total new
broker licenses (75 corporate + 2,072
individual) issued over the period of
analysis from 2022 through 2026. Of
63301
these 2,147 licenses, 75 would be issued
to corporations which would result in
105 corporate district permits (as
mentioned above, each customs broker
permit holder currently has 1.4 district
permits on average). Additionally, as
mentioned above, 100 percent of
corporations exercise the option of
concurrently receiving their first district
permit with their customs broker’s
license, therefore saving the $100 permit
application fee for their first district
permit. This means that, absent this
rule, corporations would get 75 permits
for free and would then have to pay for
the remaining 30 permits for a cost of
$3,000 ($100 permit application fee * 30
corporate permits). As a result of this
rule, these 75 corporate brokers will
each have to get a single national permit
and pay the $100 permit application fee
for each national permit for a total cost
of $7,500 (75 national permits * $100
permit application fee). This results in
an additional cost to these corporate
brokers of $4,500 ($7,500 ¥ $3,000)
over the period of the analysis from
2022 through 2026. Please see Table 4
below for a breakdown of these costs.
TABLE 4—COSTS FOR CORPORATE PERMIT HOLDERS
[2022 U.S. dollars]
New corporate
licenses
Year
2022
2023
2024
2025
2026
Costs absent
the rule
Permits
Costs with the
rule
Cost of the
rule
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
15
15
15
15
15
21
21
21
21
21
$600
600
600
600
600
$1,500
1,500
1,500
1,500
1,500
$900
900
900
900
$900
Total ..............................................................................
75
105
3,000
7,500
4,500
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Note: Values may not sum to total due to rounding.
As shown above in Table 3, if this
rule were not in effect there would be
2,072 new individual broker licenses
resulting in 396 new individual permits
over the period of analysis. According to
CBP’s Broker Management Branch,
individual brokers do not get their first
district permit issued concurrently with
their customs broker’s licenses nearly as
often as corporations. Approximately
two percent of individual customs
broker license holders, or 42 of the
estimated 2,072 new brokers, get their
first district permit issued concurrently
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with their broker’s license, saving the
$100 permit application fee charged for
the first district permit. Using the
average of 1.4 district permits per
customs broker permit holder, we
estimate that these 42 individual
customs brokers would get 59 district
permits over the period of the analysis
if this rule did not go into effect. Since,
under the baseline, the brokers would
get 42 out of the 59 permits for free,
brokers would have to pay for the
remaining 17 permits for a cost of
$1,700 ($100 permit application fee * 17
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permits). Under this rule, these 42
individual brokers would each need a
single national permit for a total of 42
permits resulting in a total cost of
$4,200 ($100 national permit
application fee * 42 national permits).
As a result of this rule, two percent of
individual brokers will bear an
additional total cost of $2,500 ($4,200 ¥
$1,700) over the period of analysis.
Please see Table 5 below for a
breakdown of these costs.
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TABLE 5—COSTS FOR TWO PERCENT OF INDIVIDUAL PERMIT HOLDERS
[2022 U.S. dollars]
Individual
licenses for
2% of permit
holders
Year
2022
2023
2024
2025
2026
Number of
permits issued
Costs for 2%
without rule
Costs for 2%
with rule
Rule’s costs
for 2%
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
9
9
8
8
8
13
13
11
11
11
$400
400
300
300
300
$900
900
800
800
800
$500
500
500
500
500
Total ..............................................................................
42
59
1,700
4,200
2,500
Note: Values may not sum to total due to rounding.
The remaining 98 percent of
individual customs broker license
holders do not get their first district
permit concurrently with their broker’s
license, if they get any permits at all. Of
the 15,226 active licensed brokers,
approximately 15.5 percent hold at least
one permit. Because only 15.5 percent
of license holders hold a permit, and
two percent of those are corporate
license holders and only two percent are
individuals who get a permit
concurrently with their license, the
remaining 11.5 percent are individual
licensed brokers who apply for and
receive a permit after their license is
issued. Accordingly, under the current
permit system, using an average of 1.4
permits per broker, 238 individual
customs broker permit holders pay
$33,600 for 336 permits because they
pay the $100 fee for every permit.29
With the national permit system, these
brokers would pay $23,800 for 238
national permits, resulting in a savings
of $9,800. Please see Table 6 below for
an itemization of these costs.
TABLE 6—SAVINGS FOR 11.5 PERCENT OF INDIVIDUAL PERMIT HOLDERS
[2022 U.S. dollars]
Number of
licenses for
11.5% of
permit holders
Number of
permits issued
Costs for
11.5% without
rule
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
51
49
48
46
44
72
69
68
65
62
$7,200
6,900
6,800
6,500
6,200
$5,100
4,900
4,800
4,600
4,400
$2,100
2,000
2,000
1,900
1,800
Total ..............................................................................
238
336
33,600
23,800
9,800
Year
2022
2023
2024
2025
2026
Costs for
11.5% with
rule
Rule’s savings
for 11.5%
khammond on DSKJM1Z7X2PROD with RULES2
Note: Values may not sum to total due to rounding.
Any brokers who apply for more than
one permit will experience a time
savings as a result of this rule because
they will only need to apply for a single
permit. According to CBP’s Broker
Management Branch, currently, brokers
spend approximately three hours to
collect and submit the appropriate
documentation to CBP.30 The rule’s
elimination of these applications will
result in time savings for the brokers as
well as for CBP. The estimated number
of permits requested separately from
individual licenses for the entire period
of the analysis is taken from Tables 5
and 6. Table 5 implies there are 17
permits for which two percent of
individual customs brokers currently
pay $100 ($1,700 permit costs without
rule/$100 per permit). Table 6 shows
that 11.5 percent of individual customs
brokers currently pay $100 for 336
permits. Summing these two figures, we
find that all individual customs brokers
will pay $100 for 353 permits. Table 7
shows the removal of the application for
these permits will result in a monetized
time savings worth $36,864. This benefit
is based on CBP’s estimated fully loaded
hourly time value for customs brokers of
$34.81.31
29 About 15.5 percent of all brokers, corporate and
individual, hold a permit. Of those, 2 percent are
corporate brokers and 2 percent are individual
brokers who get their permit concurrently with
their license. Therefore, about 11.5 percent of
brokers are individuals who will get a permit at
some point in their careers after receiving a license.
Based on the projections described above, CBP
estimates that 2,072 indiviudal licenses will be
issued from 2022–2026. Approximately 11.5
percent of those individuals results in 238.
30 Source: CBP’s Broker Management Branch on
May 16, 2019.
31 CBP calculated this loaded wage rate by first
multiplying the Bureau of Labor Statistics’ (BLS)
2021 median hourly wage rate for Cargo and Freight
Agents ($22.55), occupation code 43–5011, which
CBP assumes best represents the wage for brokers,
by the ratio of BLS’ average 2021 total
compensation to wages and salaries for Office and
Administrative Support occupations (1.4819), the
assumed occupational group for brokers, to account
for non-salary employee benefits. Sources: U.S.
Bureau of Labor Statistics. Occupational
Employment Statistics, ‘‘May 2021 National
Occupational Employment and Wage Estimates
United States.’’ Updated March 31, 2022. Available
at https://www.bls.gov/oes/2021/may/oes_
nat.htm#43-0000. Accessed May 25, 2022; U.S.
Bureau of Labor Statistics. Employer Costs for
Employee Compensation. ‘‘ECEC Civilian
Workers—2004 to Present.’’ March 2022. Available
at https://www.bls.gov/web/ecec.supp.toc.htm.
Accessed May 25, 2022. CBP assumes an annual
growth rate of 4.15% based on the prior year’s
change in the implicit price deflator, published by
the Bureau of Economic Analysis.
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63303
TABLE 7—APPLICATION TIME SAVINGS FOR INDIVIDUAL BROKERS
[2022 U.S. dollars]
Number of
permits issued
separate from
license
Year
2022
2023
2024
2025
2026
Hourly time
burden for
permit
application
Rule’s savings
for individual
brokers
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
76
73
71
68
65
3
3
3
3
3
$7,937
7,623
7,415
7,101
6,788
Total ......................................................................................................................................
353
3
36,864
Note: Values may not sum to total due to rounding.
Corporate brokers would also see time
savings resulting from fewer permit
applications prepared and submitted.
Table 4 shows that corporate brokers
currently apply for, receive, and pay
$100 for 30 permits after their licenses
have been issued. Table 8 shows the
removal of the application for these
permits will result in a monetized time
savings worth $3,133, based on CBP’s
estimated fully loaded hourly time
value for customs brokers of $34.81.
TABLE 8—APPLICATION TIME SAVINGS FOR CORPORATE BROKERS
[2022 U.S. Dollars]
Number of
permits issued
separate from
license
Year
2022
2023
2024
2025
2026
Hourly time
burden for
permit
application
Rule’s savings
for corporate
brokers
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
6
6
6
6
6
3
3
3
3
3
$627
627
627
627
627
Total ......................................................................................................................................
30
3
3,133
Note: Values may not sum to total due to rounding.
Relatedly, CBP would see benefits due
to the elimination of the district permit
application review process. CBP
estimates that it takes two hours of CBP
processing, including time to review
and approve an application and create
and deliver the permit to the
applicant.32 Given the wage rate, CBP
estimates that processing costs
approximately $164 per permit. The
applicant pays a $100 fee, which
compensates CBP for a portion of the
economic activity undertaken to process
the application. CBP currently funds the
remaining portion from appropriated
funds. Therefore, with the rule in place,
CBP will experience a cost savings of
approximately $64 per permit no longer
applied for, as the remaining $100 is
saved by the broker applicant and
accounted for in Tables 5 and 6 above.
Going forward, CBP believes that a $100
fee recovers a reasonable portion of its
costs for the national permit
application. Table 9 shows CBP’s total
estimated benefits of $24,573 over the
period of analysis. This is based on a
CBP fully loaded wage rate of $82.08 for
CBP staff reviewing applications.33
TABLE 9—TIME SAVINGS FOR CBP
[2022 U.S. Dollars]
Number of
permits issued
separate from
license
Hourly time
burden for
permit
application review
Rule’s savings
for CBP
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
82
79
77
74
71
2
2
2
2
2
$5,261
5,069
4,940
4,748
4,555
Total ......................................................................................................................................
383
2
24,573
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Year
2022
2023
2024
2025
2026
32 Source: CBP’s Broker Management Branch on
May 16, 2019.
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33 CBP bases this wage on the FY 2022 salary and
benefits of the national average of CBP Trade and
Revenue positions, which is equal to a GS–12, Step
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Lastly, the district permit waiver
described in current § 111.19(d)(2)
would be eliminated with the rule.
Currently, requests for a waiver of the
requirement for an individual broker in
the district must be submitted to the
port director and include a description
of responsible supervision and control
procedures and information on the
volume and type of customs business
conducted. The port director reviews
the request and makes a
recommendation to headquarters.
Headquarters reviews and issues the
decision.34 According to the CBP Broker
Management Branch, this process takes
two hours for brokers, including
application processing and mailing
paper documents to CBP. It takes an
hour and a half for CBP to review the
waiver analysis, prepare the
recommendation memorandum, and for
headquarters to make the final
decision.35 As shown in Tables 11 and
12 there is a total benefit of $3,579
($1,293 + $2,286), as this entire process
is eliminated under the national permit
framework. Waiver estimates for
calendar years 2022 to 2026 are based
on compound annual growth rate from
calendar years 2017–2021, found in
Table 10 below.
TABLE 10—PERMIT WAIVERS 2017–
2021
Broker district
permit waivers
Year
2017
2018
2019
2020
2021
......................................
......................................
......................................
......................................
......................................
14
13
7
10
6
Total ...............................
50
TABLE 11—TIME SAVINGS FOR BROKERS SEEKING WAIVERS
[2022 U.S. dollars]
2022
2023
2024
2025
2026
Hourly time
burden for
waiver
application
Broker district
permit waivers
Year
Rule’s savings
for brokers
seeking
waivers
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
5
4
4
3
3
2
2
2
2
2
353
298
251
212
179
Total ......................................................................................................................................
19
........................
1,293
TABLE 12—TIME SAVINGS FOR CBP REVIEWING WAIVERS
[2022 U.S. dollars]
Year
2022
2023
2024
2025
2026
Hourly time
burden for
waiver
application
review
Broker district
permit waivers
Rule’s savings
for CBP
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
5
4
4
3
3
1.5
1.5
1.5
1.5
1.5
$624
526
444
375
317
Total ......................................................................................................................................
19
1.5
2,286
Table 13 provides a summary of the
costs and savings resulting from the
removal of the district permit
application and $100 fee over the period
of analysis.
TABLE 13—SUMMARY OF COSTS AND SAVINGS TO ALL PARTIES
[2022 U.S. dollars]
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Savings for
11.5%
2022
2023
2024
2025
2026
Costs/savings for individuals
Costs for
the 2%
Time savings
Costs/savings for corporations
Costs for
corporation
Waivers
applications
time savings
Savings for CBP
Time
savings
Review of
permits
Review
waivers
....................................................................
....................................................................
....................................................................
....................................................................
....................................................................
$2,100
2,000
2,000
1,900
1,800
$500
500
500
500
500
$7,937
7,623
7,415
7,101
6,788
$900
900
900
900
900
$353
298
251
212
179
$627
627
627
627
627
$5,261
5,069
4,940
4,748
4,555
$624
526
444
375
317
Total .............................................................
9,800
2,500
36,864
4,500
1,293
3,133
24,573
2,286
34 See
19 CFR 111.19(d)(2).
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35 Source: CBP’s Broker Management Branch on
May 16, 2019.
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3.3 Record of Transactions
Each broker must keep current, in a
correct and itemized manner, records of
accounts reflecting all of his or her
financial transactions as a broker. The
broker must keep and maintain on file
copies of all correspondence and other
records relating to customs business.
With this rule, each broker must provide
notification to the processing Center of
any known breach of electronic or
physical records relating to customs
business. Notification to CBP must be
provided within 72 hours of the
discovery of the breach with a list of all
known compromised importer
identification numbers. CBP received
several comments on the potential
difficulty of reporting a breach and
compromised importer numbers within
this time frame. As explained above in
Section II, Discussion of Comments, in
response, CBP has revised the
requirement such that brokers must
report the breach within 72 hours, and,
within ten (10) business days, must
provide an updated list of any
additional known compromised
importer identification numbers. To the
extent that additional information is
discovered, a broker must provide that
information within 72 hours of
discovery. Brokers already compile this
information through their normal course
of business, and they can report the
information to CBP in any format they
choose. CBP assumes data breaches are
rare but includes this requirement as a
preventive measure. CBP assumes this
provision has virtually no cost to the
brokers due to the infrequency of data
breaches. CBP will use this information
in its targeting of imports for inspection,
which will help make imports safer.
3.4 Records Availability
Currently, during the period of
retention (five years after the date of
entry), the broker must maintain its
records in such a manner that they can
be readily examined by CBP when
necessary. Records required to be
maintained under this provision must
be made available upon reasonable
notice for inspection, copying,
reproduction or other official use by
representatives of the Department of
Homeland Security. Additionally,
customs brokers currently have the
option to store records offsite. Under the
rule, upon request by CBP to examine
records, the designated recordkeeping
contact must make all records available
to CBP within thirty (30) calendar days,
or any longer timeframe as specified by
CBP, at the location specified by CBP.
This change in the regulations is
necessary to ensure brokers continue to
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give CBP the requested information and
to specifically state for clarity that
brokers need to keep records in the
customs territory of the United States.
As this is an existing requirement newly
stated for the sake of clarity, this will
result in no additional burden for
customs brokers.
CBP received comments regarding the
requirement to maintain records within
the customs territory of the United
States. As further discussed above in
Section II, Discussion of Comments,
CBP has clarified that while primary
records must be stored within the
customs territory of the United States,
duplicates or backups may be stored
outside it.
3.5 Termination of Client Relationship
The rule requires that a broker
document and report to CBP when it
separates from a client relationship as a
result of the broker’s determination that
the client is intentionally attempting to
use the broker’s services to defraud or
otherwise commit any criminal act
against the U.S. Government. This is an
entirely new provision, so CBP does not
have data on how often clients may use
a broker’s services to defraud or
otherwise commit criminal acts against
the U.S. Government. However, based
on stakeholder feedback during the
development of the NPRM, CBP subject
matter experts do not expect this to
happen often. CBP’s Broker
Management Branch estimates this to
occur approximately five times per year
and each resulting report will take
brokers approximately four hours to
draft. CBP requested public comment on
this assumption and did not receive any
comments. CBP did receive some
comments regarding this provision and
the responsibility of the broker, which
are discussed in greater detail in the
comment responses above.
CBP expects that, in most cases, the
necessary information will be submitted
by customs brokers employing in-house
or external attorneys to draft the report.
CBP received one comment in response
to the attorney wage rate used in the
NPRM stating that while attorney
compensations may be accurately
reported by the Bureau of Labor
Statistics, actual costs of employing an
attorney are significantly higher than
estimated by CBP. CBP agrees and has
updated the cost estimates to reflect a
higher wage. The loaded wage rate for
an attorney is $94.15, which accounts
for regional differences as well as
differences in experience and
specialty.36 CBP assumes this wage
36 CBP calculated this loaded wage rate by first
multiplying the Bureau of Labor Statistics’ (BLS)
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reflects the average wage of an in-house
attorney. Using data and estimates
compiled by the American Intellectual
Property Law Association (AIPLA), CBP
estimates the hourly wage for an
external attorney to be $466.38.37 CBP
assumes that, generally, large companies
employing licensed customs brokers
will also employ in-house attorneys,
while small companies employ
attorneys outside the business.
Approximately 6 percent of brokerages
are considered large (see the Regulatory
Flexibility Act section, below), while 94
percent are considered small. A
weighted average wage, therefore, is
$443.85 per hour. Five reports represent
an additional burden to the broker and
will result in a total annual cost of
$8,877 or a total cost of $44,385 over the
five-year period of analysis.
3.6
Customs Power of Attorney
A customs broker is required to have
a customs power of attorney prior to
transacting any customs business on
behalf of the importer of record.38
Currently, an agent of the importer of
record, who could be a freight forwarder
that is properly designated by the
importer of record, may issue a power
of attorney on behalf of the importer of
record to a customs broker. In such
instances, the customs broker may never
have any contact with the importer of
record, only its agent (the forwarder).
With this rule, the broker must secure
a customs power of attorney directly
from the importer of record or drawback
2021 median hourly wage rate for Lawyers,
occupation code 23–1011 ($61.54), which CBP
assumes best represents the wage for attorneys, by
the ratio of BLS’ average 2021 total compensation
to wages and salaries for Professional and related
occupations (1.4689), the assumed occupational
group for brokers, to account for non-salary
employee benefits. Sources: U.S. Bureau of Labor
Statistics. Occupational Employment Statistics,
‘‘May 2021 National Occupational Employment and
Wage Estimates United States.’’ Updated March 31,
2022. Available at https://www.bls.gov/oes/2021/
may/oes_nat.htm#23-0000. Accessed May 25, 2022;
U.S. Bureau of Labor Statistics. Employer Costs for
Employee Compensation. ‘‘ECEC Civilian
Workers—2004 to Present.’’ March 2022. Available
at https://www.bls.gov/web/ecec.supp.toc.htm.
Accessed May 25, 2022. CBP assumes an annual
growth rate of 4.15% based on the prior year’s
change in the implicit price deflator, published by
the Bureau of Economic Analysis.
37 AIPLA’s study surveyed intellectual property
(IP) lawyers that were used in the 2017 Report of
the Economic Survey. The median hourly billing
rate for these lawyers was $400 in 2016 dollars,
which is the most recent data available, and
($447.78) after adjustment to 2021 dollars. CBP
assumes an annual growth rate of 4.15% based on
the prior year’s change in the implicit price
deflator, published by the Bureau of Economic
Analysis. Source: American Intellectual Property
Law Association. 2017 Report of the Economic
Survey. ‘‘Billable Hours, Billing Rate, Dollars Billed
(Q29, Q30, Q27).’’ June 2017.
38 See 19 CFR 141.46
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claimant and not via the freight
forwarder or any other third-party agent.
This gives the broker direct access to the
importer of record when entering into
the power of attorney, which increases
transparency in the verification process.
Since brokers are currently required to
execute a customs power of attorney,
and importers already provide a power
of attorney, this provision would not
result in any additional burden to
brokers. The new provision only
requires direct contact between the
broker and the importer of record. CBP
received several comments on this
provision, which are discussed in
greater detail in the Discussion of
Comments section above. In reviewing
the concerns raised in these comments,
CBP has decided to retain its proposed
new policy requiring contact directly
between the importer of record and the
broker.
According to CBP’s Broker
Management Branch, it takes
approximately 1.75 hours, on average,
for the broker to obtain a customs power
of attorney from the freight forwarder, a
time estimate CBP believes will also
apply to securing a power of attorney
from the importer of record or drawback
claimant. CBP received two comments
disputing this estimation in response to
the NPRM, both noting that it may take
substantially longer to acquire a power
of attorney under the rule, though
neither commenter provided an
estimated time burden. However, this
estimation is an average across all
clients and over time. While it may
initially take slightly longer to secure a
power of attorney directly from certain
clients, for others it will be faster than
dealing with the freight forwarder.
Additionally, as brokers regularly work
directly with importers of record and
drawback claimants, the process will
likely move faster. Furthermore, CBP
based this average on subject matter
expertise and information from
discussions between the Broker
Management Branch and representatives
of trade associations and individual
brokers. CBP therefore believes the
average time to procure a power of
attorney will not change once the
intermediary is removed and the broker
must obtain the customs power of
attorney directly from the importer of
record or drawback claimant instead of
allowing a freight forwarder or other
third party to do so on their behalf.
3.7 Professionalism
A number of the changes contained in
this rule are meant to increase
professionalism and clarify what
brokers should already be doing. CBP
recognized this need given the volume
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of routinely fielded questions about
these topics. The next several sections
describe the current process, and what
is changing as a result of this rule, for
new requirements related to Customs
Business, Records Confidentiality,
Responsible Supervision and Control,
and Advice to Client.
3.7.1 Customs Business
Currently, customs business must be
conducted within the customs territory
of the United States as it is defined in
19 CFR 101.1. Furthermore, each
brokerage or company employing
brokers must designate a licensed broker
or knowledgeable employee to be
available to CBP to respond to issues
related to the transacting of customs
business. CBP received several
comments regarding this requirement.
As discussed above in Section II,
Discussion of Comments, CBP is not
requiring 24-hour on-call coverage by
brokers. Instead, CBP requires that a
broker provide a knowledgeable point of
contact covering all ports where the
broker does business, which could
encompass ports with business hours
extending beyond a regular business
day. Each broker must maintain
accurate and current point of contact
information for that employee with CBP
and may update that information in a
CBP-authorized EDI system, instead of
submitting on paper. Under this rule,
the requirements related to contact
information are not changing; the
regulations now recognize that use of
the EDI satisfies the requirement and
mandates that brokers use an EDI,
unless one is unavailable. CBP fields
questions on this provision from the
public, so adding this additional
language to the regulation will clarify
the provision for the public. There are
no costs to this provision because it
does not change the requirement. The
public will benefit as the public now
has more clarity regarding the
requirement without needing to contact
CBP.
3.7.2 Records Confidentiality
Currently, records pertaining to the
clients of the broker are to be considered
confidential and the broker must not
disclose their contents, or any
information connected with the records
to any other persons except the relevant
surety, other than specifically described
Government representatives with regard
to a particular entry or due to a
subpoena. This is not changing under
the rule. However, this description is
clarified to state that these records may
not be disclosed to any persons other
than the ones mentioned above and to
the representatives of the Department of
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Homeland Security except by court
order, subpoena (as mentioned above),
or when authorized in writing by the
client. This has been the practice but
has been the subject of confusion.
Finally, the revised language clarifies
that the confidentiality provision does
not apply to information that is in the
public domain, which has been a point
of confusion for some brokers. CBP
received several comments on this
provision, discussed in greater detail in
the comment responses above, but is not
revising the requirements for this final
rule or the analysis of costs and benefits.
3.7.3 Responsible Supervision and
Control
Brokers often have employees
working for them who are not licensed
brokers. These employees help with
information collection and submission
of entry documentation to CBP. Each
broker is responsible for exercising
responsible supervision and control
over the transaction of the customs
business done under his or her broker
license. This requirement currently
exists and is not changing as a result of
this rule. However, this rule moves the
list of factors CBP considers when
determining whether a customs broker
is exercising responsible supervision
and control from the definition of
‘‘responsible supervision and control’’
in § 111.1 to § 111.28. This list is of a
substantive nature and is more
appropriately located in the section on
responsible supervision and control as
opposed to the definitions section. CBP
has always maintained that the current
factors are not exhaustive, and in the
rule, CBP is simply clarifying existing
requirements that brokers, for the most
part, are already complying with in
practice.39 This is not a change of
practice as these factors for responsible
supervision already exist and are just
being moved and formally stated in the
regulations to clarify what already
should be occurring.
In this final rule, CBP has also made
some clarifying changes. In § 111.28(a),
CBP combined factors (12) and (13) into
one new factor (12), which deals with
the broker-CBP relationship, and
combined factors (14) and (15) into one
new factor (13), relating to the brokerofficer/member relationship. In
39 Brokers looking for more information beyond
what is stated in CBP regulations can consult the
CBP website at https://www.cbp.gov/trade/
programs-administration/customs-brokers. The
website is updated more frequently than the
regulations themselves. CBP provides guides on
how to become a broker, broker exam information,
validating the power of attorney, broker
compliance, employing convicted felons, fees,
national permits, and triennial reports, as well as
webinars and informed compliance publications.
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addition, CBP added a reference to
‘‘member(s)’’ in the new factor (13) to
account for partnerships, in addition to
associations and corporations as a type
of broker entity. The factors themselves
are not new; only their position in the
list has been changed.
CBP received many comments
regarding the responsible supervision
and control factors and their use in
evaluating broker performance. These
comments are discussed in greater detail
above in Section II, Discussion of
Comments. CBP did not revise the
analysis of costs and benefits based on
these comments.
Additionally, CBP is clarifying some
of the requirements on the reporting of
employee information by brokers, for
consistency. This rule removes the
requirement for the broker to report
each employee’s last home address,
email address, the name and address of
each former employer, and, if the
employee had been employed by the
broker for less than three years, the
dates of employment for the three-year
period preceding current employment
with the broker. This rule retains the
requirement that brokers report other
information, including employee names,
social security numbers, dates and
places of birth, dates of hire, and current
home addresses. An updated list must
be submitted to the processing Center
and updated in ACE if any of the
information required changes, including
notation of new or terminated
employees. This update must be
submitted within thirty (30) calendar
days of the change. However, brokers
already have an up-to-date list of their
employees’ contact information. This
new requirement amounts to a routine
submission each month in ACE with
data that the brokers already routinely
keep. They are likely to do this at the
same time as making their other filings
or routine reports so submitting one
more existing document is not an
additional measurable burden on
customs brokers.
3.7.4 Advice to Client
Currently, if a broker knows that a
client has not complied with the law or
has made an error in, or omission from,
any document, affidavit, or other record
which the law requires the client to
execute, the broker must advise the
client promptly of that noncompliance,
error, or omission. This rule also
requires the broker to advise the client
on the proper corrective actions and
retain a record of the broker’s
communication with the client for
potential review by CBP on a routine
visit to the broker. Brokers will not have
to report errors, omissions or
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noncompliance discovered by the
broker each time one is discovered, and
the client is counseled. However, if CBP
identifies the error, omission or
noncompliance and brings it to the
broker’s attention, the broker should
provide the documentation of the
communication with the client. These
additions clarify the level of
professionalism that is expected in the
broker/importer relationship. Most
brokers are already in compliance with
this requirement, so this provision will
not add a significant burden to customs
brokers. CBP received a few comments
on this provision, which are further
discussed above in Section II,
Discussion of Comments. However, CBP
maintains the requirement that brokers
provide and document advice given to
clients on corrective actions and has not
revised the analysis of costs and benefits
as a result. The discussion of comments
above clarifies how a broker can achieve
proper documentation.
3.8 CBP’s New Payment Platform, the
eCBP Portal
In this final rule, CBP is also
announcing the deployment of the eCBP
portal, a new payment and submission
system. The eCBP portal is part of an
ongoing effort by CBP to eliminate
manual processes, reduce cash and
check collections at ports of entry,
standardize processes, integrate data
with cargo systems, reduce wait times at
ports of entry, provide more online
payment options, and provide better
and more accessible data. As described
above in The Benefits of CBP’s New
Payment and Submission System, the
eCBP Portal, for Licensed Customs
Brokers under Section IV, the eCBP
portal streamlines and validates data,
which in turn reduces errors and
provides data to support security-related
decision making by CBP personnel.
Additionally, the eCBP portal allows for
fewer cash transactions, lowering the
risk of cash losses, and allows CBP to
shift resources from revenue collection
to law enforcement and trade
facilitation.
As further discussed above, CBP
tested the eCBP portal for use in filing
the triennial status report between
December of 2017 and May 2018. The
new portal was then deployed for the
following filing period of the triennial
report beginning in December of 2020
and will be used for the next filing in
December 2023 into early 2024. The
portal was also deployed to accept
license exam application fees in August
of 2019. As a part of regular
announcements, CBP announced the
new payment system through CSMS
messages, a message on CBP’s website,
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63307
tweets, and in webinars for the broker
community. Finally, CBP added the
automatic suspension and revocation
processing of licenses for unsubmitted
triennial status reports as a portal
functionality in February 2021, though
a CBP employee still reviews all license
records with unsubmitted reports prior
to suspension or revocation.
CBP saw significant savings resulting
from reduced processing and personnel
hours, discussed further below, with the
deployment of the eCBP portal. The
portal also required some initial
investment in programming and
technical development. However, those
costs are part of a long-term project
within CBP called Revenue
Modernization, which touches on
several different areas of CBP’s payment
processing systems. The Revenue
Modernization team is not able to easily
identify an exact allocation of its
development costs for the eCBP-specific
initiatives at this time. The development
costs are intertwined with back-end
development shared with another
Revenue Modification project’s solution,
as well as development that serves as a
front-end platform for numerous other
fee collection efforts. The eCBP portal
will eventually encompass a variety of
different fees, so full development costs
are not limited to broker-related
projects. The program plans to allocate
the costs once it is closer to the
solutions being complete. CBP estimates
that, as of FY 2021, development costs
have amounted to less than $3 million
for the broker fees deployed in the eCBP
portal to date.
The eCBP portal currently allows
brokers and broker exam applicants to
submit paperwork and fees for the
broker exam and the triennial status
report electronically. According to CBP
data, between 80 and 90 percent of the
brokers required to submit applications
and fees did so via the portal following
the introduction of both functionalities,
resulting in significant time savings for
applicants, brokers, and CBP personnel.
To access the portal, users must first
create a login.gov account, which takes
about three-five minutes. However, an
account must only be created once.
In 2019, the first year that broker
exam applicants were able to use the
portal, 1,327 applicants successfully
paid their fees for the fall exam via the
eCBP portal, saving an average of 43
minutes relative to a paper form.40 CBP
40 CBP estimates a time burden of approximately
60 minutes for a paper submission, while an
electronic submission takes an average of 17
minutes. Without access to live timings from the
public, CBP’s Revenue Modernization team relied
on a testing team to set up two common scenarios
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offers the exam twice per year; once in
April and again in October. Applicants
were again able to use the portal for two
exams each in 2020 and 2021.41 An
average of 1,291.4 applicants used the
portal for each exam. See Table 14. CBP
estimates an average time burden of 60
minutes for a paper form, which
includes the time needed to print, fillin, and submit the form and pay either
in-person at the port or by mail.42
In 2021, brokers were able to use the
portal to file their triennial status
reports and related fees. Approximately
91 percent of brokers, or 13,772 filers,
did so, with 1,406 brokers preferring to
file a paper report. The electronic filers
saved an average of 19 minutes relative
to paper filers.43
With information and payments
submitted electronically in 2019, CBP
subject matter experts estimate that CBP
saved approximately 280 hours of exam
fee processing time, in addition to about
430 hours of time processing
withdrawals and mailing out results, for
a total savings of 710 hours in 2019,
implying a time savings of 32 minutes
per applicant.44 CBP also saved
approximately 1,836 hours of processing
of triennial status reports and fees in
2021.45
TABLE 14—CBP TIME SAVINGS FROM EXAM APPLICANTS USING THE ECBP PORTAL
Year
khammond on DSKJM1Z7X2PROD with RULES2
2019
2020
2020
2021
2021
Applicants
CBP hours saved
CBP minutes
saved/applicant
...........................................................................................................................
(1) .....................................................................................................................
(2) .....................................................................................................................
(1) .....................................................................................................................
(2) .....................................................................................................................
1,327
1,372
1,421
1,312
1,025
710
734
760
702
548
32
32
32
32
32
Total ....................................................................................................................
6,457
3,455
..............................
Applicants, brokers, and CBP will
save time with the eCBP portal over the
period of analysis from 2022–2026. CBP
will offer the broker exam twice per
year, meaning approximately 1,292
applicants will use the portal at each
exam, for a total of 2,583 applicants per
year.46 As Table 15 shows, those broker
exam applicants will save about
$284,728 over the course of five years,
accounting for time spent creating a
login.gov account as well as time saved
in using the portal relative to a paper
submission.47 CBP assumes the number
of applicants will stay largely the same
over the period of analysis, and that the
wage rate for brokers most closely
approximates the wage earned by
applicants.48 Over the period of
analysis, there will only be one triennial
reporting year (2024). In that year,
brokers using the eCBP portal can
expect to save approximately $160,909,
as shown in Table 16. CBP assumes that
about 91 percent of newly licensed
applicants will elect to file their
triennial status reports via the portal, in
line with the 91 percent of already
licensed brokers who chose to do so in
2021. Therefore, accounting for the new
licenses issued each year, as described
above in Table 3, about 14,597 brokers
will use the portal to submit their report
fees. Those brokers will have already
created a login.gov account, either to
submit the exam application fees,
participate in the testing or original
deployment of the portal, or in the
course of their customs business.
Savings for CBP over the period of
analysis amount to $716,066,
incorporating savings from the
processing of payments, paper forms,
exam withdrawals, results, and
suspensions. CBP will also require less
data entry, resulting in fewer mistakes,
reduced time fixing errors, and more
time on tasks other than administration.
The automation of payments also allows
for greater efficiency and speed in
payment processing, and reduced cash
losses. CBP did incur some unquantified
IT and development costs. As stated
above, these costs are part of a larger
modernization effort by CBP and cannot
be separated out by program. Table 17
summarizes these savings.
for applicants making their customs broker license
examination (CBLE) registration. The basic
elements of the registration process include
establishing a login.gov ID for first time users, login
in, filling in the form and making payment.
41 The spring exam in 2020 was cancelled due to
the COVID–19 pandemic. The exam was offered
twice in October to make up for the cancellation.
42 See https://www.reginfo.gov/public/do/
PRAViewICR?ref_nbr=202010-1651-013 for more
information on the time burden to submit a paper
form. Before electronic submission options were
available, filers needed to obtain and fill in a paper
form, and mail the form and their payment to the
appropriate port. Alternatively, filers could submit
in person at the port, sometimes compelling them
to wait in line to submit the form and payment and
receive their receipt. Beginning in 2015, filers could
use a fillable PDF form on pay.gov to submit their
form along with their payment. Using pay.gov
required typing in all the information, providing an
electronic signature, and submitting the form and
payment. The one-hour time burden is an average
accounting for both paper submission by mail or in
person, or electronic submission.
43 CBP estimates a 30-minute time burden for the
filing of a paper triennial report and fee payment.
After testing using the same methodology as
described above, the Revenue Modernization team
estimates an electronic filing to take an average of
11 minutes. Before the eCBP portal was available,
brokers filed their triennial reports in paper form
by mailing them along with payment to the port,
or by submitting the report and payment in person.
For the 2015 and 2018 reporting cycles, brokers
could use a fillable PDF on pay.gov to submit their
triennial reports. In 2015, 15 percent of brokers did
so. In 2018, 85 percent used pay.gov. The 30-minute
time burden is an average accounting for those
brokers filing in person or by mail on paper.
44 Time savings compiled and provided by CBP’s
Broker Management Branch and CBP’s Revenue
Modernization team based on a comparison of the
time spent on paper submissions vs electronic
submissions. Much of the time savings resulted
from reduced administrative burden, like filling
envelopes, payment data entry, and cross-checking
paper forms with electronic databases.
45 As discussed below, CBP saved 1,500 hours of
processing time over 11,254 brokers in the 2018
reporting cycle, implying a savings on 8 minutes
per payment. In 2021, CBP processed 13,772
payments. A savings of 8 minutes over 13,772
payments results in 1,836 hours in 2021.
46 The eCBP portal is a relatively new tool and is
only now becoming required in certain instances.
Because we do not have very many years worth of
data, an average is a more accurate estimate of the
number of future applicants.
47 For the purposes of calculating a time burden,
CBP assumes that all exam applicants will need to
create a login.gov account. Although some
applicants will take the test multiple times, CBP
does not have data on the frequency.
48 Many applicants for the broker exam already
work in the brokerage industry. However, because
CBP does not have specific wage data for nonlicensed brokerage employees, nor can we estimate
the average wage for those working outside the
brokerage industry, we have approximated using
the broker wage rate.
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63309
TABLE 15—TIME SAVINGS FOR EXAM APPLICANTS
[Undiscounted 2022 U.S. dollars]
Year
2022
2023
2024
2025
2026
Time savings
per
submission
(minutes)
Applicants
Login.gov
account
creation
(minutes)
Wage rate
Total net
savings
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
2583
2583
2583
2583
2583
43
43
43
43
43
5
5
5
5
5
34.81
34.81
34.81
34.81
34.81
$56,946
56,946
56,946
56,946
56,946
Total ..............................................................................
12,914
........................
........................
........................
284,728
TABLE 16—TIME SAVINGS FOR BROKERS
[Undiscounted 2022 U.S. dollars]
Broker filers
Time savings
per
submission
(minutes)
Wage rate
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
........................
........................
14,597
........................
........................
........................
........................
19
........................
........................
........................
........................
$34.81
........................
........................
0
0
$160,909
0
0
Total ..........................................................................................................
14,597
........................
........................
160,909
Total time
savings
(hours)
Wage rate
Year
2022
2023
2024
2025
2026
Total savings
TABLE 17—COST SAVINGS FOR CBP
[Undiscounted 2022 U.S. dollars]
Year
khammond on DSKJM1Z7X2PROD with RULES2
2022
2023
2024
2025
2026
Applications
Total savings
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
2,583
2,583
17,180
2,583
2,583
1,378
1,378
3,214
1,378
1,378
82.08
82.08
82.08
82.08
82.08
$113,073
113,073
263,772
113,073
113,073
Total ..........................................................................................................
27,512
8,724
........................
716,066
In the course of the eCBP portal test,
both CBP and brokers/applicants
experienced significant time savings.
CBP’s time savings throughout the test
resulted primarily from greater
efficiency in electronic processing of
payments, an increase in the number of
on-time payments, reduction in time
spent on administrative tasks in
processing withdrawals and results, and
the introduction of automatic
suspension. CBP personnel saved 1,500
hours across the 2017/2018 reporting
cycle—savings from which are reported
in 2018 in Table 18. CBP saved 710
hours across a single exam in 2019, as
well as 1,494 hours across two exams in
2020, as shown in Table 14 above. CBP
also saved 1,836 hours across the 2020/
2021 reporting cycle, reported in 2021
in Table 18, and 1,250.4 hours across
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18:04 Oct 17, 2022
Jkt 259001
two exams.49 CBP also incurred some
non-quantified IT and development
costs, as described earlier.
Brokers and applicants also saved
time if they chose to participate. In the
2017/2018 reporting cycle, 11,254
participating brokers saved 19 minutes
per submission. Those savings are
reported in 2018 in Table 18 below. In
2019, 1,327 exam applicants saved 43
minutes each, while in 2020, 2,793
exam applicants saved the same. In
2021, 2,337 exam applicants saved 43
minutes each. In the 2020/2021
reporting cycle, 13,772 brokers saved 19
49 The triennial status report is due on the 28th
of February, every three years. To allow adequate
time for brokers submitting the reports, CBP begins
accepting reports and payments at the end of the
year prior to the due date. For ease of presentation,
and because the majority of submissions occur in
January and February, CBP presents these costs in
a single year.
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minutes each, the savings from which
are reported in 2021 in Table 18.
Brokers did experience a time cost in
creating their Login.gov account. About
80 percent of brokers filing that year, or
11,254 people, chose to use the portal in
the 2017/2018 reporting cycle, and in
doing so, spent about three-five minutes
creating a Login.gov account, the costs
of which are reported in 2018 in Table
18 below. For the 2020/2021 reporting
cycle, 13,772 brokers, or about 90
percent used the electronic option, costs
for which are reported in 2021 in Table
18. This represents 2,518 more brokers
than in the previous reporting cycle.
Those 2,518 brokers also faced the
three-five-minute cost of creating a
Login.gov account. In 2019, 2020, and
2021, exam applicants also spent threefive minutes creating an account. As
stated above, there were 1,327
applicants in 2019, 2,793 applicants
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across two exams in 2020, and 2,337
applicants across two exams in 2021.
Although the costs and benefits of the
test deployment of the eCBP portal are
not recoverable, they are reported here
for transparency and excluded from the
total costs and benefits of the rule. See
Table 18 for a description of these costs
and benefits.
TABLE 18—COSTS AND BENEFITS OF THE ECBP PORTAL TEST
[Undiscounted 2022 U.S. dollars]
Year
2018
2019
2020
2021
Activity
CBP costs
Costs
Costs
Costs
Costs
CBP savings
Broker/applicant savings
Login.gov
costs
Total savings
....................
....................
....................
....................
Triennial Report ..............................
License Exam .................................
2 License Exams ............................
Triennial Report; 2 License Exams
IT
IT
IT
IT
.............
.............
.............
.............
$123,120
58,277
122,658
253,331
$124,055
33,105
69,677
$210,113
$32,646
3,849
8,102
14,084
$214,529
87,532
184,233
449,360
Total ............
.........................................................
............................
557,386
436,950
58,681
935,654
* Totals may not sum due to rounding.
3.9
Total Costs
The total monetized costs for customs
brokers include a $100 fee that two
percent of individual customs brokers
who receive their first district permit
concurrently with their broker’s license
will need to pay for their permit and the
costs resulting from the new
requirement that a broker document and
report to CBP when it separates from a
client relationship as a result of
attempted fraud or criminal acts. The
costs also include the 5 minute time
costs broker license exam applicants
will experience in creating their
Login.gov accounts. Table 18 shows the
total annual cost of the rule. Over the
five-year period of analysis, this rule
will cost brokers about $88,850.
TABLE 19—TOTAL ANNUAL COSTS FOR
BROKERS
[2022 U.S. dollars]
Year
2022
2023
2024
2025
2026
Total costs
............................................
............................................
............................................
............................................
............................................
$17,770
17,770
17,770
17,770
17,770
TABLE 19—TOTAL ANNUAL COSTS FOR
BROKERS—Continued
[2022 U.S. dollars]
Year
Total costs
Total ........................................
88,850
Note: Values may not sum to total due to
rounding.
Table 20 shows the present value and
annualized costs of the rule over the
period of analysis at a three and seven
percent discount rate. Total costs range
from $72,860 to $81,381, depending on
the discount rate used. Annualized costs
are $17,770.
TABLE 20—TOTAL PRESENT VALUE AND ANNUALIZED COSTS
[2022 U.S. dollars]
Total present value costs
khammond on DSKJM1Z7X2PROD with RULES2
3.10
3%
7%
3%
7%
$81,381
$72,860
$17,770
$17,770
Total Benefits
The total annual monetized savings
for customs brokers are the result of
monetary savings from switching from a
district permitting system to a national
permitting system. Namely, there is a
time savings and fee savings of $100 per
permit application for individual
customs brokers who do not
concurrently receive their first district
permit with their broker license. There
is also a time savings to CBP due to the
removal of the district permit waiver
application reviews. Brokers, potential
brokers applying to take the broker
exam, and CBP also experience time
savings resulting from use of the eCBP
portal. As shown in Table 21, total
undiscounted savings over the period of
analysis are $1,277,116.
In addition to these quantified
benefits, there are unquantified benefits
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18:04 Oct 17, 2022
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resulting from this rule’s updates. These
benefits include increased
professionalism of the broker industry,
greater clarity for brokers in
understanding the rules and regulations
by which they must abide, greater data
security, and better reporting of
potential fraud to CBP. The eCBP portal
also increases the efficiency of payment
processing, reduces errors, and allows a
shift of resources from paperwork and
administration to other CBP priorities.
TABLE 21—TOTAL ANNUAL
UNDISCOUNTED SAVINGS FOR BROKERS AND CBP—Continued
[2022 U.S. dollars]
Year
Total benefits
2025 ......................................
2026 ......................................
192,475
191,777
Total ..................................
1,277,116
Note: Values may not sum to total due to
rounding.
TABLE 21—TOTAL ANNUAL
Table 22 shows the present value and
UNDISCOUNTED SAVINGS FOR BROannualized savings of the rule over the
KERS AND CBP
period of analysis at a three and seven
percent discount rate. Total savings
Total benefits range from $1,046,477 to $1,169,689,
depending on the discount rate used.
$194,412 Annualized savings total approximately
193,655
$255,000.
[2022 U.S. dollars]
Year
2022 ......................................
2023 ......................................
2024 ......................................
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504,797
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TABLE 22—TOTAL PRESENT VALUE AND ANNUALIZED BENEFITS
[2022 U.S. dollars]
Total present value benefits
3.11
Annualized Benefits
3%
7%
3%
7%
$1,169,689
$1,046,477
$255,407
$255,226
Net Benefits
Table 23 summarizes the monetized
costs and benefits of this rule to
individual and business entity customs
brokers. As shown, the total monetized
present value net benefits of this rule
over a five-year period of analysis
ranges from $973,616 to 1,088,308 and
the annualized net benefit is
approximately $237,500.
TABLE 23—PRESENT VALUE AND ANNUALIZED NET BENEFIT OF RULE
[2022 U.S. dollars]
3% Discount rate
Present value
Total Cost ........................................................................................................
Total Benefit .....................................................................................................
Total Net Benefit ..............................................................................................
khammond on DSKJM1Z7X2PROD with RULES2
3.12 Distributional Impact
Under the rule, the customs broker
license application will change from
$200 for both individuals and business
entities to $300 for individuals and $500
for business entities. Consequently,
CBP’s fee would increase by $100 for
individuals and $300 for business
entities. As discussed in section 2, CBP
estimates that over the next five years,
2,072 individuals and 75 business
entities will be issued a new customs
broker license (See Table 3). Using these
estimates and the fee increases, CBP
estimates that the rule will result in
increased transfer payments from
brokers to the government of
approximately $229,700 over the next
five years (2,072 individual applications
* $100 fee increase = $207,200; 75
business entity applications * $300 fee
increase = $22,500; $207,200 + $22,500
= $229,700).
Although the fee changes will
increase costs for individuals and
business entities, CBP has determined
that these increases are necessary in
order to recover some of the costs to
provide the services necessary to
facilitate the customs broker license
application process.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.), as amended by the
Small Business Regulatory Enforcement
and Fairness Act of 1996, requires
agencies to assess the impact of
regulations on small entities. A small
entity may be a small business (defined
as any independently owned and
operated business not dominant in its
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$81,381
1,169,689
1,088,308
field that qualifies as a small business
concern per the Small Business Act); a
small organization (defined as any notfor-profit enterprise which is
independently owned and operated and
is not dominant in its field); or a small
governmental jurisdiction (defined as a
locality with fewer than 50,000 people).
In an effort to modernize the
regulations governing customs brokers,
CBP is finalizing regulatory changes that
include: eliminating district permits so
each customs broker only needs one
national permit, which reduces the time
submitting permit applications and the
fees owed; mandating that each broker
provide notification to CBP of any
known breach of its records within 72
hours of discovery; 50 requiring brokers
to make all records available to CBP,
upon request within thirty (30) calendar
days at the location specified by CBP;
mandating that customs brokers now
obtain a customs power of attorney
directly from the importer of record or
drawback claimant, not a freight
forwarder or other third party, to
transact customs business for that
importer or drawback claimant; and
requiring that a broker must document
and report to CBP when it separates
from or terminates representation of a
client as a result of the broker’s
determination that the client is
intentionally attempting to use the
50 Additionally, within ten (10) business days, a
broker must provide an updated list of any
additional known compromised importer
identification numbers. To the extent that
additional information is discovered, a broker must
provide that information within 72 hours of
discovery.
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7% discount rate
Annualized
$17,770
255,407
237,637
Present value
$72,860
1,046,477
973,616
Annualized
$17,770
255,226
237,456
services of a broker to defraud or
otherwise commit any criminal act
against the U.S. Government.
Furthermore, CBP is also making
various non-substantive changes and
conforming edits to clarify the existing
language in the regulations to better
reflect what is already occurring.
The rule would apply to all customs
brokers, regardless of size. Accordingly,
the rule would affect a substantial
number of small entities, as a small
business within the Freight
Transportation Arrangement industry
(NAICS code 448510), the industry in
which brokers are employed, is defined
as one whose annual receipts are less
than $17.5 million.51 The rule would
result in an average annualized cost per
customs broker of $0.08 ($36 annualized
costs/429 average brokers per year),
excluding savings resulting from the use
of the eCBP portal.52 The time savings
resulting from the eCBP portal’s
introduction accrue to both broker
license exam applicants who may or
may not be in the Freight Transportation
Arrangement industry as well as to all
51 Small business size standards are defined in 13
CFR 121.
52 A large part of the savings in this rule accrue
to CBP. Therefore, to calculate the impact on small
businesses, CBP considered only the costs and
savings of the rule for customs brokers. This
includes the savings for 11.5% of brokers reported
in Table 6, application time savings for individuals
reported in Table 7, application time savings
reported for coprorations in Table 8, waiver request
time savings as reported in Table 11, costs for
corporate brokers reported in Table 4, costs for the
2 percent of brokers reported in Table 5, and the
costs of an attorney as described above. Over the
period of analysis, the net costs total $296, or about
$36 annualized at a discount rate of three percent.
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existing, active licensed brokers. Those
two groups will only experience the net
cost savings provided by the eCBP
portal.
Additionally, as discussed above, the
customs broker license application fee
increase for the 2,147 new customs
brokers over the period of analysis
would result in a distributional impact
of $229,700, with 2,072 individual
applicants paying an additional $100
and 75 corporate applicants paying an
additional $300 over a 5-year period.
Including distributional impacts, the
rule costs individual brokers $100 or
costs corporate brokers $300 per year, or
less than one percent of annual revenue
for brokers of any size. Please see Table
23 for a breakdown of brokerages by
size. Because the distributional impact
and saving are relatively small on a per
broker basis, this rule will not have a
significant economic impact on customs
brokers. Accordingly, CBP certifies that
this rule does not have a significant
economic impact on a substantial
number of small entities.
TABLE 24—ANNUAL REVENUE BY FIRM SIZE 53
Enterprise size
(number of employees)
khammond on DSKJM1Z7X2PROD with RULES2
01:
02:
03:
04:
05:
06:
07:
08:
09:
10:
11:
12:
13:
14:
15:
16:
17:
18:
Number of
firms
Total ............................................................................................................
<100 ............................................................................................................
100–499 ......................................................................................................
500–999 ......................................................................................................
1,000–2,499 ................................................................................................
2,500–4,999 ................................................................................................
5,000–7,499 ................................................................................................
7,500–9,999 ................................................................................................
10,000–14,999 ............................................................................................
15,000–19,999 ............................................................................................
20,000–24,999 ............................................................................................
25,000–29,999 ............................................................................................
30,000–34,999 ............................................................................................
35,000–39,999 ............................................................................................
40,000–49,999 ............................................................................................
50,000–74,999 ............................................................................................
75,000–99,999 ............................................................................................
100,000+ .....................................................................................................
C. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (Pub. L. 104–13,
44 U.S.C. 3507), an agency may not
conduct, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number
assigned by OMB. The collections of
information contained in these
regulations are provided for by OMB
control number 1651–0034 (CBP
Regulations Pertaining to Customs
Brokers) and by OMB control number
1651–0076 (Recordkeeping
Requirements).
The final rule formalizes the use of
the eCBP portal as an option for
applicants and brokers to submit the
Application for Broker License Exam
and payment and the Triennial Status
Report and payment. The eCBP portal
reduces the time burden to submit these
forms and fees. CBP would submit to
OMB for review the following
adjustments to the previously approved
Information Collection under OMB
53 U.S.
Census Bureau, 2017 SUSB Annual Data
Tables by Establishment Industry, ‘‘The Number of
Firms and Establishments, Employment, Annual
Payroll, and Receipts by Industry and Enterprise
Receipts Size: 2017, NAICS 4885 Freight
Transportation Arrangement. https://
www.census.gov/data/tables/2017/econ/susb/2017susb-annual.html. Accessed June 7, 2021.
VerDate Sep<11>2014
18:04 Oct 17, 2022
Jkt 259001
15,104
1,856
4,655
2,459
2,706
1,327
589
317
281
176
105
67
49
45
49
85
54
284
control number 1651–0034 to account
for this rule’s changes.
CBP Regulations Pertaining to Customs
Brokers
Application for Broker License Exam
Estimated Number of Respondents:
2,583.
Estimated Number of Responses per
Respondent: 1.
Estimated Number of Total Annual
Responses: 2,583.
Estimated Time per Response: 17
minutes (0.283 hours).
Triennial Status Report
Estimated Number of Respondents:
4,866 (14,597 every 3-years).
Estimated Number of Responses per
Respondent: 1.
Estimated Number of Total Annual
Responses: 4,866.
Estimated Time per Response: 11
minutes (0.183 hours).
Estimated Total Annual Burden
Hours: 1,621.47 hours.
VII. Signing Authority
This document is being issued in
accordance with 19 CFR 0.1(b)(1),
which provides that the Secretary of the
Treasury delegated to the Secretary of
Homeland Security the authority to
prescribe and approve regulations
relating to customs revenue functions
on behalf of the Secretary of the
PO 00000
Frm 00052
Fmt 4701
Sfmt 4700
Receipts
($1,000s)
Receipts per
firm
(in millions)
64,643,370
95,206
1,247,577
1,769,394
4,244,215
4,572,835
3,454,385
2,627,240
3,180,898
2,698,956
2,068,177
1,582,086
1,313,422
1,282,808
1,536,283
3,198,608
2,825,197
26,946,083
$243,761
51,296
268,008
719,558
1,568,446
3,445,995
5,864,830
8,287,823
11,319,922
15,334,977
19,696,924
23,613,224
26,804,531
28,506,844
31,352,714
37,630,682
52,318,463
94,880,574
Small
business?
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
No.
No.
No.
No.
No.
No.
No.
No.
Treasury for when the subject matter is
not listed as provided by Treasury
Department Order No. 100–16.
Accordingly, this final rule amending
such regulations may be signed by the
Secretary of Homeland Security (or his
or her delegate). Additionally, while the
general topic of this rulemaking covers
customs revenue functions delegated to
the Secretary of Homeland Security by
the Secretary of the Treasury, this
document also includes certain fees
over which the Secretary of the Treasury
retains authority, as provided for in 19
CFR 0.1(a)(1) and paragraph 1(a)(i) of
Treasury Department Order 100–16.
Accordingly, this final rule is also being
signed by the Secretary of the Treasury
(or his or her delegate).
List of Subjects
19 CFR Part 24
Accounting, Claims, Customs duties
and inspection, Harbors, Reporting and
recordkeeping requirements, Taxes.
19 CFR Part 111
Administrative practice and
procedure, Brokers, Customs duties and
inspection, Penalties, Reporting and
recordkeeping requirements.
E:\FR\FM\18OCR2.SGM
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Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Rules and Regulations
Regulatory Amendments to the CBP
Regulations
For the reasons given above, parts 24
and 111 of title 19 of the Code of
Federal Regulations (19 CFR parts 24
and 111) are amended as set forth
below:
PART 24—CUSTOMS FINANCIAL AND
ACCOUNTING PROCEDURE
1. The general authority citation for
part 24 continues to read as follows:
■
Authority: 5 U.S.C. 301; 19 U.S.C. 58a–
58c, 66, 1202 (General Note 3(i), Harmonized
Tariff Schedule of the United States), 1505,
1520, 1624; 26 U.S.C. 4461, 4462; 31 U.S.C.
3717, 9701; Pub. L. 107–296, 116 Stat. 2135
(6 U.S.C. 1 et seq.).
*
*
§ 24.1
*
*
*
[Amended]
2. In § 24.1, paragraph (a)(3)(i) is
amended by removing the phrases ‘‘who
does not have a permit for the district
(see the definition of ‘‘district’’ at
§ 111.1 of this chapter) where the entry
is filed,’’ and ‘‘which is unconditioned
geographically’’ from the third sentence.
■
PART 111—CUSTOMS BROKERS
3. The authority citation for part 111
is revised 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 111.2 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.
4. In § 111.1:
a. Add a definition for ‘‘Appropriate
Executive Director, Office of Trade’’ in
alphabetical order;
■ b. Remove the definition of ‘‘Assistant
Commissioner’’;
■ c. Add a definition for ‘‘Broker’s office
of record’’ in alphabetical order;
■ d. Remove the definition of ‘‘District’’;
■ e. Add a definition for ‘‘Executive
Assistant Commissioner’’ in
alphabetical order;
■ f. Amend the definition of ‘‘Permit’’
by removing the word ‘‘any’’ and adding
in its place the word ‘‘a’’;
■ g. Add a definition for ‘‘Processing
Center’’ in alphabetical order;
■ h. Remove the definition of ‘‘Region’’;
and
■ i. Revise the definition of
‘‘Responsible supervision and control’’.
The additions and revisions read as
follows:
khammond on DSKJM1Z7X2PROD with RULES2
■
■
§ 111.1
Definitions.
*
*
*
*
*
Appropriate Executive Director, Office
of Trade. ‘‘Appropriate Executive
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Jkt 259001
Director, Office of Trade’’ means the
Executive Director responsible for
broker management.
*
*
*
*
*
Broker’s office of record. ‘‘Broker’s
office of record’’ means the office
designated by a customs broker as the
broker’s primary location that oversees
the administration of the provisions of
this part regarding all activities
conducted under a national permit.
*
*
*
*
*
Executive Assistant Commissioner.
‘‘Executive Assistant Commissioner’’
means the Executive Assistant
Commissioner of the Office of Trade at
the Headquarters of U.S. Customs and
Border Protection.
*
*
*
*
*
Processing Center. ‘‘Processing
Center’’ means the broker management
operations of a Center of Excellence and
Expertise (Center) that process
applications for a broker’s license under
§ 111.12(a), applications for a national
permit under § 111.19(b) for an
individual, partnership, association, or
corporation, as well as submissions
required in this part for an alreadylicensed broker.
*
*
*
*
*
Responsible supervision and control.
‘‘Responsible supervision and control’’
means that degree of supervision and
control necessary to ensure the proper
transaction of the customs business of a
broker, including actions necessary to
ensure that an employee of a broker
provides substantially the same quality
of service in handling customs
transactions that the broker is required
to provide. See § 111.28 for a list of
factors which CBP may consider when
evaluating responsible supervision and
control.
*
*
*
*
*
■ 5. In § 111.2:
■ a. Amend the section heading by
removing the word ‘‘district’’;
■ b. Amend paragraph (a)(2)(ii)(A)(1) by
removing ‘‘the port director’’ and
‘‘Customs’’ and adding in their place the
term ‘‘CBP’’;
■ c. Amend paragraph (a)(2)(ii)(A)(2) by
removing the words ‘‘port director’’ and
adding the words ‘‘processing Center’’
in their place and by removing the last
sentence.
■ d. Amend paragraph (a)(2)(ii)(B) by
removing the words ‘‘port director’’
wherever they appear and adding in
their place the words ‘‘processing
Center’’; and
■ e. Revise paragraph (b).
The revision reads as follows:
§ 111.2
*
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*
License and permit required.
*
Frm 00053
*
Fmt 4701
*
Sfmt 4700
63313
(b) National permit. A national permit
issued to a broker under § 111.19 will
constitute sufficient permit authority for
the broker to conduct customs business
within the customs territory of the
United States as defined in § 101.1 of
this chapter.
■
6. Add § 111.3 to read as follows:
§ 111.3
Customs business.
(a) Location. Customs business must
be conducted within the customs
territory of the United States as defined
in § 101.1 of this chapter.
(b) Point of contact. A licensed
customs broker, or partnership,
association, or corporation, conducting
customs business under a national
permit must designate a knowledgeable
point of contact to be available to CBP
during and outside of normal operating
hours to respond to customs business
issues. The licensed customs broker, or
partnership, association, or corporation,
must maintain accurate and current
point of contact information in a CBPauthorized electronic data interchange
(EDI) system. If a CBP-authorized EDI
system is not available, then the
information must be provided in writing
to the processing Center.
■
7. Revise § 111.12 to read as follows:
§ 111.12
Application for license.
(a) Submission of application and fee.
An application for a broker’s license
must be timely submitted to the
processing Center after the applicant
attains a passing grade on the
examination. The application must be
executed on CBP Form 3124. The
application must be accompanied by the
application fee prescribed in § 111.96(a)
and one copy of the appropriate
attachment required by the application
form (Articles of Agreement or an
affidavit signed by all partners, Articles
of Agreement of the association, or the
Articles of Incorporation). If the
applicant proposes to operate under a
trade or fictitious name in one or more
States, evidence of the applicant’s
authority to use the name in each of
those States must accompany the
application. The application,
application fee and any additional
documentation as required above may
be submitted to a CBP-authorized
electronic data interchange (EDI)
system. If a CBP-authorized EDI system
is not available, then the information
must be submitted in writing to the
processing Center. An application for an
individual license must be submitted
within the 3-year period after the
applicant took and passed the
examination referred to in
§§ 111.11(a)(4) and 111.13. The
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processing Center may require an
individual applicant to provide a copy
of the notification that the applicant
passed the examination (see § 111.13(e))
and will require the applicant to submit
fingerprints at the time of the interview.
The processing Center may reject an
application as improperly filed if the
application is incomplete or, if on its
face, the application demonstrates that
one or more of the basic requirements
set forth in § 111.11 has not been met at
the time of filing; in either case the
application and fee will be returned to
the filer without further action.
(b) Withdrawal of application. An
applicant for a broker’s license may
withdraw the application at any time
prior to issuance of the license by
providing written notice of the
withdrawal to the processing Center or
through a CBP-authorized EDI system, if
available. However, withdrawal of the
application does not entitle the
applicant to a refund of the application
fee set forth in § 111.96(a).
8. In § 111.13:
a. Amend paragraph (b) by removing
‘‘$390’’ and revising the last sentence;
■ b. Amend paragraph (c) by:
■ i. Removing the words ‘‘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)’’ and adding in their
place the words ‘‘the transaction of
customs business’’; and
■ ii. Removing ‘‘$390’’ in the last
sentence;
■ c. Amend paragraph (d) by removing
‘‘$390’’;
■ d. Amend paragraph (e) in the first
sentence by adding the words ‘‘or
electronic’’ after the word ‘‘written’’;
and
■ e. Revise paragraph (f).
The revisions read as follows:
■
■
§ 111.13
license.
Examination for individual
khammond on DSKJM1Z7X2PROD with RULES2
*
*
*
*
*
(b) * * * CBP will give notice of the
time and place for the examination,
including whether alternatives to on-site
testing will be available, which is at
CBP’s sole discretion.
*
*
*
*
*
(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 or electronic appeal
with the Office of Trade at the
Headquarters of U.S. Customs and
Border Protection, Attn: Broker
Management Branch, within 60 calendar
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18:04 Oct 17, 2022
Jkt 259001
days after the date of the written or
electronic notice provided for in
paragraph (e) of this section. CBP will
provide to the examinee written or
electronic 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
submitting a written or electronic
request to the appropriate Executive
Director, Office of Trade, U.S. Customs
and Border Protection, within 60
calendar days after the date of the notice
on that decision.
■
9. Revise § 111.14 to read as follows:
§ 111.14 Background investigation of the
license applicant.
(a) Scope of background investigation.
A background investigation under this
section will ascertain facts relevant to
the question of whether the applicant is
qualified and will cover, but need not be
limited to:
(1) The accuracy of the statements
made in the application and interview;
(2) The business integrity and
financial responsibility of the applicant;
and
(3) When the applicant is an
individual (including a member of a
partnership or an officer of an
association or corporation), the
character and reputation of the
applicant, including any association
with any individuals or groups that may
present a risk to the security or to the
revenue collection of the United States.
(b) Referral to Headquarters. The
processing Center will forward the
application and supporting
documentation to the appropriate
Executive Director, Office of Trade. The
processing Center will also submit the
recommendation for action on the
application.
(c) Additional inquiry. The
appropriate Executive Director, Office of
Trade, may require further inquiry if
additional facts are deemed necessary to
evaluate the application. The
appropriate Executive Director, Office of
Trade, may also require the applicant
(or in the case of a partnership,
association, or corporation, one or more
of its members or officers) to appear in
person or by another approved method
before the appropriate Executive
Director, Office of Trade, or his or her
representatives, for the purpose of
undergoing further written or oral
inquiry.
■
10. Revise § 111.15 to read as follows:
§ 111.15
Issuance of license.
If the appropriate Executive Director,
Office of Trade, finds that the applicant
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Frm 00054
Fmt 4701
Sfmt 4700
is qualified and has paid all applicable
fees prescribed in § 111.96(a), the
Executive Assistant Commissioner will
issue a license. A license for an
individual who is a member of a
partnership, or an officer of an
association or corporation will be issued
in the name of the individual licensee
and not in his or her capacity as a
member or officer of the organization
with which he or she is connected. The
license will be forwarded to the
processing Center, which will deliver it
to the licensee.
■
11. Revise § 111.16 to read as follows:
§ 111.16
Denial of a license.
(a) Notice of denial. If the appropriate
Executive Director, Office of Trade,
determines that the application for a
license should be denied for any reason,
notice of denial will be given by him or
her to the applicant and to the
processing Center. The notice of denial
will state the reasons why the license
was not issued.
(b) Grounds for denial. The grounds
sufficient to justify denial of an
application for a license include, but
need not be limited to:
(1) Any cause which would justify
suspension or revocation of the license
of a broker under the provisions of
§ 111.53;
(2) The failure to meet any
requirement set forth in § 111.11;
(3) A failure to establish the business
integrity and financial responsibility of
the applicant;
(4) A failure to establish the good
character and reputation of the
applicant;
(5) Any willful misstatement or
omission of pertinent facts in the
application or interview for the license;
(6) Any conduct which would be
deemed unfair or detrimental in
commercial transactions by accepted
standards;
(7) A reputation imputing to the
applicant criminal, dishonest, or
unethical conduct, or a record of that
conduct; or
(8) Any other relevant information
uncovered over the course of the
background investigation.
■
12. Revise § 111.17 to read as follows:
§ 111.17
Review of the denial of a license.
(a) By the appropriate Executive
Director, Office of Trade. Upon the
denial of an application for a license,
the applicant may file with the
appropriate Executive Director, Office of
Trade, in writing, additional
information or arguments in support of
the application and may request to
appear in person, by telephone, or by
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Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Rules and Regulations
other acceptable means of
communication. This filing and request
must be received by the appropriate
Executive Director, Office of Trade
within sixty (60) calendar days of the
denial.
(b) By the Executive Assistant
Commissioner. Upon the decision of the
appropriate Executive Director, Office of
Trade, affirming the denial of an
application for a license, the applicant
may file with the Executive Assistant
Commissioner, in writing, a request for
any additional review that the Executive
Assistant Commissioner, deems
appropriate. This request must be
received by the Executive Assistant
Commissioner within sixty (60)
calendar days of the affirmation by the
appropriate Executive Director, Office of
Trade, of the denial of the application
for a license.
(c) By the Court of International
Trade. Upon a decision of the Executive
Assistant Commissioner affirming the
denial of an application for a license,
the applicant may appeal the decision to
the Court of International Trade,
provided that the appeal action is
commenced within sixty (60) calendar
days after the decision date by the
Executive Assistant Commissioner.
§ 111.18
[Amended]
13. Amend § 111.18 by adding the
phrase ‘‘and addressing how
deficiencies have been remedied’’ after
the term ‘‘§ 111.12’’.
■
14. In § 111.19:
a. Revise the section heading;
b. Revise paragraphs (a) and (b);
c. Remove paragraph (d);
d. Redesignate paragraph (e) as
paragraph (d) and revise it;
■ e. Revise paragraph (f); and
■ f. Redesignate paragraph (g) as
paragraph (e) and revise it.
The revisions read as follows:
■
■
■
■
■
khammond on DSKJM1Z7X2PROD with RULES2
§ 111.19
National permit.
(a) General. A national permit is
required for the purpose of transacting
customs business throughout the
customs territory of the United States as
defined in § 101.1 of this chapter.
(b) Application for a national permit.
An applicant who obtains a passing
grade on the examination for an
individual broker’s license may apply
for a national permit. The applicant will
exercise responsible supervision and
control (as described in § 111.28) over
the activities conducted under that
national permit. The national permit
application may be submitted
concurrently with or after the
submission of an application for a
broker’s license. An applicant applying
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18:04 Oct 17, 2022
Jkt 259001
for a national permit on behalf of a
partnership, association, or corporation
must be a licensed broker employed by
the partnership, association, or
corporation. An application for a
national permit under this paragraph
must be submitted in the form of a letter
to the processing Center or to a CBPauthorized electronic data interchange
(EDI) system. The application must set
forth or attach the following:
(1) The applicant’s broker license
number and date of issuance if
available;
(2) If the applicant is applying for a
national permit on behalf of a
partnership, association, or corporation:
the name of the partnership, association,
or corporation and the title held by the
applicant within the partnership,
association, or corporation;
(3) If the applicant is applying for a
national permit on behalf of a
partnership, association, or corporation:
a copy of the documentation issued by
a State, or local government that
establishes the legal status and reserves
the business name of the partnership,
association, or corporation;
(4) The address, telephone number,
and email address of the office
designated by the applicant as the office
of record as defined in § 111.1. The
office will be noted in the national
permit when issued;
(5) The name, telephone number, and
email address of the point of contact
described in § 111.3(b) to be available to
CBP to respond to issues related to the
transaction of customs business;
(6) If the applicant is applying for a
national permit on behalf of a
partnership, association, or corporation:
the name, broker license number, office
address, telephone number, and email
address of each individual broker
employed by the partnership,
association, or corporation;
(7) A list of all employees together
with the specific employee information
prescribed in § 111.28 for each
employee;
(8) A supervision plan describing how
responsible supervision and control will
be exercised over the customs business
conducted under the national permit,
including compliance with § 111.28;
(9) The location where records will be
retained (see § 111.23);
(10) The name, telephone number,
and email address of the knowledgeable
employee responsible for broker-wide
records maintenance and financial
recordkeeping requirements (see
§ 111.21(d)); and
(11) A receipt or other evidence
showing that the fees specified in
§ 111.96(b) and (c) have been paid in
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Fmt 4701
Sfmt 4700
63315
accordance with paragraph (b) of this
section.
*
*
*
*
*
(d) Action on application; list of
permitted brokers. The processing
Center that receives the application will
review the application to determine
whether the applicant meets the
requirements of paragraphs (a) and (b) of
this section. If the processing Center is
of the opinion that the national permit
should not be issued, the processing
Center will submit written reasons for
that opinion to the appropriate
Executive Director, Office of Trade, CBP
Headquarters, for appropriate
instructions on whether to grant or deny
the national permit. The appropriate
Executive Director, Office of Trade, CBP
Headquarters, will notify the applicant
if his or her application is denied. CBP
will issue a national permit to an
applicant who meets the requirements
of paragraphs (a) and (b) of this section.
CBP will maintain and make available
to the public an alphabetical list of
permitted brokers.
(e) Review of the denial of a national
permit—(1) By the Executive Assistant
Commissioner. Upon the denial of an
application for a national permit under
this section, the applicant may file with
the Executive Assistant Commissioner,
in writing, additional information or
arguments in support of the application
and may request to appear in person, by
telephone, or by other acceptable means
of communication. This filing and
request must be received by the
Executive Assistant Commissioner
within sixty (60) calendar days of the
denial.
(2) By the Court of International
Trade. Upon a decision of the Executive
Assistant Commissioner affirming the
denial of an application for a national
permit under this section, the applicant
may appeal the decision to the Court of
International Trade, provided that the
appeal action is commenced within
sixty (60) calendar days after the
decision date by the Executive Assistant
Commissioner.
(f) Responsible supervision and
control. The individual broker who
qualifies for the national permit will
exercise responsible supervision and
control (as described in § 111.28) over
the activities conducted under that
national permit.
15. In § 111.21:
a. Redesignate paragraphs (b) and (c)
as paragraphs (c) and (d);
■ b. Add a new paragraph (b); and
■ c. Revise newly redesignated
paragraph (d).
The addition and revision read as
follows:
■
■
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§ 111.21
Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Rules and Regulations
Record of transactions.
*
*
*
*
*
(b) Each broker must provide
notification to the CBP Office of
Information Technology Security
Operations Center (CBP SOC) of any
known breach of electronic or physical
records relating to the broker’s customs
business. Notification must be
electronically provided (cbpsoc@
cbp.dhs.gov) within 72 hours of the
discovery of the breach, including any
known compromised importer
identification numbers (see 19 CFR
24.5). Within ten (10) business days of
the notification, a broker must
electronically provide an updated list of
any additional known compromised
importer identification numbers. To the
extent that additional information is
subsequently discovered, the broker
must electronically provide that
information within 72 hours of
discovery. Brokers may also call CBP
SOC at a telephone number posted on
CBP.gov with questions as to the
reporting of the breach, if any guidance
is needed.
*
*
*
*
*
(d) Each broker must designate a
knowledgeable employee as the party
responsible for brokerage-wide
recordkeeping requirements. Each
broker must maintain accurate and
current point of contact information in
a CBP-authorized electronic data
interchange (EDI) system. If a CBPauthorized EDI system is not available,
then the information must be provided
in writing to the processing Center.
■ 16. In § 111.23, revise paragraph (a) to
read as follows:
§ 111.23
Retention of records.
(a) Place of retention. A licensed
customs broker must maintain originals
of the records referred to in this part,
including any records stored in
electronic formats, within the customs
territory of the United States and in
accordance with the provisions of this
part and part 163 of this chapter.
*
*
*
*
*
■ 17. Revise § 111.24 to read as follows:
khammond on DSKJM1Z7X2PROD with RULES2
§ 111.24
Records confidential.
The records referred to in this part
and pertaining to the business of the
clients serviced by the broker are to be
considered confidential, and the broker
must not disclose their contents or any
information connected with the records
to any persons other than those clients,
their surety on a particular entry, and
representatives of the Department of
Homeland Security (DHS), or other duly
accredited officers or agents of the
United States, except on subpoena or
VerDate Sep<11>2014
18:04 Oct 17, 2022
Jkt 259001
court order by a court of competent
jurisdiction, or when authorized in
writing by the client. This
confidentiality provision does not apply
to information that properly is available
from a source open to the public.
■
18. Revise § 111.25 to read as follows:
§ 111.25
Records must be available.
(a) General. During the period of
retention, the broker must maintain the
records referred to in this part in such
a manner that they may readily be
examined. Records required to be
maintained under the provisions of this
part must be made available upon
reasonable notice for inspection,
copying, reproduction or other official
use by representatives of the
Department of Homeland Security
(DHS) within the prescribed period of
retention or within any longer period of
time during which they remain in the
possession of the broker.
(b) Examination request. Upon
request by DHS to examine records, the
designated recordkeeping contact (see
§ 111.21(d)), must make all records
available to DHS within thirty (30)
calendar days, or such longer time as
specified by DHS, at the location
specified by DHS.
(c) Recordkeeping requirements.
Records subject to the requirements of
part 163 of this chapter must be made
available to DHS in accordance with the
provisions of that part.
§ 111.27
[Amended]
19. Amend § 111.27 by removing the
phrase ‘‘the port director and other
proper officials of the Treasury
Department’’ and adding in its place the
phrase ‘‘DHS, or other duly accredited
officers or agents of the United States,’’.
■
20. In § 111.28:
a. Revise the section heading;
b. Revise paragraphs (a) and (b);
c. Redesignate paragraphs (c) and (d)
as paragraphs (d) and (e);
■ d. Add a new paragraph (c);
■ e. Amend newly redesignated
paragraph (d) by:
■ i. Removing the words ‘‘Assistant
Commissioner’’ and adding in their
place the words ‘‘appropriate Executive
Director, Office of Trade,’’; and
■ ii. Removing the phrase ‘‘director of
each port through which a permit has
been granted to the partnership,
association, or corporation’’ and adding
in its place the words ‘‘processing
Center’’; and
■ f. Revise newly redesignated
paragraph (e).
The addition and revisions read as
follows:
■
■
■
■
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§ 111.28
control.
Responsible supervision and
(a) General. Every individual broker
operating as a sole proprietor, every
licensed member of a partnership that is
a broker, and every licensed officer of an
association or corporation that is a
broker must exercise responsible
supervision and control (see § 111.1)
over the transaction of the customs
business of the sole proprietorship,
partnership, association, or corporation.
A sole proprietorship, partnership,
association, or corporation must employ
a sufficient number of licensed brokers
relative to the job complexity, similarity
of subordinate tasks, physical proximity
of subordinates, abilities and skills of
employees, and abilities and skills of
the managers. While the determination
of what is necessary to perform and
maintain responsible supervision and
control will vary depending upon the
circumstances in each instance, factors
which CBP may consider in its
discretion and to the extent any are
relevant include, but are not limited to,
the following:
(1) The training provided to broker
employees;
(2) The issuance of instructions and
guidelines to broker employees;
(3) The volume and type of business
conducted by the broker;
(4) The reject rate for the various
customs transactions relative to overall
volume;
(5) The level of access broker
employees have to current editions of
CBP regulations, the Harmonized Tariff
Schedule of the United States, and CBP
issuances;
(6) The availability of a sufficient
number of individually licensed brokers
for necessary consultation with
employees of the broker;
(7) The frequency of supervisory visits
of an individually licensed broker to
another office of the broker that does not
have an individually licensed broker;
(8) The frequency of audits and
reviews by an individually licensed
broker of the customs transactions
handled by employees of the broker;
(9) The extent to which the
individually licensed broker who
qualifies the permit is involved in the
operation of the brokerage and
communications between CBP and the
brokerage;
(10) Any circumstances which
indicate that an individually licensed
broker has a real interest in the
operations of a brokerage;
(11) The timeliness of processing
entries and payment of duty, tax, or
other debt or obligation owing to the
Government for which the broker is
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responsible, or for which the broker has
received payment from a client;
(12) Communications between CBP
and the broker, and the broker’s
responsiveness and action to
communications, direction, and notices
from CBP;
(13) Communications between the
broker and its officer(s) or member(s),
and the broker’s responsiveness and
action to communications and direction
from its officer(s) or member(s).
(b) Employee information—(1)
Current employees. Each national
permit holder must submit to the
processing Center a list of the names of
persons currently employed by the
broker. The list of employees must be
submitted prior to issuance of a national
permit under § 111.19 and before the
broker begins to transact customs
business. For each employee, the broker
must provide the name, social security
number, date and place of birth, date of
hire, and current home address. After
the initial submission, an updated list
must be submitted to a CBP-authorized
electronic data interchange (EDI) system
if any of the information required by
this paragraph changes. If a CBPauthorized EDI system is not available,
then the information must be provided
in writing to the processing Center. The
update must be submitted within thirty
(30) calendar days of the change.
(2) New employees. Within thirty (30)
calendar days of the start of
employment of a new employee(s), the
broker must submit a list of new
employee(s) with the information
required under paragraph (b)(1) of this
section to a CBP-authorized EDI system.
The broker may submit a list of the new
employee(s) or an updated list of all
employees, specifically noting the new
employee(s). If a CBP-authorized EDI
system is not available, then the
information must be provided in writing
to the processing Center.
(3) Terminated employees. Within
thirty (30) calendar days after the
termination of employment of an
employee, the broker must submit a list
of terminated employee(s) to a CBPauthorized EDI system. The broker may
submit a list of the terminated
employee(s) or an updated list of all
employees, specifically noting the
terminated employee(s). If a CBPauthorized EDI system is not available,
then the information must be provided
in writing to the processing Center.
(c) Broker’s responsibility.
Notwithstanding a broker’s
responsibility for providing the
information required in paragraph (b) of
this section, in the absence of
culpability by the broker, CBP will not
hold the broker responsible for the
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accuracy of any information that is
provided to the broker by the employee.
*
*
*
*
*
(e) Change in ownership. If the
ownership of a broker changes and
ownership shares in the broker are not
publicly traded, the broker must
immediately provide written notice of
that fact to the appropriate Executive
Director, Office of Trade, and must send
a copy of the written notice to the
processing Center. When a change in
ownership results in the addition of a
new principal to the organization, and
whether or not ownership shares in the
broker are publicly traded, CBP reserves
the right to conduct a background
investigation on the new principal. The
processing Center will notify the broker
if CBP objects to the new principal, and
the broker will be given a reasonable
period of time to remedy the situation.
If the background investigation
uncovers information which would
have been the basis for a denial of an
application for a broker’s license and
the principal’s interest in the broker is
not terminated to the satisfaction of the
processing Center, suspension or
revocation proceedings may be initiated
under subpart D of this part. For
purposes of this paragraph, a
‘‘principal’’ means any person having at
least a five (5) percent capital,
beneficiary or other direct or indirect
interest in the business of a broker.
■ 21. In § 111.30:
■ a. Paragraphs (a) and (b) are revised;
■ b. The first sentence of paragraph (c)
is revised;
■ c. Paragraph (d) is revised; and
■ d. The first sentence of paragraph (e)
introductory text is revised.
The revisions read as follows:
§ 111.30 Notification of change in address,
organization, name, or location of business
records; status report; termination of
brokerage business.
(a) Change of address. A broker is
responsible for providing CBP with the
broker’s current addresses, which
include the broker’s office of record
address as defined in § 111.1, an email
address, and, if the broker is not actively
engaged in transacting business as a
broker, the broker’s non-business
address. If a broker does not receive
mail at the broker’s office of record or
non-business address, the broker must
also provide CBP with a valid address
at which he or she receives mail. When
address information (the broker’s office
of record address, mailing address,
email address) changes, or the broker is
no longer actively engaged in
transacting business as a broker, he or
she must update his or her address
information within ten (10) calendar
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63317
days through a CBP-authorized
electronic data interchange (EDI)
system. If a CBP-authorized EDI system
is not available, then address updates
must be provided in writing within ten
(10) calendar days to the processing
Center.
(b) Change in organization. A
partnership, association, or corporation
broker must update within ten (10)
calendar days in writing to the
processing Center any of the following:
(1) The date on which a licensed
member or officer ceases to be the
qualifying member or officer for
purposes of § 111.11(b) or (c)(2), and the
name of the licensed member or officer
who will succeed as the license
qualifier;
(2) The date on which a licensed
employee ceases to be the national
permit qualifier for purposes of
§ 111.19(a), and the name of the
licensed employee who will succeed as
the national permit qualifier; and
(3) Any change in the Articles of
Agreement, Charter, Articles of
Association, or Articles of Incorporation
relating to the transaction of customs
business, or any other change in the
legal nature of the organization (for
example, conversion of a general
partnership to a limited partnership,
merger with another organization,
divestiture of a part of the organization,
or entry into bankruptcy protection).
(c) * * * A broker who changes his
or her name, or who proposes to operate
under a trade or fictitious name in one
or more States and is authorized by
State law to do so, must submit to the
appropriate Executive Director, Office of
Trade, at the Headquarters of U.S.
Customs and Border Protection,
evidence of his or her authority to use
that name. * * *
(d) Triennial status report—(1)
General. Each broker must file a
triennial status report with CBP on
February 1 of each third year after 1985.
The report must be filed through a CBPauthorized EDI system and will not be
considered received by CBP until
payment of the triennial status report
fee prescribed in § 111.96(d) is received.
If a CBP-authorized EDI system is not
available, the triennial status report
must be filed with the processing
Center. A report received during the
month of February will be considered
filed timely. No form or particular
format is required.
(2) Individual—(i) Each individual
broker must state in the report required
under paragraph (d)(1) of this section
whether he or she is actively engaged in
transacting business as a broker. If he or
she is so actively engaged, the broker
must also:
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(A) State the name under which, and
the address at which, the broker’s
business is conducted if he or she is a
sole proprietor, and an email address;
(B) State the name and address of his
or her employer if he or she is employed
by another broker, unless his or her
employer is a partnership, association or
corporation broker for which he or she
is a qualifying member or officer for
purposes of § 111.11(b) or (c)(2); and
(C) State whether or not he or she still
meets the applicable requirements of
§ 111.11 and § 111.19 and has not
engaged in any conduct that could
constitute grounds for suspension or
revocation under § 111.53.
(ii) An individual broker not actively
engaged in transacting business as a
broker must provide CBP with the
broker’s current mailing address and
email address, and state whether or not
he or she still meets the applicable
requirements of §§ 111.11 and 111.19
and has not engaged in any conduct that
could constitute grounds for suspension
or revocation under § 111.53.
(3) Partnership, association, or
corporation—(i) Each partnership,
association, or corporation broker must
state in the report required under
paragraph (d)(1) of this section the name
under which its business as a broker is
being transacted, the broker’s office of
record (see § 111.1), the name, address
and email address of each licensed
member of the partnership or licensed
officer of the association or corporation,
including the license qualifier under
§ 111.11(b) or (c)(2) and the name of the
licensed employee who is the national
permit qualifier under § 111.19(a), and
whether the partnership, association, or
corporation is actively engaged in
transacting business as a broker. The
report must be signed by a licensed
member or officer.
(ii) A partnership, association, or
corporation broker must state whether
or not the partnership, association, or
corporation broker still meets the
applicable requirements of §§ 111.11
and 111.19 and has not engaged in any
conduct that could constitute grounds
for suspension or revocation under
§ 111.53.
(4) Failure to file timely. If a broker
fails to file the report required under
paragraph (d)(1) of this section by
March 1 of the reporting year, the
broker’s license is suspended by
operation of law on that date. By March
31 of the reporting year, CBP will
transmit written notice of the
suspension to the broker by certified
mail, return receipt requested, at the
address reflected in CBP records. If the
broker files the required report and pays
the required fee within 60 calendar days
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of the date of the notice of suspension,
the license will be reinstated. If the
broker does not file the required report
and pay the required fee within that 60day period, the broker’s license is
revoked by operation of law without
prejudice to the filing of an application
for a new license. Notice of the
revocation will be published in the
Federal Register.
(e) * * * Upon permanent
termination of brokerage business,
written notification of the name,
address, email address and telephone
number of the party having legal
custody of the brokerage business
records must be provided to the
processing Center. * * *
*
*
*
*
*
22. Section 111.32 is revised to read
as follows:
■
§ 111.32
False information.
A broker must not file or procure or
assist in the filing of any claim, or of
any document, affidavit, or other
papers, known by such broker to be
false. In addition, a broker must not
give, or solicit or procure the giving of,
any information or testimony that the
broker knew or should have known was
false or misleading in any matter
pending before the Department of
Homeland Security or to any
representative of the Department of
Homeland Security. A broker also must
document and report to CBP when the
broker separates from or cancels
representation of a client as a result of
determining the client is intentionally
attempting to use the broker to defraud
the U.S. Government or commit any
criminal act against the U.S.
Government. The report to CBP must
include the client name, date of
separation or cancellation, and reason
for the separation or cancellation.
23. In § 111.36, revise paragraph (c)(3)
to read as follows:
■
§ 111.36 Relations with unlicensed
persons.
*
*
*
*
*
(c) * * *
(3) The broker must execute a customs
power of attorney directly with the
importer of record or drawback
claimant, and not via a freight forwarder
or other third party, to transact customs
business for that importer of record or
drawback claimant. No part of the
agreement of compensation between the
broker and the forwarder, nor any action
taken pursuant to the agreement, can
forbid or prevent direct communication
between the importer of record,
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drawback claimant, or other party in
interest and the broker; and
*
*
*
*
*
24. In § 111.39:
a. Paragraph (a) is revised;
b. Paragraphs (b) and (c) are
redesignated as paragraphs (c) and (d);
■ c. A new paragraph (b) is added; and
■ d. Newly redesignated paragraph (c) is
amended by:
■ i. Removing the word ‘‘paper’’ and
adding in its place the word ‘‘record’’;
and
■ ii. Adding a sentence to the end of the
paragraph.
The additions and revisions read as
follows:
■
■
■
§ 111.39
Advice to client.
(a) Withheld or false information. A
broker must not withhold information
from a client relative to any customs
business it conducts on behalf of a
client who is entitled to the information.
The broker must not knowingly impart
to a client false information relative to
any customs business.
(b) Due diligence. A broker must
exercise due diligence to ascertain the
correctness of any information which
the broker imparts to a client, including
advice to the client on the proper
payment of any duty, tax, or other debt
or obligation owing to the U.S.
Government.
(c) * * * The broker must advise the
client on the proper corrective actions
required and retain a record of the
broker’s communication with the client
in accordance with §§ 111.21 and
111.23.
*
*
*
*
*
§ 111.42
[Amended]
25. In § 111.42:
a. Paragraph (a)(1) is amended by
removing the word ‘‘Customs’’ and
adding in its place the word ‘‘customs’’;
and
■ b. Paragraph (a)(3) is amended by
adding the word ‘‘Executive’’ before the
word ‘‘Assistant’’ and adding the phrase
‘‘, or his or her designee,’’ after the
words ‘‘Assistant Commissioner’’.
■ 26. In § 111.45:
■ a. Paragraphs (a), (b), and (c) are
revised; and
■ b. In paragraph (d), remove the crossreference ‘‘or (b)’’ in the second
sentence.
The revisions read as follows:
■
■
§ 111.45
Revocation by operation of law.
(a) License and permit. If a broker that
is a partnership, association, or
corporation fails to have, during any
continuous period of 120 days, at least
one member of the partnership or at
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least one officer of the association or
corporation who holds a valid
individual broker’s license, that failure
will, in addition to any other sanction
that may be imposed under this part,
result in the revocation by operation of
law of the license and the national
permit issued to the partnership,
association, or corporation. If a broker
that is a partnership, association, or
corporation fails to employ, during any
continuous period of 180 days, a
licensed customs broker who is the
national permit qualifier for the broker,
that failure will, in addition to any other
sanction that may be imposed under
this part, result in the revocation by
operation of law of the national permit
issued to the partnership, association, or
corporation. CBP will notify the broker
in writing of an impending revocation
by operation of law under this section
thirty (30) calendar days before the
revocation is due to occur, if the broker
has provided advance notice to CBP of
the underlying events that could cause
a revocation by operation of law under
this section. If the license or permit of
a partnership, association, or
corporation is revoked by operation of
law, CBP will notify the organization of
the revocation.
(b) Annual broker permit fee. If a
broker fails to pay the annual permit
user fee pursuant to § 111.96(c), the
permit is revoked by operation of law.
The processing Center will notify the
broker in writing of the failure to pay
and the revocation of the permit.
(c) Publication. Notice of any
revocation under this section will be
published in the Federal Register.
*
*
*
*
*
■ 27. In § 111.51:
■ a. Paragraph (a) is revised;
■ b. Paragraph (b) is amended by:
■ i. Removing the words ‘‘Assistant
Commissioner’’ and adding in their
place the words ‘‘appropriate Executive
Director, Office of Trade,’’; and
■ ii. Removing the word ‘‘Secretary’’
and adding in its place the words
‘‘Executive Assistant Commissioner’’.
The revision reads as follows:
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§ 111.51
Cancellation of license or permit.
(a) Without prejudice. The appropriate
Executive Director, Office of Trade, may
cancel a broker’s license or permit
‘‘without prejudice’’ upon written
application by the broker if the
appropriate Executive Director, Office of
Trade, determines that the application
for cancellation was not made in order
to avoid proceedings for the suspension
or revocation of the license or permit. If
the appropriate Executive Director,
Office of Trade, determines that the
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63319
application for cancellation was made
in order to avoid those proceedings, he
or she may cancel the license or permit
‘‘without prejudice’’ only with
authorization from the Executive
Assistant Commissioner.
*
*
*
*
*
final determination together with a
proposed statement of charges when
recommending that charges be
preferred.
■ 32. Revise § 111.57 to read as follows:
§ 111.52
The appropriate Executive Director,
Office of Trade, will make a
determination on whether or not
charges should be preferred, and will
notify the processing Center of the
decision.
[Amended]
28. Amend § 111.52 by removing the
words ‘‘Assistant Commissioner’’ and
adding in their place the words
‘‘appropriate Executive Director, Office
of Trade,’’.
■ 29. In § 111.53:
■ a. Remove the word ‘‘Customs’’
wherever it appears and add in its place
the term ‘‘CBP’’;
■ b. Amend paragraph (e) by removing
the words ‘‘Assistant Commissioner’’
and adding in their place the words
‘‘appropriate Executive Director, Office
of Trade,’’;
■ c. Amend paragraph (f) by removing
the word ‘‘or’’ following the semicolon;
■ d. Redesignate paragraph (g) as
paragraph (h); and
■ e. Add a new paragraph (g).
The addition reads as follows:
■
§ 111.53 Grounds for suspension or
revocation of license or permit.
*
*
*
*
*
(g) The broker has been convicted of
committing or conspiring to commit an
act of terrorism as described in section
2332b of title 18, United States Code; or
*
*
*
*
*
■ 30. Revise § 111.55 to read as follows:
§ 111.55
Investigation of complaints.
Every complaint or charge against a
broker which may be the basis for
disciplinary action may be forwarded
for investigation to the appropriate
investigative authority within the
Department of Homeland Security. The
investigative authority will submit a
final report on the investigation of
complaints to the processing Center and
send a copy of the report to the
appropriate Executive Director, Office of
Trade.
■ 31. Revise § 111.56 to read as follows:
§ 111.56 Review of report on the
investigation of complaints.
The processing Center will review the
report on the investigation of
complaints, or if there is no report on
the investigation of complaints, other
documentary evidence, to determine if
there is sufficient basis to recommend
that charges be preferred against the
broker. The processing Center will then
submit the recommendation with
supporting reasons to the appropriate
Executive Director, Office of Trade, for
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§ 111.57 Determination by appropriate
Executive Director, Office of Trade.
§ 111.59
[Amended]
33. In § 111.59, paragraph (a) and
paragrapb (b) introductory text are
amended by removing the words ‘‘port
director’’ and adding in their place the
words ‘‘processing Center’’.
■
§ 111.60
[Amended]
34. In § 111.60, remove the words
‘‘port director’’ in the last sentence and
add in their place the words ‘‘processing
Center’’.
■ 35. Revise § 111.61 to read as follows:
■
§ 111.61 Decision on preliminary
proceedings.
The processing Center will prepare a
summary of any oral presentations made
by the broker or the broker’s attorney
and forward it to the appropriate
Executive Director, Office of Trade,
together with a copy of each paper filed
by the broker. The processing Center
will also give to the appropriate
Executive Director, Office of Trade, a
recommendation on action to be taken
as a result of the preliminary
proceedings. If the appropriate
Executive Director, Office of Trade,
determines that the broker has
satisfactorily responded to the proposed
charges and that further proceedings are
not warranted, he or she will so inform
the processing Center, who will notify
the broker. If no response is filed by the
broker or if the appropriate Executive
Director, Office of Trade, determines
that the broker has not satisfactorily
responded to all of the proposed
charges, he or she will advise the
processing Center of that fact and
instruct the processing Center to
prepare, sign, and serve a notice of
charges and the statement of charges. If
one or more of the charges in the
proposed statement of charges was
satisfactorily answered by the broker in
the preliminary proceedings, the
appropriate Executive Director, Office of
Trade, will instruct the processing
Center to omit those charges from the
statement of charges.
■ 36. In § 111.62:
■ a. Revise paragraph (d); and
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■
b. Amend paragraph (e) by:
i. Removing the phrase ‘‘, in
duplicate’’; and
■ ii. Removing the words ‘‘port
director’’ and adding in their place the
words ‘‘processing Center’’.
The revision reads as follows:
§ 111.70
■
■
§ 111.62
■
Contents of notice of charges.
*
*
*
*
*
(d) The broker will be notified of the
time and place of a hearing on the
charges; and
*
*
*
*
*
■ 37. In § 111.63:
■ a. Remove the words ‘‘port director’’
wherever they appear and add in their
place the words ‘‘processing Center’’;
and
■ b. Revise paragraphs (a)(2) and (c).
The revisions read as follows:
§ 111.63 Service of notice and statement
of charges.
*
*
*
*
*
(a) * * *
(2) By certified mail, return receipt
requested, addressed to the broker’s
office of record (or other address as
provided pursuant to § 111.30).
*
*
*
*
*
(c) Certified mail; evidence of service.
When service under this section is by
certified mail to the broker’s office of
record (or other address as provided
pursuant to § 111.30), the receipt of the
return card signed or marked will be
satisfactory evidence of service.
§ 111.64
[Amended]
38. In § 111.64, paragraph (a) is
amended by removing the words ‘‘port
director’’ and adding in their place the
words ‘‘processing Center’’.
■
§ 111.66
[Amended]
39. Section 111.66 is amended by
removing the words ‘‘Secretary of
Homeland Security, or his designee,’’
and adding in their place the words
‘‘Executive Assistant Commissioner’’.
■
§ 111.67
[Amended]
40. In § 111.67:
■ a. Paragraph (d) is amended by
removing the words ‘‘port director’’
wherever they appear and adding in
their place the words ‘‘processing
Center’’; and
■ b. Paragraph (e) is removed.
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■
§ 111.69
[Amended]
41. Section 111.69 is amended by
removing the words ‘‘Secretary of
Homeland Security, or his designee’’
and adding in their place the words
‘‘Executive Assistant Commissioner’’.
■
VerDate Sep<11>2014
18:04 Oct 17, 2022
Jkt 259001
[Amended]
42. Section 111.70 is amended by
removing the words ‘‘Secretary of
Homeland Security, or his designee’’
and adding in their place the words
‘‘Executive Assistant Commissioner’’.
§ 111.71
[Amended]
43. Section 111.71 is amended by
removing the words ‘‘Secretary of
Homeland Security, or his designee’’
and adding in their place the words
‘‘Executive Assistant Commissioner’’.
■ 44. Revise § 111.72 to read as follows:
§ 111.72 Dismissal subject to new
proceedings.
If the Executive Assistant
Commissioner finds that the evidence
produced at the hearing indicates that a
proper disposition of the case cannot be
made on the basis of the charges
preferred, he or she may instruct the
processing Center to serve appropriate
charges as a basis for new proceedings
to be conducted in accordance with the
procedures set forth in this subpart.
■ 45. Revise § 111.74 to read as follows:
§ 111.74 Decision and notice of
suspension or revocation or monetary
penalty.
If the Executive Assistant
Commissioner finds that one or more of
the charges in the statement of charges
is not sufficiently proved, the
suspension, revocation, or monetary
penalty action may be based on any
remaining charges if the facts alleged in
the charges are established by the
evidence. If the Executive Assistant
Commissioner in the exercise of
discretion and based solely on the
record, issues an order suspending a
broker’s license or permit for a specified
period of time or revoking a broker’s
license or permit or, except in a case
described in § 111.53(b)(3), assessing a
monetary penalty in lieu of suspension
or revocation, the appropriate Executive
Director, Office of Trade, will promptly
provide written notification of the order
to the broker and, unless an appeal from
the order of the Executive Assistant
Commissioner is filed by the broker (see
§ 111.75), the appropriate Executive
Director, Office of Trade, will publish a
notice of the suspension or revocation,
or the assessment of a monetary penalty,
in the Federal Register. If no appeal
from the order of the Executive
Assistant Commissioner is filed, an
order of suspension or revocation or
assessment of a monetary penalty will
become effective sixty (60) calendar
days after issuance of written
notification of the order unless the
Executive Assistant Commissioner finds
that a more immediate effective date is
PO 00000
Frm 00060
Fmt 4701
Sfmt 4700
in the national or public interest. If a
monetary penalty is assessed and no
appeal from the order of the Executive
Assistant Commissioner is filed,
payment of the penalty must be
tendered within sixty (60) calendar days
after the effective date of the order, and,
if payment is not tendered within that
sixty (60)-day period, the license or
permit of the broker will immediately be
suspended until payment is made.
§ 111.75
[Amended]
46. In § 111.75:
a. In the section heading, remove the
word ‘‘Secretary’s’’ and add in its place
the words ‘‘Executive Assistant
Commissioner’s’’;
■ b. Remove the words ‘‘Secretary of
Homeland Security, or his designee’’
and add in their place the words
‘‘Executive Assistant Commissioner’’;
and
■ c. Remove the word ‘‘Secretary’s’’ and
add in its place the words ‘‘Executive
Assistant Commissioner’s’’.
■ 47. In § 111.76:
■ a. In paragraph (a), remove the word
‘‘written’’ and the words ‘‘in duplicate’’
in the first sentence and remove the
words ‘‘Assistant Commissioner’’ and
add in their place the words
‘‘appropriate Executive Director, Office
of Trade,’’; and
■ b. Revise paragraph (b).
The revision reads as follows:
■
■
§ 111.76
Reopening the case.
*
*
*
*
*
(b) Procedure. The appropriate
Executive Director, Office of Trade, will
forward the application, together with a
recommendation for action thereon, to
the Executive Assistant Commissioner.
The Executive Assistant Commissioner
may grant or deny the application to
reopen the case and may order the
taking of additional testimony before the
appropriate Executive Director, Office of
Trade. The appropriate Executive
Director, Office of Trade, will notify the
applicant of the decision by the
Executive Assistant Commissioner. If
the Executive Assistant Commissioner
grants the application and orders a
hearing, the appropriate Executive
Director, Office of Trade, will set a time
and place for the hearing and give due
written notice of the hearing to the
applicant. The procedures governing the
new hearing and recommended decision
of the hearing officer will be the same
as those governing the original
proceeding. The original order of the
Executive Assistant Commissioner will
remain in effect pending conclusion of
the new proceedings and issuance of a
new order under § 111.77.
■ 48. Revise § 111.77 to read as follows:
E:\FR\FM\18OCR2.SGM
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Federal Register / Vol. 87, No. 200 / Tuesday, October 18, 2022 / Rules and Regulations
§ 111.77
order.
Notice of vacated or modified
If, pursuant to § 111.76 or for any
other reason, the Executive Assistant
Commissioner issues an order vacating
or modifying an earlier order under
§ 111.74 suspending or revoking a
broker’s license or permit, or assessing
a monetary penalty, the appropriate
Executive Director, Office of Trade, will
notify the broker in writing and will
publish a notice of the new order in the
Federal Register.
§ 111.78
[Amended]
49. Section 111.78 is amended by
removing the words ‘‘port director’’ and
adding in their place the words
‘‘processing Center’’.
■
§ 111.79
50. Section 111.79 is amended by
removing the words ‘‘Assistant
Commissioner’’ and adding in their
place the words ‘‘appropriate Executive
Director, Office of Trade,’’ wherever
they appear.
■ 51. Revise § 111.81 to read as follows:
Settlement and compromise.
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The Executive Assistant
Commissioner may settle and
compromise any disciplinary
proceeding which has been instituted
under this subpart according to the
terms and conditions agreed to by the
parties including, but not limited to, the
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§ 111.91
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[Amended]
52. In § 111.91:
a. The introductory text is amended
by removing the word ‘‘Customs’’ and
adding in its place the term ‘‘CBP’’; and
■ b. Paragraph (a) is amended by
removing the phrase ‘‘§§ 111.53(a)
through (f)’’ and adding in its place the
phrase ‘‘§ 111.53(a) through (g)’’.
■
■
§ 111.92
[Amended]
53. In § 111.92, amend paragraph (a)
by removing the word ‘‘Customs’’ and
adding in its place the term ‘‘CBP’’.
■
§ 111.94
[Amended]
■
§ 111.81
assessment of a monetary penalty in lieu
of any proposed suspension or
revocation of a broker’s license or
permit.
[Amended]
54. Section 111.94 is amended by
removing the word ‘‘Customs’’ wherever
it appears and adding in its place the
term ‘‘CBP’’.
■ 55. In § 111.96, revise paragraphs (a),
(b), and (d) to read as follows:
■
§ 111.96
Fees.
(a) License fee; examination fee;
fingerprint fee. Each applicant for a
broker’s license pursuant to § 111.12
must pay a fee of $300 for an individual
license application and $500 for a
partnership, association, or corporation
license application to defray the costs to
CBP in processing the application. Each
individual who intends to take the
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Sfmt 9990
63321
examination provided for in § 111.13
must pay a $390 examination fee before
taking the examination. An individual
who submits an application for a license
must also pay a fingerprint processing
fee; the processing Center will inform
the applicant of the current Federal
Bureau of Investigation fee for
conducting fingerprint checks, which
must be paid to CBP before further
processing of the application will occur.
(b) Permit application fee. An
application fee of $100 must be paid in
connection with a national permit
issued under § 111.19 to defray the
processing costs, including costs
associated with an application for
reinstatement of a permit that was
revoked by operation of law or
otherwise.
*
*
*
*
*
(d) Triennial status report fee. A fee
of $100 is required to defray the costs
of administering the triennial status
reporting requirement prescribed in
§ 111.30(d)(1).
*
*
*
*
*
Helen Mary B. McGovern,
Assistant Secretary for Trade and Economic
Security, Department of Homeland Security.
Thomas C. West, Jr.,
Deputy Assistant Secretary of the Treasury
for Tax Policy.
[FR Doc. 2022–22445 Filed 10–17–22; 8:45 am]
BILLING CODE 9111–14–P
E:\FR\FM\18OCR2.SGM
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Agencies
[Federal Register Volume 87, Number 200 (Tuesday, October 18, 2022)]
[Rules and Regulations]
[Pages 63267-63321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22445]
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DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
DEPARTMENT OF THE TREASURY
19 CFR Parts 24 and 111
[USCBP-2020-0009;CBP Dec. 22-21]
RIN 1651-AB16
Modernization of the Customs Broker Regulations
AGENCY: U.S. Customs and Border Protection, Department of Homeland
Security, Department of the Treasury.
ACTION: Final rule.
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SUMMARY: This document adopts as final, with changes, proposed
amendments to the U.S. Customs and Border Protection (CBP) regulations
modernizing the customs broker regulations. CBP is transitioning all
customs brokers to a single national permit and expanding the scope of
the national permit authority to allow national permit holders to
conduct any type of customs business throughout the customs territory
of the United States. To accomplish this, CBP is eliminating broker
districts and district permits, which in turn removes the need for the
maintenance of district offices, and district permit waivers. CBP is
also updating, among other changes, the responsible supervision and
control oversight framework, ensuring that customs business is
conducted within the United States, and requiring that a customs broker
have direct communication with an importer. These changes are designed
to enable customs brokers to meet the challenges of the modern
operating environment while maintaining a high level of service in
customs business. Further, CBP is increasing fees for the broker
license application to recover some of the costs associated with the
review of customs
[[Page 63268]]
broker license applications and the necessary vetting of individuals
and business entities (i.e., partnerships, associations, and
corporations). Additionally, CBP is announcing the deployment of a new
online system, the eCBP Portal, for processing broker submissions and
electronic payments. Lastly, CBP is publishing a concurrent final rule
document to eliminate all references to customs broker district permit
user fees (see ``Elimination of Customs Broker District Permit Fee''
RIN 1515-AE43) to align with the changes made in this final rule
document.
DATES: This final rule is effective December 19, 2022.
FOR FURTHER INFORMATION CONTACT: Melba Hubbard, Chief, Broker
Management Branch, (202) 325-6986, [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Discussion of Comments
Subpart A. General Provisions
Subpart B. Procedure to Obtain License or Permit
Subpart C. Duties and Responsibilities of Customs Brokers
Subpart D. Cancellation, Suspension, or Revocation of License or
Permit, and Monetary Penalty in Lieu of Suspension or Revocation
Subpart E. Monetary Penalty and Payment of Fees
III. Other Changes
IV. The Benefits of CBP's New Payment and Submission System, the
eCBP Portal, for Licensed Customs Brokers
V. Conclusion
VI. Statutory and Regulatory Requirements
A. Executive Orders 13563 and 12866
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
VII. Signing Authority
List of Subjects
Regulatory Amendments
I. Background
The Role of Licensed Customs Brokers in Conducting Customs Business
Section 641 of the Tariff Act of 1930, as amended (19 U.S.C. 1641),
provides that individuals and business entities must hold a valid
customs broker's license and permit to transact customs business on
behalf of others. The statute also sets forth standards for the
issuance of broker licenses and permits; provides for disciplinary
action against brokers in the form of suspension or revocation of such
licenses and permits, or assessment of monetary penalties; and,
provides for the assessment of monetary penalties against other persons
for conducting customs business without the required broker's license.
Section 641 authorizes the Secretary of the Treasury to prescribe rules
and regulations relating to the customs business of brokers as may be
necessary to protect importers and the revenue of the United States and
to carry out the provisions of section 641.\1\
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\1\ The Homeland Security Act of 2002 generally transferred the
functions of the U.S. Customs Service from the Department of the
Treasury to the Secretary of the Department of Homeland Security
(DHS). See Public Law 107-296, 116 Stat. 2142. The Act provides that
the Secretary of the Treasury retains the customs revenue functions
unless delegated to the Secretary of DHS. The regulation of customs
brokers is encompassed within the customs revenue functions set
forth in section 412 of the Homeland Security Act. On May 15, 2003,
the Secretary of the Treasury delegated authority related to the
customs revenue functions to the Secretary of DHS subject to certain
exceptions. See Treasury Order No. 100-16 (Appendix to 19 CFR part
0). Because the authority to prescribe the rules and regulations
related to customs brokers is not listed as one of the exceptions,
this authority now resides with the Secretary of DHS. However, the
regulation of user fees is encompassed within the customs revenue
functions set forth in section 412 of the Act. See Appendix to 19
CFR part 0.
---------------------------------------------------------------------------
The regulations issued under the authority of section 641 are set
forth in part 111 of title 19 of the Code of Federal Regulations (19
CFR part 111) and provide for, among other things, the rules for
license and permit requirements; recordkeeping and other duties and
responsibilities of brokers; the grounds and procedures for the
cancellation, suspension or revocation of broker licenses and permits,
and monetary penalties in lieu of suspension or revocation; and, rules
pertaining to the imposition of a monetary penalty, and fee payment
requirements applicable to brokers under section 641 and 19 U.S.C.
58c(a)(7).
Customs brokers are private individuals and/or business entities
(partnerships, associations, or corporations) that are licensed and
regulated by U.S. Customs and Border Protection (CBP) to assist
importers in conducting customs business. Customs brokers have an
enormous responsibility to their clients and to CBP, which requires
them to properly prepare importation documents, file these documents
timely and accurately, classify and value goods properly, pay duties,
taxes, and fees, safeguard their clients' information, and protect
their licenses from misuse.
The existing customs broker regulations are based on the district
system. A district is the geographic area covered by a customs broker
permit other than a national permit. Customs brokers are currently
required to maintain a physical presence within a district so that the
broker is physically close to the ports of entry within the district in
order to file any paperwork associated with an entry, entry summary, or
post-summary activity. Entry, entry summary, and certain post-summary
activities are customs business activities for which a district permit
is required. See 19 CFR 111.1; 111.2(b)(1). As a rule, all merchandise
imported into the United States is required to be entered, unless
specifically excepted. The act of entering merchandise consists of the
filing of paper or electronic data with CBP containing sufficient
information to enable CBP to determine whether imported merchandise may
be released from CBP custody. See 19 CFR 141.0a(a). Additionally, entry
summary refers to documentation that enables CBP to assess duties,
collect statistics on imported merchandise, and determine whether other
requirements of law or regulation are met. See 19 CFR 141.0a(b).
Pursuant to the existing regulations, customs business includes certain
post-summary activities such as the refund, rebate, or drawback of
duties, taxes, or other charges.
The Impact of the Centers of Excellence and Expertise and the Automated
Commercial Environment on Licensed Customs Brokers
Two major developments, the establishment of the Centers of
Excellence and Expertise (Centers) and the creation of the Automated
Commercial Environment (ACE), have fundamentally changed the
traditional ways that customs brokers and CBP interact. After a four-
year transition of operational trade functions from ports of entry and
port directors to Centers and Center directors, CBP published an
interim final rule in the Federal Register (81 FR 92978), which
codified the role of the Centers as strategic locations around the
country to focus CBP's trade expertise on industry-specific issues and
provide tailored support for importers. This permanent shift to Centers
was made in order to facilitate trade, reduce transaction costs,
increase compliance with applicable import laws, and achieve uniformity
of treatment at the ports of entry for the identified industries. The
interim final rule transferred to the Centers and Center directors a
variety of post-release trade functions that were handled by port
directors, including decisions and processing related to entry
summaries; decisions and processing related to all types of protests;
suspension and extension of liquidations; decisions and processing
concerning free trade agreements and duty preference programs;
decisions concerning warehouse withdrawals wherein the goods are
entered into the commerce of
[[Page 63269]]
the United States; all functions and decisions concerning country of
origin marking issues; functions concerning informal entries; and,
classification and appraisement of merchandise. With the transfer of
trade functions to the Centers, a significant portion of these
activities, including entry summary and post-summary, are now handled
directly by the Centers. The Center structure is based on subject
matter expertise, as opposed to geographic location, placing the
Centers outside of the district system. Consequently, the existing
broker regulations based on the district system do not fully reflect
how trade functions are currently being processed by CBP.
The other relevant major development was the creation of ACE. In an
effort to modernize the business processes essential to securing U.S.
borders, facilitating the flow of legitimate shipments, and targeting
illicit goods pursuant to the Customs Modernization Act (Mod Act)
(passed as part of the North American Free Trade Agreement
Implementation Act (NAFTA), Pub. L. 103-182 Sec. 623 (1993)), and the
Security and Accountability for Every (SAFE) Port Act of 2006 (Pub. L.
109-347, 120 Stat. 1884), CBP developed ACE to ultimately replace the
Automated Commercial System (ACS) as the CBP-authorized electronic data
interchange (EDI) system.\2\
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\2\ Pursuant to 19 CFR 143.32(b), an authorized EDI is defined
as any established mechanism approved by the Commissioner of CBP
through which information can be transferred electronically. In
addition to ACE, which is the system through which the trade
community reports imports and exports, and the government determines
admissibility, the ACE Secure Data Portal (ACE Portal), the
electronic Customs and Border Protection (eCBP) portal and the
Automated Broker Interface (ABI) are examples of such authorized
EDIs. The ACE Portal is a web-based entry point for ACE to connect
CBP, trade representatives and government agencies who are involved
in importing goods into the United States. The eCBP portal,
developed as part of CBP's Revenue Modernization (Rev Mod) program,
is currently the access point for a new system for electronic
payments of licensed customs broker fees. When fully implemented,
the eCBP portal will allow for easy collection of many types of
duties, taxes, and fees. Lastly, ABI is a functionality that allows
entry filers to transmit immediate delivery, entry and entry summary
data electronically to, and receive electronic messaging from, CBP
and receive transmissions from ACE or any other CBP-authorized EDI
system. See 19 CFR 143.32(a). It is a voluntary program available to
brokers, importers, carriers, port authorities and independent
service centers. For additional information regarding the
transmission of entry summary and cargo release data via an EDI, see
the CBP and Trade Automated Interface Requirements (CATAIR),
specifically the chapter entitled Entry Summary Create/Update, which
is available online at https://www.cbp.gov/document/technical-documentation/entry-summary-createupdate-catair and the chapter
entitled Cargo Release, which is available online at https://www.cbp.gov/document/guidance/ace-catair-cargo-release-chapter.
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On October 13, 2015, CBP published an interim final rule in the
Federal Register (80 FR 61278) that designated ACE as a CBP-authorized
EDI system, effective November 1, 2015. ACE now offers the operational
capabilities necessary to enable users to transmit a harmonized set of
import data elements, via a ``single window,'' to obtain the release
and clearance of goods. As a result, the International Trade Data
System (ITDS) eliminates redundant reporting requirements and
facilitates the transition from paper-based reporting and other
procedures to faster and more cost-effective electronic submissions to,
and communication among, government agencies. These electronic
capabilities that allow brokers to file entry information in ACE reduce
the need for brokers to be physically close to the ports of entry, as
required under the district permit regulations.
The Availability of a Remote Option for the Customs Broker License
Examination
On April 21, 2021, the bi-annual customs broker license exam was
administered at over 120 testing locations, and for the first time, via
remote proctor delivery. CBP provided information regarding system
requirements for the remote testing option, testing room requirements,
and other general exam information on its website for prospective exam
applicants.\3\ CBP continues to offer a remotely proctored exam if the
exam provider is equipped to administer such type of testing. CBP does
want to emphasize, however, that the availability of a remote
examination is at CBP's sole discretion. If a remote exam is available,
applicants who prefer to take the exam in a remote setting for
convenience or to avoid travel may select the remote option at the time
of registration for the exam. However, a remote examination cannot be
requested, a spot might not be assured due to limited capacity, and the
lack of availability of a remote exam cannot be appealed. CBP will
notify prospective applicants of whether the remote option is available
at the time the exam is announced on CBP's website.
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\3\ Information regarding the customs broker license exam,
especially the remotely-proctored exam, may be found online at
https://www.cbp.gov/trade/programs-administration/customs-brokers/license-examination-notice-examination.
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Proposed Rulemaking To Modernize the Customs Broker Regulations
On June 5, 2020, CBP published a notice of proposed rulemaking
(NPRM) in the Federal Register (85 FR 34836) proposing to modernize the
customs broker regulations in part 111 of the CFR to align with the
development of CBP trade initiatives, including ACE and the Centers,
and reflect the changes to a more automated commercial environment for
both customs brokers and importers. Specifically, CBP proposed to
eliminate broker districts and district permits, and transition all
brokers who hold only a district permit to a national permit. Further,
CBP proposed to expand the scope of the national permit authority to
allow all national permit holders to conduct business throughout the
customs territory of the United States. In addition, CBP proposed to
increase the license application fee in order to recover some of CBP's
costs for reviewing license applications and vetting applicants. The
NPRM provided for a 60-day comment period, which ended on August 4,
2020. Concurrently, CBP published an NPRM in the Federal Register (85
FR 34549) proposing the elimination of customs broker district permit
user fees to conform with the proposed elimination of broker districts
and district permits. CBP received no comments to the latter NPRM.
II. Discussion of Comments
CBP received 55 documents in response to the publication of the
part 111 NPRM, two of which were duplicate submissions, and one of
which was a two-part submission by one commenter discussing the same
issue. In effect, 52 different documents were received. Commenters
raised some concerns about the proposed changes and recommended changes
for improvement, but overall expressed support of CBP's effort to
modernize customs broker regulations, and welcomed the changes being
made to reflect the reality of a rapidly changing world of
international trade for both brokers and CBP. Commenters expressed
appreciation for CBP's recognizing the broker community's needs to have
clarity as to their duties and minimal regulatory burdens to target the
essential needs to protect the revenue and enforce the relevant laws.
The commenters further acknowledged CBP's efforts in providing the
least bureaucratic framework over the years and collaborating with the
broker community, including the latest effort in modernizing some of
the outdated reporting requirements. For instance, one commenter
welcomed the addition of specific language to cover convictions of
committing or conspiring to commit an act of terrorism in Sec. 111.53
as a ground for suspension or revocation of a license or permit.
Commenters also supported the proposed removal of the
[[Page 63270]]
requirement to submit an answer in duplicate to the charges against the
broker in Sec. 111.62(e) as this change aligns with the current
electronic business environment.
CBP recognizes a licensed broker's vital role in the international
trade environment and in interactions with clients and CBP. A broker is
tasked with the responsibility to exercise the highest level of
accuracy and knowledge when filing entries, navigate the complex nature
of international trade, ensure that the clients' needs are met timely
and accurately, and facilitate the movement of legitimate cargo.
Brokers need to be knowledgeable about the governing rules and
regulations as well as any changes, maintain a good relationship with
clients, and provide a high-quality service to their clients. CBP
determined that it was important to modernize customs broker
regulations and clarify existing regulations since the creation of
Centers and the increasingly automated environment have changed the way
customs business is conducted. Due to those changes, a broker may need
to make contact with CBP personnel in parts of the customs territory
that are not within the broker's district. The elimination of district
permits and expansion of the scope of activities allowed under a
national permit will provide brokers with the flexibility to easily
conduct customs business anywhere within the customs territory of the
United States. In addition, the elimination of district permits also
eliminates the burden on brokers of maintaining permits for multiple
districts or appointing subagents in districts in which they do not
have permits. This change also provides cost savings for CBP when it
comes to the processing of license and permit applications.
The changes made to the broker regulations will increase efficiency
and flexibility as submission requirements are updated, additional
electronic submission options are provided, and electronic
communication options for certain submissions are added. This update of
the regulations will further increase a broker's professionalism due to
the addition of grounds to justify the denial of license in Sec.
111.16, the addition of required information or arguments in support of
an application during review of the denial of the application in Sec.
111.19, and a new reporting requirement in Sec. 111.30 for inactive
brokers.
The submissions received in response to the NPRM contained comments
on multiple topics regarding the proposed regulations. The public
comments, together with CBP's analysis, were grouped by topic within a
subpart of part 111, and are set forth below:
Subpart A. General Provisions.
Comment: CBP proposed adding a new term ``Designated Center'' for
the submission of applications for a broker's license by an individual,
partnership, association, or corporation. Several commenters expressed
concern with the use of this term as the structure of Centers is not
necessarily conducive to broker management, nor were the Centers
designed to include brokers filing entries on a broad range of
commodities. The commenters requested that CBP maintain a dedicated
Broker Management Division or unit with offices reporting to CBP
Headquarters, including full-time, dedicated personnel on a national
level, with each broker assigned to one team or office for management
purposes (as suggested by Commercial Customs Operations Advisory
Committee (COAC) recommendation No. 10048 (April 27, 2016)). The
commenters reasoned that this approach would ensure a uniform and
efficient process for both CBP and brokers, and thus proposed to change
the term ``Designated Center'' to ``Designated Broker Management
Office'' to better reflect the structure that is more suitable for
broker matters. Ideally, according to some commenters, CBP would create
a new Center for broker licensing and management issues only or expand
the broker management division in CBP's Office of Trade.
Response: CBP appreciates the opportunity to clarify that brokers
will not be assigned to a specific Center, and CBP will not create a
Center solely for broker licensing and management issues. Brokers
operate within a unique business model as their clientele have
different Center interests, thus, an assignment to one specific Center
would not be beneficial to brokers' business filings concerning
different commodities. In addition, to prevent any disruption of
dealings with brokers in case of personnel changes or workload
distributions within Centers, CBP does not see a benefit to assigning a
broker to a particular Center. Broker management officers (BMOs), who
are Center personnel at 41 port locations throughout the U.S. customs
territory, will handle the administration of all activities conducted
under a broker's license and permit. Prior to the creation of Centers,
these BMOs were assigned to a port and managed broker applications and
other submissions. With the transition of certain trade functions from
ports to Centers, the assignment of BMOs transitioned as well. Thus,
Center personnel will process new applications for licenses and permits
and will also manage submissions provided by already-licensed brokers.
A current broker will continue to contact the BMO at a location where
the broker's license was issued. After the effective date of this final
rule, a BMO will also process any matters relating to a national permit
of a broker at that same location. A district permit holder whose
permit is transitioned to a national permit will continue to contact
the BMO at the location where the broker's license was issued. Any new
applicant for a permit or license should contact a BMO in the
geographic area where the applicant is located and/or intends to do
customs business. CBP has published a chart with all of the locations
and contact information for BMOs on its website.\4\
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\4\ The BMO contact information for the 41 port locations may be
found online at https://www.cbp.gov/trade/programs-administration/customs-brokers by clicking on the tab titled ``Broker Management
Officer (BMO) Contact Information''.
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In order to better describe CBP's responsibilities for broker
licensing and management issues, CBP changed the proposed term
``Designated Center'' to ``Processing Center'' in this final rule. A
``Processing Center'' means the broker management operations of a
Center that processes applications for a license under Sec. 111.12(a)
and applications for a national permit under Sec. 111.19(b) for an
individual, partnership, association, or corporation, as well as
submissions required in part 111 by already-licensed brokers.\5\ The
revision of the proposed language clarifies that brokers are not
assigned to a specific Center, and that Center personnel at any of the
41 port locations may process applications and submissions, depending
on the broker's filings and location. All references to ``Designated
Center'' in the proposed regulations are updated in this final rule to
reference ``Processing Center.'' In addition, CBP removed any
references to ``director of'' a Center throughout part 111 to simply
state ``Processing Center'', keeping the regulatory language more
general. This change aligns with the statutory language in 19 U.S.C.
1641 that references ``employees of U.S. Customs and Border
Protection'' or ``duly accredited officers'' without pointing out a
specific title or position within CBP. This change also provides the
agency more flexibility in processing
[[Page 63271]]
brokers' applications and submissions, without any changes for the
brokers.
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\5\ In this document, CBP uses ``Processing Center'' in quotes
to denote a replacement of the proposed term ``Designated Center'';
when the words ``processing Center'' without quotation marks are
used, CBP is referring to the Center of Excellence and Expertise
that is actually performing a processing function.
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Comment: Two commenters asked for clarification as to how brokers
would be assigned to a Center, including contact information for the
designated Center. Another commenter sought further clarification on
the process that CBP will use to assign brokers with existing national
permits to a specific Center. One commenter suggested that a primary
point of contact be assigned for each of the ten (10) Centers.
Commenters also asked that CBP have a reporting structure in place
to allow for an escalation process so brokers could properly address a
designated broker management office. Some commenters argued that a
broker should also have the opportunity to request a specific Center to
align with the broker's business model familiar with the commodities,
transactions and types of entry processes by the broker. Additionally,
some commenters suggested that there should be an avenue for a broker
to request re-assignment to a specific Center.
Response: As there will be no designated Centers, there will be no
assignment to a Center by CBP, and brokers will not have to request an
assignment to a specific Center or a re-assignment to another Center.
As mentioned above, BMOs who are currently managing broker submissions
and questions will continue to do so. If a broker is unsatisfied with
the handling of a matter by a BMO, a broker may escalate an issue to
the supervisor of the BMO. The names of the Assistant Center Directors,
who may be contacted for purposes of escalation, are listed on the
contact information chart mentioned above.
Comment: One commenter suggested that ``certain functions,'' as
mentioned in the NPRM, that were previously performed by the port
director and transitioned to the Center director, should be clarified
in the ``Broker Management Handbook'' and the ``Centers of Excellence
and Expertise Trade Process Document'' to provide clear policy
direction to CBP and the trade community in order to assist with a
smooth transition to a Center. The commenter further stated that CBP
must consider a full transition of all brokers to a designated Center
versus a staged approach. The commenter recommended further that the
Centers prepare for the transition and implement their oversight at the
same time, ensuring a fair and consistent treatment of brokers. The
commenter also strongly recommended that CBP consider a broker working
group which would provide feedback to the Centers on operational trade
and post-summary functions, mirroring the current working group in
place today.
Response: The ``Centers of Excellence and Expertise Trade Process
Document'' already includes most of the information regarding the
transition from ports to Centers. Any updates made with this final rule
will be communicated to the broker community on CBP's website.
Additionally, CBP has created a guidance document containing
operational information regarding the regulatory changes, as well as
general information on various broker matters. This document will be
published concurrently with the publication of this final rule. In time
for the publication of this final rule, CBP will issue additional
specific operational guidance regarding certain regulatory changes on
CBP's website.
As mentioned above, current license and permit holders will
continue to contact the BMO who has been processing brokers' licensing
and permitting matters. Center personnel are ready and able to continue
to do so. To ensure uniformity among Center personnel and efficiency in
handling broker matters, BMOs at the various locations will continue to
receive guidance from CBP Headquarters regarding the implementation of
any updates or changes to current processes. CBP will continue to
exercise oversight over the BMO locations to ensure that BMOs apply the
same standards, and process broker submissions and respond to questions
from brokers consistently and uniformly.
Regarding the request for CBP to consider a working group, CBP will
continue general broker outreach and keep the broker community informed
of any changes through various channels, such as Cargo System Messaging
Service (CSMS) messages, webinars, and postings on CBP's website.
Accordingly, a specific working group is not needed at this time.
Comment: Another commenter acknowledged the importance of building
a strong connection between the Centers and brokers but stressed that
it is crucial that CBP avoid severing the relationship between brokers
and port directors entirely. The commenter stated that a strong
relationship is key in the efficient facilitation of cargo and
merchandise. As there is no proposed regulatory language regarding any
administrative actions that include port directors, the commenter asked
that CBP clarify this point in the final rule.
Response: CBP recognizes the importance of the relationship between
the brokers and port directors and assures the trade community that
port directors will continue to be involved. Port directors or their
designees will present the brokers' licenses in locations where there
is no Center director, or Assistant Center director, and CBP will
ensure that the port and Center management maintain open communications
regarding local broker issues. However, ultimately, Center directors
maintain the final authority over any decisions pertaining to broker
issues. CBP does not believe that the regulation needs to be amended.
Comment: One commenter agreed that reliable channels of
communication between CBP and the brokers are essential but disagreed
with the requirement to designate a primary location pursuant to the
proposed definition of ``broker's office of record'' in Sec. 111.1 for
overseeing the administration of the part 111 provisions. The commenter
proposed to revise the definition to include language which clarifies
that the office of record is the primary location that acts as the
point of contact (emphasis added) for the administration of the
provisions of part 111 because businesses may not always have one
location that oversees all the activities conducted under a national
permit.
Another commenter suggested that CBP utilize electronic reporting
systems as the method of communication rather than designating a
specific location. The commenter argued that flexibility of
administration and effective communication are not dependent on
location.
Response: CBP disagrees with the first commenter's request to
modify the definition of the broker's office of record. CBP determined
that the proposed definition should be adopted because the primary
office that oversees the administration of all activities conducted
under a national permit may be different from the primary office that
acts as the point of contact. The addition of the words suggested by
the commenter would change CBP's intended meaning of this definition.
As district offices will no longer exist, CBP needs to not only know
the point of contact for the administration of the part 111
regulations, but also the location that has been identified as the
office overseeing the transactions occurring under the national permit.
This may not be the only location through which broker activities
occur, but it would be the primary location to which CBP would send
correspondence and where CBP would conduct a physical inspection
pursuant to Sec. 111.27. Moreover, the primary location is also the
address that is provided in the application for a national permit and
[[Page 63272]]
must be kept up to date for so long as a broker holds a license and
permit.
In response to the second commenter, CBP is already utilizing
electronic reporting tools, such as ACE and the eCBP portal, and is
using email when corresponding with a broker. The eCBP portal is CBP's
new payment and submission system, streamlining the payment and
submission process for broker examination applications and triennial
status reports. Additional reporting capabilities for brokers will
follow, as discussed in more detail below in Section IV. Despite the
availability of the above-mentioned electronic reporting tools, a
broker has the responsibility to establish an actual location for
purposes of visits and audits but is free to determine where to
establish his or her office(s) within the U.S. customs territory. CBP
understands that flexibility is needed when it comes to establishing a
primary office, especially during the COVID-19 pandemic, which caused
many brokers to work from home. Thus, CBP appreciates the opportunity
to clarify that the primary location does not have to be an office
location but can be the broker's home as long as there is a physical
location at which the broker can be reached.
Comment: One commenter suggested that CBP make a small change in
the definition of ``permit'' in Sec. 111.1 by replacing the word
``any'' with ``a'' to clarify that CBP requires only one permit per
business, even if a business operates a drawback business and a
consulting business, or an entry business.
Response: CBP agrees with the commenter. In the NPRM, CBP already
proposed this change, and now finalized this change to clarify that
there is only one national permit that a broker needs to hold in order
to conduct customs business within the U.S. customs territory.
Comment: Several commenters expressed support for the elimination
of the district permits as it reflects a shift toward modern practice
of working with the Centers and filing entries in ACE. However, one
commenter requested clarification of CBP's statements in the preamble
of the NPRM that the granting of a national permit to current district
permit holders would be automatic, but that CBP would, at the same
time, provide guidance regarding the permit transition upon the
adoption of the final regulations. The commenter stated that the need
to provide further instructions as to the transition did not seem to
make the transition ``automatic''. In addition, the commenter asked
whether there would be a grace period to ensure an uninterrupted and
smooth transition. Lastly, the commenter also stated that the
grandfathering rules should be included in the regulation, and not
merely in the preamble, as they are critical to a smooth transition.
Response: CBP appreciates the opportunity to clarify that the
transition for a district permit holder to a national permit will be
automatic, without any actions to be taken by the brokers. CBP will use
the ACE data that is on file for each district permit holder who or
which does not already have a national permit and automatically create
a national permit for each current district permit holder. In addition,
to ensure an uninterrupted transition, active district permits will not
be cancelled until all national permits have been issued. District
permit holders will be able to continue to conduct customs business
without any interruptions or delays. CBP will notify current district
permit holders by email (if an email address is on file with CBP) that
a new national permit will be issued; otherwise, CBP will notify by
mail at the permit holder's business location on file. The transition
of permits will occur between the date of publication of this final
rule and the date of effectiveness of the final regulations, which will
be 60 days after publication. In addition to the notification of the
permit holders by email or mail, CBP will issue a CSMS message
informing district permit holders of the transition to national
permits.
With regard to the transition of the district permits to national
permits, it is a one-time event and, thus, there is no need for
including the transition to national permits in the regulations. Any
new applicants for a national permit will apply pursuant to the final
regulations.
Comment: Three commenters expressed disagreement with CBP's
proposal to eliminate the district permits. One commenter argued that
eliminating the district permits would drastically affect the broker's
ability to provide optimum responsible supervision and control over
brokerage operations. Brokers should at least have one permit holder
per district. The commenter explained that in some cases, a face-to
face meeting with a national permit holder might be impossible, so the
district permit holder would be able to have such a meeting. It would
also be more convenient and more time efficient to resolve questions
quickly with a district permit holder who is located closer to a CBP
office. In addition, a local expert is more familiar with the port
nuances, staff, and different hours of operations, to name a few. With
the proposed elimination, a district permit holder might consider not
renewing the individual license, which could lead to the elimination of
hundreds, if not thousands, of licenses, which in a time when import
volumes are increasing seems unreasonable.
Response: CBP understands that the transition from a district
permit system requiring multiple local permits to a single national
permit may raise new or unique concerns for customs brokers in ensuring
proper exercise of responsible supervision and control over the customs
business they conduct. However, CBP disagrees with the commenter that
responsible supervision and control will be more difficult to maintain
because customs brokers will no longer need to expend time and
resources monitoring several district offices. Brokers may consolidate
operations and focus on a single nationally permitted office to ensure
that optimal responsible supervision and control is maintained. Under
the national permit system, customs brokers may also choose to continue
to operate locally by liaising with the port where entries are filed
and imports are released from customs custody, while conducting customs
business and engaging with clients at a national level. Regardless of
whether a broker decides to eliminate offices or personnel in a
particular location or continues to conduct customs business in its
current locations, brokers remain responsible for the customs business
they perform and over which they have supervision no matter where that
is occurring under the purview of their license. Existing
responsibilities of a broker do not disappear simply because district
permits are eliminated. In addition, prior to the publication of the
NPRM, CBP had conducted outreach to the broker community through
webinars, port meetings, and broker association meetings to solicit
feedback on brokerage needs in the modern business environment. COAC
had recommended that CBP enable brokers to operate through a single,
national permit, in light of the changes to CBP's operational structure
and growing technological capabilities. CBP incorporated the broker
community's feedback and COAC's recommendation in the final
regulations, reflecting the modern technological and business
environment of customs brokers, and highlighting the importance of
electronic process advancements to communicate with local ports, and to
submit broker information and entry filings.
It is CBP's goal to ensure that the communication between brokers
and CBP (ports and Centers) is easy and
[[Page 63273]]
efficient. CBP always strives to improve the dialogue with brokers, as
exemplified by CBP's ongoing effort to utilize electronic tools for
reporting and communicating. If in-person meetings are not possible due
to timing or distance, meetings can be held via video conferencing to
quickly and efficiently resolve any questions or concerns. A current
district permit holder who does not hold a national permit prior to the
transition to national permits will possibly have to familiarize
himself or herself with the nuances of a particular port, hours of
operation and particular staff. However, the benefits gained from the
elimination of district permits and the transition to one national
permit will outweigh the initial inconveniences that some brokers may
experience.
Comment: One commenter argued that because customs business is
generally conducted in connection with logistics and handling of cargo,
both customs business and logistics would become more consolidated
outside the ports without any consideration for the local ports'
interests, including revenue in connection with those services. In
addition, responsible supervision and control of customs business would
change and prove much more difficult in a remote setting. The commenter
is of the opinion that if a broker wishes to perform customs business
in a certain physical location, he or she should be required to have a
permit issued by that local port.
Response: CBP does not agree with the commenter's concern. When it
comes to logistics and cargo handling, local ports will still be
involved. Revenue collection will continue to be carried out at the
ports. Supervision over employees who are not local will continue to be
exercised, especially in light of the updated responsible supervision
and control standards, adding, among other factors, the requirement
that brokerage firms employ a sufficient number of licensed brokers to
satisfy the supervision standard, and the requirement for new permit
holders to have a supervision plan in place to ensure that reasonable
supervision and control is exercised over the customs business
conducted under a national permit. In response to this comment, CBP
further wishes to emphasize the importance of the accuracy and
completeness of broker submissions to ensure that CBP has sufficient
information available to exercise its oversight over broker operations.
National permits cover local ports across the U.S. customs
territory; thus, a broker may still perform customs business in a
specific location if the broker so chooses. The national permit allows
customs business within the entire U.S. customs territory and for
brokers to perform any activities allowed under the permit, thus
providing a broker with the choice of where to perform customs business
and lessening the burden on a broker to work within the scope of a
district permit for a geographic area. These regulatory changes will
benefit the customs broker community without CBP's losing oversight
over broker entities responsible for supervising their employees.
Comment: Several commenters recommended that CBP define ``customs
business'' in Sec. 111.3 and explain when a license is required and
when it is not. One commenter stated that the term ``customs business''
should be redefined to reflect the commercial activities and the roles
the individual parties play in a transaction. The commenter explained
that customs business can mean something different for different
brokers, depending on what role the broker plays in a transaction, from
the mere gathering of data for submission to assisting an importer with
the entire importation process.
Response: CBP disagrees with the commenters that a revised
definition of customs business is needed, as the applicable statute and
regulations already provide extensive definitions. Section 1641(a)(2)
of title 19 of the United States Code defines ``customs business'' as
those activities involving transactions with CBP concerning the entry
and admissibility of merchandise, its classification and valuation, the
payment of duties, taxes, or other charges assessed or collection by
CBP upon merchandise by reason of its importation, or the refund,
rebate, or drawback thereof. ``Customs business'' also includes the
preparation, and activities relating to the preparation, of documents
or forms, the electronic transmission of such documents, invoices,
bills, or parts thereof, which are intended to be filed with CBP in
furtherance of such activities. The regulatory definition in Sec.
111.1 mirrors the statutory definition in section 1641(a)(2), except
for the additional explanation that ``corporate compliance activity''
is not considered customs business. In addition, CBP issued a
Headquarters Ruling Letter (Headquarters ruling) H272798 (January 26,
2017), which provided an in-depth analysis of what customs business
entails in several different scenarios provided by the ruling
requester.\6\ The ruling serves as guidance to other brokers who
encounter the same scenarios. CBP does not believe that further
explanations or clarifications are needed.
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\6\ The cited Headquarters ruling, and other Headquarters
rulings mentioned in this final rule, may be viewed in CBP's
searchable database, the Customs Rulings Online Search System
(CROSS), which may be found on CBP's website at https://rulings.cbp.gov/home.
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The commenter correctly pointed out that the role of a broker in a
specific transaction depends on the broker's involvement and knowledge
of the facts, thus, decisions as to what constitutes customs business
are made in a case-by-case analysis to take into account the specific
facts and circumstances. If a broker is unsure whether a certain
transaction is considered customs business, he or she can request a
ruling pursuant to 19 CFR 177.1.
Comment: Several commenters raised concerns with respect to the
interaction of Sec. 111.3, concerning customs business, and Sec.
111.2(a)(2) concerning transactions for which a customs broker's
license is not required. The commenters stated that the proposed Sec.
111.3 only mentions the customs broker's location and point of contact,
along with a reference to Sec. 111.1 for the definition of customs
business. Meanwhile, Sec. 111.2(a)(2) lists transactions for which a
license is not required, and thus, which fall outside of the customs
business definition. The commenters suggested that, in order to avoid
any confusion, CBP either state in Sec. 111.2(a)(2) that the listed
transactions are not considered customs business or list the specific
transactions in Sec. 111.3 and clarify that because they do not
constitute customs business, they do not require a license. One
commenter asserted that CBP should make it clear in Sec. 111.3 that
customs business must be conducted within the U.S. customs territory,
as opposed to the transactions listed in Sec. 111.2(a)(2), which may
be conducted outside of the U.S. customs territory.
Response: CBP disagrees with the commenters' suggestion to cross-
reference the two mentioned regulations. CBP believes that the
regulations, as written, make clear that a customs broker's license is
required to conduct customs business, and that customs business must be
conducted within the U.S. customs territory. Whether a transaction that
is not specifically mentioned in the statutory definition of section
1641(a)(2) or in the regulatory definition in Sec. 111.1 is considered
customs business can be determined by requesting a ruling, as mentioned
above. CBP cannot exhaustively list all transactions that are
[[Page 63274]]
(or are not) covered by the customs business definition. A
determination as to whether a specific activity is considered customs
business is based on a fact-specific analysis, which is better
addressed in a CBP ruling letter than a regulation.
Comment: Two commenters expressed disagreement with the requirement
in Sec. 111.3(b) for a broker's designation of a knowledgeable point
of contact to be available to CBP ``outside of normal operating
hours''. One commenter argued that this requirement goes beyond the
requirements set forth in 19 U.S.C. 1641. Another commenter argued that
this requirement should only pertain to cargo security matters, such as
Customs Trade Partnership Against Terrorism (CTPAT) matters, and CBP
should clarify that in the regulation.
Response: CBP disagrees with the commenters. Due to the shift from
multiple district permits (and multiple points of contact) to one
national permit (and one point of contact), the one individual who is a
knowledgeable point of contact for a broker needs to be available to
cover all the ports of entry where the brokerage enters goods, which
could mean coverage beyond normal operating hours of any one port of
entry. Although CBP does not require 24-hour availability, CBP does
need one point of contact to cover the operating hours across all time
zones to address situations where a port may need to contact an
importer regarding the release of goods. While questions relating to
the CTPAT program may certainly occur outside of normal operating
hours, those are not the only situations that are covered.
Comment: One commenter stated that Sec. 111.3(a) does not address
the use of offshore resources to assist importers and/or licensed
brokers with the classification process under the Harmonized Tariff
Schedule of the United States (HTSUS). The commenter requested
clarification on three scenarios: (1) whether Sec. 111.3(a) prohibits
the classification of goods either at the four- or six-digit HTSUS
levels by unlicensed offshore resources located outside of the customs
territory, if the HTSUS codes will be used for the purpose of making
customs entry globally, including in the United States (and whether the
answer would be different if the offshore resources were employees of a
U.S. importer or U.S. licensed broker); (2) whether Sec. 111.3(a)
prohibits the classification of goods either at the eight- or ten-digit
HTSUS levels by unlicensed offshore resources/persons located outside
of the customs territory if a U.S. importer or U.S. licensed broker
only uses this classification as a resource to determine the
classification of goods consistent with Headquarters ruling H272798;
\7\ and, (3) whether a U.S. licensed broker is permitted to use
acceptable sampling methods to review the classification determinations
undertaken by its employees (or unlicensed offshore resources if
scenarios (1) or (2) above are permissible) to assist with satisfying
the ``responsible supervision and control'' and ``due diligence''
standards in Sec. Sec. 111.28(a) and 111.39(b).
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\7\ Headquarters ruling H272798 held that a company would not be
unlawfully engaged in the conduct of ``customs business'' by
creating a tariff classification database to be used by a licensed
broker in preparing to file an entry so long as the company issues a
disclaimer cautioning clients that the specific tariff
classification to be filed for an entry of merchandise must be
determined by a licensed customs broker. The disclaimer must also
caution that the opinion of the broker takes priority over the
proposed classification in the database. Creation of a
classification database is permissible only if the database is used
as a resource and will not direct a client or a licensed customs
broker in the preparation or filing of a specific entry.
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With regard to the third scenario, the commenter noted that the use
of statistical sampling methods is explicitly codified in the customs
regulations, for instance, in 19 CFR 162.74(j), with respect to prior
disclosures, and 19 CFR 163.11(c) with respect to customs audits. Thus,
the regulations in part 111 would benefit from the inclusion of
specific guidance regarding the acceptability of statistical sampling
methods for the purposes of satisfying the responsible supervision and
control standard of Sec. 111.28(a) and the ``due diligence'' standard
of Sec. 111.39(b). The commenter further suggested to add the adequacy
of a satisfying technique as a 16th factor for responsible supervision
and control in Sec. 111.28(a) that CBP may consider, and the final
rule should also include specific guidance addressing the sampling
methods that would be acceptable to CBP.
Response: CBP has clarified in Headquarters ruling H045695 (October
15, 2010) that classification at the six-digit HTSUS level does not
constitute customs business. In addition, classification at a level
lower than six digits, such as the four-digit HTSUS level, is not
considered customs business either. Even though CBP neither regulates
non-customs business, nor whether a domestic importing company uses
foreign staff to conduct non-customs business, U.S. licensed brokers
are required to exercise special caution to ensure that any unlicensed
contractor or employee operating on behalf of the brokerage abroad does
not perform any tasks that may cross the line into conducting customs
business. See Headquarters ruling H302355 (January 29, 2019).
Regarding scenario (2), generally, classification determinations at
the eight- and ten-digit HTSUS levels are considered customs business,
and customs business must be conducted by a licensed broker. The term
``resources'' used by the commenter is vague and CBP is not able to
fully respond to this comment as to whether such advice would
constitute impermissible engagement in customs business. The commenter
should seek a ruling to determine whether the specific proposal is
permissible. However, in Headquarters ruling H272798 (January 27,
2018), CBP cautioned a requester, citing Headquarters ruling H115248
(August 28, 2011), that ``even when there is a `possibility' that
classification information will end up on an entry, a broker's license
is required `to gather classification data which will be reflected on
the entry.' ''
To respond to the commenter's third scenario, in general, the use
of sampling methods is an adequate technique, but it depends on the
circumstances of a particular situation whether a specific sampling
technique is sufficient to ensure responsible supervision and control
pursuant to Sec. 111.28(a). The due diligence standard in revised
paragraph (b) of Sec. 111.39 requires that a broker ascertain the
correctness of any information which the broker imparts to a client,
thus, certain sampling techniques may or may not be appropriate to
exercise due diligence, depending on the facts of the specific
situation.
The commenter points to 19 CFR 162.74(j), which states that a
private party may use statistical sampling to ``disclose the
circumstances of a violation'' and for calculation of lost duties,
taxes, and fees or lost revenue for purposes of prior disclosure,
provided that the statistical sampling satisfies the criteria in 19 CFR
163.11(c)(3). Section 163.11 generally sets forth the ``audit
procedures'' for CBP auditors pursuant to 19 U.S.C. 1509(b). CBP
believes that those cited regulations are not geared towards broker
audits; the notable difference being that the sampling results are
submitted to CBP in a prior disclosure, whereas the results of a
broker's own compliance activities (e.g., review of classification
determinations) are not submitted to CBP. CBP does not have any
obligation to instruct brokers on how to conduct their own audits, and,
thus, CBP does not agree that the use of adequate sampling methods be
added as a 16th factor in paragraph Sec. 111.28(a), or
[[Page 63275]]
that CBP provide additional guidance as to adequate sampling methods.
Comment: One commenter stated that CBP should confirm that Sec.
111.3(a) does not require that any activity falling within the
definition of ``corporate compliance activity'' in Sec. 111.1,
including potential classification support by a related business
entity, be conducted within the U.S. customs territory.
Response: The last sentence of the ``customs business'' definition
in Sec. 111.1 specifically states that ``corporate compliance
activity'' is not considered customs business. Section 111.3(a) states
that customs business must be conducted within the U.S. customs
territory, meaning non-customs business need not be conducted within
the U.S. customs territory. CBP believes that the regulations are clear
and additional clarification is not needed.
Subpart B--Procedure To Obtain License or Permit
Comment: Several commenters expressed support for the proposed
changes in Sec. 111.12 as they eliminate certain outdated requirements
for broker license applicants. However, one commenter recommended
changing the requirement under Sec. 111.12(a) to provide documentation
regarding the applicant's authority to use a trade or fictitious name
in one or more states in which the applicant plans to operate. The
commenter argued that under a port-based system, where ports lacked
access to a centralized database and asked for documentation regarding
the applicant's authority to use a trade or fictitious name in a state
other than the applicant's home state, that was a reasonable request;
however, in an automated world with a single license and national
permit and where the broker's filer code is linked to the broker's
information in ACE, this is no longer practical or necessary. Other
than with respect to the license and the broker's office of record
state, documentation showing that a broker is operating in additional
states purportedly has no impact on CBP's statutory or regulatory
authority over brokers. Therefore, the commenter proposed to delete the
advance notice requirement with respect to trade names both with
respect to licenses and permits.
Response: CBP disagrees with the commenter. If an applicant
proposes to operate under a trade or fictitious name in one or more
states, evidence of the applicant's authority to use the name in each
of those states must accompany the application. CBP needs to know in
which states the applicant is doing customs business, along with the
name associated with the applicant's business. If the address provided
by the broker for the national permit office is in a different state
from the address provided for the national license office, then CBP
requires documentation for both the license and permit. If they are one
and the same and the broker only operates in one state, then only
documentation for that state is required.
Comment: One commenter raised the concern that the CBP examination
results letters do not always notify examinees of their right to appeal
the examination results or mention the 60-day deadline to file an
appeal, pursuant to paragraphs (e) and (f) of Sec. 111.13. The
commenter pointed out that the preamble of the NPRM states that
examinees who wish to appeal the examination results should submit
those requests in accordance with the instructions provided in the
results letter. The commenter asked that CBP make sure that the results
letters always notify applicants of the reasons for the denial and the
right to appeal within 60 days.
The commenter also asked CBP to clarify in the regulations that
applicants may be represented in their appeals by an attorney or other
agents. The commenter stated that CBP recently eliminated language that
appeals must be written in the applicant's own words; however, there is
still confusion as to whether an applicant may contract with an
attorney or others to assist with the appeal.
Response: Regarding the commenter's first point, CBP will continue
to ensure that the examination results letters contain information as
to the examinee's right to file an appeal, along with instructions on
how to file, and the 60-day deadline to submit an appeal. The results
letters contain the examinee's score, as well as the minimum passing
score. The results letters for the October 2020 examination also
included an electronic filing option for appeals, which was proposed in
the NPRM, and has been included in the final regulation. Additionally,
examinees may find instructions on how to appeal the exam results on
CBP's website.\8\
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\8\ Instructions on how to appeal may be found online at https://www.cbp.gov/trade/programs-administration/customs-brokers/how-appeal.
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With respect to the ``own words'' language that the commenter
refers to, results letters still include language that states that the
examinee has to submit a compelling argument (``in your own words'')
explaining why the examinee's answer is better than CBP's official
answer, or why the appealed question has no possible correct answer.
CBP continues to use this language in the results letters because it is
expected that an applicant has the knowledge to draft the appeal
document and provide arguments that support the appeal for a particular
question. The focus of the appeal is of course on the articulation of
why the answer provided by the examinee on the exam should be given
credit. The written examination is a test of the applicant's knowledge
of the pertinent material, not someone else's knowledge. A third person
should not be the one to write the appeal on behalf of the examinee;
CBP understands, however, that in some instances a third person may
assist with formulating and/or submitting the appeal.
Comment: One commenter expressed support of the scope expansion for
the background investigation in Sec. 111.14 to include the financial
responsibility of an applicant, and any association with any
individuals or groups that may present a risk to the security or to the
revenue collection of the United States, but also noted that the facts
to be investigated under Sec. 111.14 should be included in the
requirements to apply for a license in Sec. 111.12.
Response: CBP disagrees with the commenter's suggestion to include
the non-exhaustive list of factors used in the background investigation
pursuant to Sec. 111.14 as requirements for the application for a
license. Section 111.12 describes the formalities of the application
process, which includes the submission of CBP Form 3124 (Application
for Customs Broker License or Permit), along with the application fee,
and any additional required documentation pursuant to paragraph (a). In
contrast, Sec. 111.14 lists facts and circumstances that CBP will
ascertain during the background investigation to determine whether an
applicant is qualified to hold a license. The background investigation
is a separate step in the application process that follows the
submission of the application and fee, and the scope of each
investigation depends on the facts and circumstances presented by the
applicant and of which CBP becomes aware during its investigation.
Including all the considerations that are part of CBP's background
investigation as part of the general application process would confuse
the requirements for the basic application process with the
requirements to qualify for a license after a thorough investigation of
more information by CBP.
Comment: One commenter objected to the addition of new grounds to
justify the denial of a license in Sec. 111.16(b). The commenter wrote
that no due
[[Page 63276]]
process opportunity is provided to challenge CBP's denial of a license.
Response: CBP disagrees with the commenter. CBP always provides a
reason in the denial notice as to why the license was not issued;
decisions are not made arbitrarily. Section 111.17 further provides the
applicant the opportunity to have the denial of the application
reviewed, and upon the affirmation of the denial of the license, the
applicant has a second opportunity to request an additional review by
the Executive Assistant Commissioner, Office of Trade, and a third
opportunity to appeal the decision to the Court of International Trade.
Revised Sec. 111.17(a) provides greater flexibility to the applicant
and CBP by allowing the applicant to file additional information or
arguments in support of the license application, and request to appear
in person, by telephone, or other acceptable means of communication by
which an applicant may provide further information to CBP. These
avenues provide sufficient notice and due process to an applicant under
the regulations.
Comment: Several commenters expressed concern with the proposed
term ``financial responsibility'' in Sec. 111.16(b)(3) and argued that
it should not be a factor in the determination whether a license should
be denied, especially during the COVID-19 pandemic. One commenter
argued that CBP could conceivably deny a license based on a blemish on
an applicant's credit history, which would be unfair. One commenter
asked CBP to provide a clear definition of ``pertinent facts'' in Sec.
111.16(b)(5) if CBP wished to penalize an applicant for the omission of
pertinent facts in the application or interview. Commenters also
expressed confusion as to what constitutes ``detrimental'' commercial
transactions in Sec. 111.16(b)(6), especially to whom the transactions
have to be detrimental, and whether the term could include poor
business decisions that are unrelated to a brokerage or customs
business but are detrimental to the individual making the decision. One
commenter expressed great concern with the grounds for denial of a
license in paragraph Sec. 111.16(b)(8) that includes ``any other
relevant information uncovered over the course of the background
investigation'' as it is over-reaching, which the commenter equated to
CBP's being able to deny a license for any reason.
Response: CBP appreciates the opportunity to clarify that the
financial responsibility of a license applicant has always been an
expectation when determining an applicant's qualification to hold a
license, as part of the business integrity requirement in Sec.
111.16(b)(3). A business integrity evaluation includes the provision of
financial reports, which reflect upon the financial responsibility of
an individual. By expressly including this factor in the final
regulation, CBP confirms that the financial responsibility of an
applicant is part of the determination whether a license is issued or
denied. Nonetheless, CBP has always taken into account the personal
circumstances of an applicant when making a decision. It has been CBP's
practice to follow up with the applicant with any questions or concerns
that arise during the review of the provided information and request
additional information and/or request information regarding an
applicant's plan to mitigate any debt or other financial difficulties,
before making the determination to deny a license.
``Pertinent facts'' in Sec. 111.16(b)(5) are those facts that are
requested on CBP Form 3124 when applying for a license, the facts
gathered during the interview with the applicant, and during the
background investigation. These are the same pertinent facts about
which an applicant should not make a willful misstatement under the
existing regulations. Those same facts should not be omitted, as the
omission of those may be just as significant as a misstatement of those
facts. The addition of the word ``detrimental'' along with the word
``unfair'' in Sec. 111.16(b)(6) better reflects CBP's intent of
including not only unfair transactions but also those that would be
detrimental, e.g., those that may cause financial harm, to a client,
CBP, or any other individual or entity implicated in a commercial
transaction. Whether an applicant's conduct is deemed detrimental is
determined on a case-by-case basis, considering the circumstances
surrounding the commercial transaction.
Lastly, CBP included a catch-all provision in Sec. 111.16(b)(8) to
account for any other relevant information that CBP uncovers over the
course of the investigation that may influence CBP's decision to accept
or deny a license application, but that is not mentioned in the non-
exhaustive list in Sec. 111.16(b)(1) through (7). Each application is
reviewed individually, and because factors (1) through (7) do not cover
every aspect that could lead to a denial of a license, a provision that
covers any other relevant information is necessary to assist with CBP's
determination.
Comment: One commenter stated that the requirement to provide a
copy of the documentation issued by a State or local government that
establishes the legal status and reserves the business name of the
entity pursuant to Sec. 111.19(b)(3) is already on file with respect
to the license. Given that there is now unity between the scope of the
license and permit, this requirement appears redundant. Moreover,
another commenter argued that there is no regulatory reason for other
offices covered by the national permit to supply such information when
the broker's office of record is provided. Therefore, the commenter
proposed to delete this requirement.
Response: While it is true that a license applicant who proposes to
operate under a trade or fictitious name in one or more states has to
provide evidence of the applicant's authority to use the name in each
of those states pursuant to Sec. 111.12(a), and that information is
already in CBP's records, it is possible that a broker has an office in
one state under which the license application was filed, but then later
applies for a national permit and provides a different office in a
different state with a different trade or fictitious name. In this
scenario, CBP would not know about a broker's second office if the
broker did not provide this information. Due to the elimination of
district permits and a district permit holder's responsibility to
provide information for the local office, CBP needs to ensure that all
the information regarding the broker's various offices, which could be
operating in different states, potentially under different names, is
provided to CBP. Having this information available enables CBP to
exercise oversight over a broker's customs business and verify whether
the broker is exercising responsible supervision and control in each of
the broker's customs business locations. Thus, CBP disagrees with the
elimination of the requirement in Sec. 111.19(b)(3).
Comment: More than one commenter maintained that the proposed
requirement for a supervision plan in Sec. 111.19(b)(8) is vague and
CBP does not describe what such a plan would include. Therefore, CBP
should provide at least minimum criteria for brokers to be able to
determine what such a plan should look like. Another commenter stated
that it is not clear from the proposed regulation whether a current
national permit holder is required to submit a supervision plan, and
whether a current national permit holder is subject to cancellation of
the permit if CBP deems the supervision plan unacceptable, or whether
there is a grace period for the broker to adjust the plan. The
commenter also noted that the NPRM did not state whether single port or
single office brokers are also subject to filing a supervision plan
even though
[[Page 63277]]
effectively they are operating as though they had a single port permit.
Response: What a supervision plan should look like depends, among
other things, on the size of a broker entity, the experience of the
employees overseen by a licensed broker, the complexity of the customs
business, and the types of transactions that a broker entity handles.
CBP believes it is prudent for a broker entity to have more
supervision, i.e., more licensed brokers and/or more training, and
guidance for employees, in place if the broker entity is large and
deals with complex business transactions. CBP agrees with the
commenters that general guidance on expectations for a supervision plan
is helpful, and, thus, CBP will provide such guidance on its website
and/or through other electronic forms of communication, such as CSMS
messages.
Further, CBP welcomes the opportunity to clarify that current
national permit holders are not required to provide a supervision plan
pursuant to the new Sec. 111.19(b)(8), however, CBP wishes to
emphasize that having a supervision plan in place is highly encouraged
and should be a best practice for every permit holder. The same applies
to current district permit holders whose district permit will be
transitioned to a national permit. As for single port or single office
brokers who currently hold a district permit, or a national permit, a
supervision plan is not required pursuant to the new regulations, but
will be required of new permit applicants, even if they only have a
single office or work at a single port.
Comment: Two commenters stated that they disagreed with CBP's
proposal to eliminate the requirement that an applicant for a license
on behalf of an association or corporation be an officer (and not only
a licensed broker). The commenters argued that the broker and CBP are
best served when an officer of an association or corporation
demonstrates knowledge of customs regulations through its licensed
customs broker designation. The commenters believe that the current
requirement under Sec. 111.11(c)(2) should remain in place.
Response: CBP agrees with the commenter that it is important to
have at least one officer in an association or corporation, and at
least one member in a partnership who is a licensed broker. CBP did not
propose to eliminate this requirement in Sec. 111.11(c)(2). CBP stated
in the preamble of the NPRM that if the application is on behalf of an
association, corporation, or partnership, then the applicant is not
required to be an officer but is required to be a licensed broker. This
relaxation of CBP's prior practice provides the broker entity with
flexibility as to who may submit the application for a national permit,
but it does not eliminate the requirement under Sec. 111.11(c)(2) to
have at least one officer in an association or corporation, or at least
one member in a partnership under Sec. 111.11(b), who is a licensed
broker. It is further important to note that the individual applying
for and obtaining the license on behalf of the entity must be delegated
the proper agency authority to obtain the license and serve as the
license qualifier, thus, binding the entity with respect to the customs
business it later performs.
Comment: One commenter pointed to Sec. 111.16, pursuant to which
CBP is required to specify the reasons for denial of a license and
stated that there is no comparable requirement to specify a reason for
denial of a permit based upon the adequacy of a supervision plan under
Sec. 111.19. The commenter recommended that a permit denial include a
detailed explanation of the reason(s) for denial, so a broker has clear
direction as to what needs to be addressed.
Response: CBP includes a reason as to why a permit application is
denied when issuing a denial letter to an applicant. CBP does not agree
that there is a need to include language in Sec. 111.19 to state that
a reason for the denial will be provided, merely because of comparable
language in Sec. 111.16.
Comment: Three commenters suggested that CBP allow brokers to have
multiple national permits if they maintain separate, although related,
business entities and allow for more than one licensed broker to
qualify for the permit. The commenters reasoned that in case of any
issues with one national permit, the broker could continue to work
under a separate national permit for a related entity.
Response: CBP disagrees with the commenters. CBP moved from the
district permit system to a national permit system in order to provide
brokers with the flexibility to conduct customs business within the
entire U.S. territory with just one license and one permit. Allowing
more than one national permit for related business entities defeats the
purpose of eliminating multiple district permits in favor of one
national permit per broker. The concern that one entity under a parent
company is not exercising responsible supervision and control and
potentially putting other related entities at risk, needs to be
addressed within the entity itself. CBP will not provide more than one
national permit to an entity so that a broker may have a backup permit
for a related entity in case that entity is not exercising responsible
supervision and control or not complying with other laws and
requirements.
Additionally, it is CBP's practice to send an informed compliance
or warning letter to a broker who is not complying with regulations.
Usually, CBP provides the broker an opportunity to address any issues
that CBP had raised as a concern before revoking a permit. A broker
will usually not lose a permit upon one incident of noncompliance
unless the incident was so grave that CBP determines that a broker is
no longer qualified to hold a license to exercise customs business.
Subpart C--Duties and Responsibilities of Customs Brokers
Comment: Several commenters stated that the use of the term
``breach'' in Sec. 111.21(b) is vague and overbroad and should be
defined. One commenter asked whether only breaches that involve
customer data are included in the regulation. Some commenters stated
that the proposed regulation does not clarify the types of breaches
that are included, and whether any breaches need to be reported or only
material/serious breaches. Several commenters suggested to hold brokers
to the CTPAT cybersecurity standards, and simply indicate in the
regulations regarding ``record of transactions'' (Sec. 111.21) and
``responsible supervision and control'' (Sec. 111.28) that brokers
need to have a procedure in place to address data breaches and to
report them to CBP as appropriate. Some commenters also noted that the
proposed regulation is silent on how a breach should be reported to
CBP.
Response: CBP intends for the common meaning of `breach' to apply
and does not believe a regulatory definition is necessary. Some
considerations underlying this new regulatory provision, however, are
things such as a physical or electronic intrusion into the broker's
records whereby any information is compromised, but particularly
confidential information of the broker's clients that might have been
viewed, copied, or used without permission. Proposed Sec. 111.21(b)
specifically states that records relating to a broker's customs
business are at issue. The proposed regulation further states that
``any'' known breach that affects customer data, physical or
electronic, will have to be reported. The regulation does not
distinguish between a material/serious and non-material/non-serious
breach. Pursuant to Sec. 111.21(a), ``records'' include documents
reflecting
[[Page 63278]]
financial transactions as a broker. Any breach that affects those
records that are maintained in a broker's customs business needs to be
reported as part of CBP's overall risk management to prevent identity
theft.
CBP disagrees with the use of the CTPAT standard in this context.
The CTPAT standard applies mainly to importers and cargo carriers who
are partners of the CTPAT program. Very few brokers are CTPAT partners,
therefore, this standard would not be applicable to the majority of
brokers. Lastly, CBP wishes to take the opportunity to clarify that
security incidents, such as a breach discussed here, that have any
effect on the security posture of CBP must be reported electronically
to the CBP Office of Information Technology (OIT) Security Operations
Center (CBP SOC) at [email protected], and not the broker's designated
Center, as proposed in the NPRM. Brokers may call CBP SOC at 703-921-
6507 with questions as to the reporting of the breach, if any guidance
is needed or if brokers are unable to send an electronic notification
due to the breach. In addition, CBP added the email address to Sec.
111.21 as the method for reporting a breach, and added the CBP SOC as
the appropriate location for reporting a breach.
Comment: Several commenters disagreed with the proposed requirement
in Sec. 111.21(b) to provide notification to CBP within 72 hours of
discovery of any known breach with a list of all compromised importer
identification numbers as it is unreasonable. One commenter argued that
if the breach were to happen on a weekend followed by a holiday, the
broker would already be outside of the window of time allotted by CBP.
Other commenters pointed out that this requirement is especially
challenging for brokers who use third-party information technology (IT)
providers. Such a short time frame may also lead to incomplete reports.
Also, one commenter argued that the risk of a data breach seems to be
minimal given CBP's advance targeting system detecting anomalies in
shipping patterns.
Different commenters suggested different approaches as an
alternative to the 72-hour requirement, such as an agreed upon time
frame after the initial reporting of the fact that a breach occurred;
reporting ``as soon as practicable''; or, allowing for two weeks or ten
(10) business days for the investigation and notification of the breach
from the time of discovery. Another suggestion was to allow for a
process similar to the one set forth in 19 CFR 162.74(b)(4) in the
context of prior disclosures, providing information within 30 days of
the initial disclosure date.
Response: As identify theft is a major concern, CBP requires
brokers to provide any known breach of importer identification numbers
within a short time frame to CBP. Receiving the compromised importer
identification numbers soon after the discovery of the breach will
allow for a better targeting analysis and, thus, enhance CBP's overall
risk management. However, CBP understands that 72 hours may in some
instances not be sufficient to provide CBP with the complete
information regarding the breach. Therefore, CBP revised the proposed
requirement for brokers to provide electronic notification of the fact
that a breach occurred and any known compromised importer
identification numbers within 72 hours of discovery. In addition,
within ten (10) business days of the notification, a broker must
electronically provide an updated list of any additional known
compromised importer identification numbers. To the extent that
additional information is discovered, a broker must electronically
provide that information within 72 hours of discovery. The broker is
encouraged to work with CBP to gather the remaining information as
quickly as possible from the broker's own system or a third-party
software vendor to provide a comprehensive report. CBP believes that
the revision of the proposed language should provide sufficient time to
provide CBP with the breach information, but also satisfy CBP's need to
gather and analyze any breach information soon after its discovery.
Comment: One commenter stated that the requirement pursuant to
Sec. 111.21(b) to identify affected records in the electronic system
is far beyond most brokers' capability and should instead be imposed on
the software vendors that CBP certifies. Most brokers use third-party
software and most smaller brokers use software hosted by the provider.
The software interfacing with CBP is approved by CBP and, therefore,
CBP should be requiring these interdiction tools as part of their
certification requirements. Unless a broker is using custom software,
identification of a breach and the affected records should be the
responsibility of the CBP-approved software vendor.
Response: CBP agrees that an agreement between CBP and a CBP-
approved software vendor imposes the requirement on the software vendor
to report any security incidents that have any effect on the security
posture of CBP. However, a broker has an independent responsibility to
notify CBP of any breach that compromised importer identification
numbers, as discussed above. Also, brokers who do not engage a CBP-
approved software vendor have the responsibility to provide the breach
information either from their own server or from a third-party software
vendor that the broker employed. Regardless of where the broker's
information is stored and maintained, CBP's revision of the time frame
for the reporting requirement, as mentioned above, should allow
sufficient time for a broker to provide the required information.
Comment: One commenter stated that the notification of the breach
to CBP should be treated as confidential information because making the
breach public may subject an entity to undue harm.
Response: CBP treats information received from brokers as
confidential within the Department of Homeland Security (DHS), however,
information may be analyzed and possibly released under the rules
pertaining to the Freedom of Information Act (FOIA), as amended (5
U.S.C. 552). Section 103.21 of 19 CFR sets forth the procedures with
respect to the production or disclosure of any documents contained in
CBP files, or any information relating to material contained in CBP
files, in all federal, state, local and foreign proceedings when a
subpoena, notice of deposition, order, or demand of a court,
administrative agency or other authority is issued for such
information. Notifications by brokers of a breach would be covered
under these provisions.
Comment: One commenter stated that many companies do not designate
one individual as the party responsible for brokerage-wide
recordkeeping requirements, as proposed in Sec. 111.21(d). In most
cases, multiple individuals are responsible for records management of
policy, legal and operational matters. Another commenter stated that
CBP should understand that brokers may provide group mailboxes and
centralized contact information, monitored by multiple
``knowledgeable'' persons, which should satisfy the recordkeeping
requirement in Sec. 111.21(d).
Response: CBP understands that within a broker entity, different
individuals may be responsible for different reporting matters,
however, CBP needs the contact information for one knowledgeable
employee as the party responsible for brokerage-wide recordkeeping
requirements in case CBP has any questions or concerns. The designated
individual may contact other
[[Page 63279]]
individuals within the broker entity who have the knowledge on a
particular recordkeeping matter to address CBP's question or concern.
Under the new national permit framework, it will be especially
important to maintain a current broker point of contact to facilitate
efficient processing of entries and entry summaries. As to the second
question, a general email address or group mailbox along with an
individual's name as the point of contact is sufficient under Sec.
111.21(d).
Comment: Commenters agree that paper or hard copy documents, as
well as electronic documents maintained on a broker's privately owned,
leased, or controlled server, should be located in the United States.
However, where a broker uses a public third party to externally
maintain or host the data, CBP should allow such a party to maintain or
host the data outside of the United States, so long as that party is an
entity operating and incorporated in the United States for
jurisdictional purposes. This will provide a broker with the necessary
flexibility to maintain data, while assuring CBP that the broker
possesses the necessary authority to obtain such documents, when
necessary. One commenter argued that so long as the information is kept
securely, it should not matter if the information is kept within the
U.S. customs territory or not, referring to Headquarters ruling H292868
(March 10, 2020). Another commenter argued that software programs exist
that allow a company to file entries and declarations for multiple
countries while the broker still works in the United States. The system
being used could be securely accessed using a website and housed in
another country where the broker entity may have its corporate
entities. Such systems allow for enhanced corporate reporting and
visibility into their customers' supply chains.
Response: A broker's paper and electronic records must be stored
within the customs territory of the United States pursuant to proposed
Sec. 111.23(a). CBP has addressed the particular issue of maintaining
copies and backups of a U.S. customs broker's digital records outside
of the U.S. customs territory in Headquarters ruling H292868 (March 10,
2020). CBP determined in this ruling that a broker's electronic records
hosted and maintained by a third-party software vendor must be
maintained on a server physically located within the U.S. customs
territory. Section 111.23(a) dictates that a licensed customs broker
may maintain records relating to its customs transactions ``at any
location within the customs territory of the United States'' in
accordance with 19 CFR part 163. It is clear from the governing
statutes (19 U.S.C. 1508, 1509(a)(2)) and regulations that a broker's
electronic records must be maintained on a server physically located
within the U.S. customs territory because this is where CBP has
jurisdiction to issue a summons and inspect records. Nonetheless, CBP's
Headquarters ruling also emphasized that a broker's duplicate or backup
records may be stored outside of U.S. customs territory, so long as the
recordkeeping requirements for the original records are satisfied.
However, to make this position clearer in Sec. 111.23(a), CBP added
the words ``originals of'' before the word ``records'' to clarify that
the requirement to maintain records in the U.S. customs territory
pertains to original records, not backup records. This clarification
does not change any of the substantive regulatory requirements and is
consistent with CBP's prior rulings.
Comment: One commenter asked CBP to provide greater clarity as to
what constitutes ``records''. The commenter argued that certain
commercial circumstances dictate the disclosure of information that may
not be permissible under the current proposed language in Sec. 111.24,
such as collections, banking, or financial matters. The commenter
claimed that CBP should allow for more business-friendly flexibility,
so that a broker should not have to obtain a waiver to perform normal
business activities that are incidental to its provision of customs
business; limiting disclosable information would possibly place
additional liability on the broker in an unforeseen manner. Several
commenters suggested that a revision of the regulation to include
certain information, e.g., necessary for screening or transportation of
a client's cargo, would better reflect how data and information are
transmitted and used by brokers in the commercial environment and their
business dealings. One of the commenters argued that without such
language, brokers would question whether they are complying with their
obligation to maintain the confidentiality of their clients'
information.
Response: The term ``records'' is used throughout part 111 to refer
to those records that are kept in a customs broker's ordinary course of
business and that pertain to certain activities, including information
required in connection with any importation, declaration or entry. A
more general definition of ``records'' can be found in 19 CFR
163.1(a)(1) and encompasses a wide range of information that is made or
normally kept in the ordinary course of business that pertains to any
activity listed in 19 CFR 163.1(a)(2).
CBP does not agree with expanding the scope of disclosure of
confidential information to additional scenarios. CBP cannot give
advance authorization for the disclosure of importer records, as that
authority lies with the client (importer). A broker is merely an agent
of the importer, and the broker must obtain a written release from a
client allowing for the sharing of client information with third
parties for certain purposes, as the scope of client information to be
shared is determined by the client. Written authorization for specific
disclosures may be granted by the client to the broker as part of a
power of attorney, or as a separate release.
Comment: One of the commenters referred to Headquarters ruling
H221355 (November 21, 2012) in which CBP determined that a broker is
prohibited from disclosing the name and address of a client to a third
party for security verification purposes. The commenter asked CBP to
revise Sec. 111.24 to provide that a broker is not precluded from
disclosing client information to other third parties.
Response: CBP does not agree with the commenter's request. CBP
continues its interpretation that, absent client consent, Sec. 111.24
prevents the sharing of client contact information with a third party
for security verification or other purposes, as determined in
Headquarters ruling H221355. Any authorization for the broker to use
client information must be set forth in the power of attorney that is
agreed upon between the broker and the client or obtained in a separate
written release. The confidentiality of a client's business information
remains a paramount concern for CBP, but a client can always authorize
the broker in writing to share information with third parties for
certain purposes.
Comment: Several commenters asked CBP to consider revising the
exemption that allows brokers to disclose information to
representatives of DHS and limit the disclosure to representatives of
CBP and U.S. Immigration and Customs Enforcement (ICE). The commenters
argued that the agencies most directly involved with the business of
the clients serviced by brokers are CBP and ICE, and only those
agencies should be specified in the regulation. The commenters
suggested to add the phrase ``or as requested, in writing, by employees
of other government agencies as necessary and appropriate.'' to include
DHS representatives. Alternatively, other
[[Page 63280]]
DHS agencies could fall under the catch-all phrase ``other duly
accredited officers or agents of the United States'' in Sec. 111.24.
One commenter pointed out that the proposed regulation does not
contemplate that a broker may need to consult with an outside party,
such as an attorney or consultant, or insurance underwriter/broker. The
broker asserted that the broker should be able to discuss, and more
importantly, disclose details of an incident, to an outside third party
in the context of a damages claim by the client against the broker due
to the broker's alleged error or omission.
Response: CBP proposed to replace the list of specific covered
government employees to whom the broker records may be disclosed with a
general reference to DHS representatives in order to include any
government entity within DHS who may be involved in a broker matter.
This language maintains CBP's flexibility to involve other entities
within DHS, if deemed necessary. It is important to note that within
DHS, all agencies are bound by the same information sharing rules to
properly protect confidential information. Thus, CBP does not agree
with limiting the general rule of disclosure of client information to
CBP and ICE.
Additionally, DHS representatives are specifically mentioned in
current Sec. 111.26, in the context of interference with the
examination of records. By revising Sec. Sec. 111.24 and 111.25 and
adding a reference to DHS, CBP is creating consistency among the
regulations that deal with a broker's recordkeeping responsibilities.
Comment: One commenter, who expressed support for the addition of
exemptions that permit information sharing, stated that the exemptions
do not extend far enough to meet the needs of the modern business
community. The commenter argued that many businesses have separate
operating entities under one parent company that offers a broad set of
services to customers. In a situation where one company acts as a
broker, it should be allowed to share customer data within the larger
corporate structure, assuming certain ownership and control metrics are
met. Another commenter added that, at a minimum, the regulation should
permit data sharing with a related corporate entity, such as a
transportation provider, where the related entity originally provided
the customs information to the broker.
Response: CBP disagrees with the commenter's suggestion to expand
the scope of exemptions in Sec. 111.24. Related entities within a
larger corporate structure are still separate legal persons (see
Headquarters ruling 116025 (September 29, 2003)), and no information
may be shared among those related entities without a client's consent.
As mentioned above, a client may consent to a broker's sharing client
information within the larger corporate structure but consent to share
information with related entities cannot be assumed, and it cannot be
mandated by CBP.
Comment: One commenter, a surety association, asked CBP to amend
Sec. 111.24 to add an affirmative obligation to provide information to
those entities specifically identified in that section, i.e., when
disclosure is allowed, it should be compulsory. The commenter argued
that, as the regulation is written, the broker does not have an
affirmative requirement to provide information to the client's surety
on a particular entry. Even though a surety continues to be named as an
exception to a list of parties to whom disclosure may be allowed,
brokers do not always read that language as compulsory. The commenter
proposed to add language indicating that a broker ``must'' disclose the
contents of the records, or any information connected with the records
to those clients to the entities listed in proposed Sec. 111.24, or,
in the alternative, add language to state that information may be
disclosed if an unexpected or unanticipated matter arises and the
broker considers it necessary to consult, inform, or engage with third-
party experts.
Response: CBP does not agree with the commenter's suggestion and
will not change the regulatory language to reflect that a broker
``must'' disclose client information to a surety. CBP will not mandate
that brokers share confidential client information with the third
parties listed in Sec. 111.24. CBP maintains that sureties are third
parties, incidental to the relationship between a broker and his or her
client. Moreover, the surety is in a contractual relationship with its
own client and should be able to establish an exchange of information
with that client under the terms of their business relationship. It is
therefore not appropriate for CBP to authorize in regulations the
transmission of data to sureties pertaining to relations with
unlicensed persons.
Comment: One commenter stated that the proposed regulations have
not addressed a significant issue surrounding Sec. 111.24, namely the
storage of broker client data with cloud-based third-party providers.
The commenter stated that CBP had addressed this issue with ``service
bureaus'' in 19 CFR 143.4, but not with software service companies to
whom brokers entrust the storage and security of client data and posed
the question of whether data storage companies are considered ``service
bureaus''.
Response: Service bureaus are software providers that provide
communications facilities and data processing services for brokers and
importers, but which do not engage in the conduct of customs business,
pursuant to 19 CFR 143.1(a)(3), 143.4. Service bureaus transmit
electronic data to CBP as part of a service provided to the broker, and
this data is considered confidential and may not be disclosed to any
persons other than the filer or CBP. Companies that provide data
storage (whether cloud-based or otherwise) contract with the broker. In
such a setting, the security requirements are based on an agreement
between the company and the broker, and CBP is not involved in this
arrangement. Thus, a third-party data storage company is not considered
a ``service bureau'' pursuant to Sec. 143.1, rendering the
confidentiality requirement set forth in Sec. 143.4 inapplicable.
Comment: A few commenters stated that the proposed standard of
making the records available at a location specified by DHS in Sec.
111.25(b) is vague and CBP should provide a clarification. The
commenters suggested that CBP should specify that a broker shall make
records available at its designated broker management unit within the
appropriate Center, or at an alternative location mutually agreed upon
by the broker and CBP. The regulation should further clarify that
either paper or electronic copies of documents may be provided to
ensure that neither the broker's physical presence nor any travel is
necessary.
Response: It is CBP's current practice that the location for the
inspection of records is either the broker's office or a CBP office,
and CBP will continue to allow those two locations for the inspection
of records. In addition, CBP welcomes the opportunity to clarify that
CBP accepts both paper and electronic records for inspection purposes.
In fact, CBP has been accepting electronic records in cases of audits
and otherwise during the COVID-19 pandemic. However, CBP reserves the
right to request original versions of documents if deemed necessary.
Comment: Two commenters stated that CBP should consider repealing
19 CFR 163.5, which requires advance written notification of an
alternative storage method for records. In today's highly automated and
virtual environment, such a notification should not be required and is
an administrative
[[Page 63281]]
burden for both the trade and CBP. Two other commenters argued that the
final rule should include the freedom to allow a broker to maintain
electronic records of its brokerage tasks, as well as any other related
documents, as long as these documents can be readily retrieved and are
properly backed up to comply with the time period mandated under Sec.
163.5, without having to request written authorization.
Response: CBP disagrees with the first two commenters' request to
repeal Sec. 163.5. Section 111.25(c) refers to part 163, setting forth
the provisions for the maintenance, production, inspection, and
examination of records. Section 163.5 deals with recordkeeping
requirements in general, and applies not only to brokers, but also
owners, brokers, consignees, entry filers or agents of those persons
mentioned in Sec. 163.2. Brokers mentioned in this section are only
one of the groups of persons to which the recordkeeping requirements
apply. For these reasons, CBP will not repeal this section.
Part 111 sets forth the specific recordkeeping requirements
applicable to brokers, and the records that each customs broker must
create and maintain, and make available for CBP examination, in
addition to the requirements in part 163. As explained above, CBP will
continue its current practice of requiring that original records be
maintained within the U.S. customs territory, in a manner that they may
be readily inspected. The regulations permit either paper or electronic
storage of original records, such that any other method is deemed
alternative and requires written authorization. See Sec. 163.5(a).
Backup records may be kept outside of the U.S. customs territory
because CBP does not regulate these duplicate records.
Comment: Several commenters stated that the proposed standard in
paragraph Sec. 111.28(a) that a sole proprietorship, partnership,
association, or corporation must employ a sufficient number of licensed
brokers is vague, and a definition is needed for the term
``sufficient''. The commenters stated that CBP should not require a
``sufficient number'' of brokers as a factor, but rather set best
practices as guidance for brokers in a revised Broker Management
Handbook. Commenters stated that best practices would allow for an
administrable and enforceable standard for brokers and CBP, as it is
unclear under the proposed language how CBP would evaluate this
obligatory standard (``must employ'') and how it is meant to complement
the enumerated factors. A few commenters raised the same concerns with
respect to proposed factor (6) in paragraph (a) requiring the
availability of a sufficient number of individually licensed brokers
for necessary consultation with employees of the broker. These
commenters argued that the language should be revised with simpler
language to require only the availability of licensed brokers for
necessary consultation with employees of the broker.
One commenter recommended to delete ``sufficient'' and replace the
language with a standard number that can be applied to all brokers. For
example, if an office had more than 15 employees conducting customs
business, then an additional broker would be required to maintain
proper supervision and control. Another commenter suggested to have a
certain number of brokers per number of employees conducting customs
business.
Response: CBP does not agree that the term ``sufficient'' needs to
be revised or removed. Allowing a broker entity to determine what is a
sufficient number of licensed brokers gives the entity flexibility as
to how to exercise responsible supervision and control. The sufficiency
of licensed brokers employed by a sole proprietorship, partnership,
association, or corporation is a fact-specific determination. CBP does
not want to mandate a certain number of licensed brokers or a ratio of
employees to licensed brokers, as the sufficiency of licensed brokers
depends on multiple factors, such as the size of the broker entity, the
skills and abilities of the employees and supervising employees, and
the complexity and similarity of tasks that need to be completed. Each
broker needs to evaluate his or her own business and see what is needed
to provide high quality service to the clients. During the broker's
internal reviews and audits, the broker entity will assess the
sufficient number of licensed brokers required for the proper conduct
of customs business. For example, if an entity has a lot of new
employees, more licensed brokers may be necessary for oversight; a
larger entity with many clients will most likely need more licensed
brokers than a smaller entity with fewer clients. All determinations
concerning sufficiency are fact-specific, and CBP does not want to
specify a certain number of brokers that is required for a certain size
of business. In addition, the Broker Management Branch at CBP
Headquarters engages with the brokers to answer questions and resolve
any issues as they arise, and thus, brokers may contact CBP if there
are any questions. Additionally, with the inclusion of the ``sufficient
number'' language in the proposed regulation, CBP incorporated COAC's
recommendation to employ an adequate number of licensed brokers to
ensure responsible supervision and control, as part of its
recommendation to move to a national permit framework.
Comment: One commenter expressed the concern that the language
``sufficient number'' could be interpreted differently by different
Centers. The commenter also asked what time frame would be provided for
broker entities to come into compliance should a Center determine that
the current number of brokers is not sufficient. Lastly, the commenter
asked whether there would be ways to challenge a Center's decision, or
at least challenge the methodology used to determine, for example, the
adequacy of licensed brokers to entry writers.
Response: As mentioned above, CBP Headquarters provides guidance to
all BMOs to ensure that brokers receive consistent answers to
questions. CBP will continue to do so regarding any changes brought
about by the final regulations, including the requirement to have a
sufficient number of licensed brokers. Regarding the time frame for
compliance in case CBP determines that a broker entity does not employ
a sufficient number of licensed brokers, CBP will handle this matter in
the same fashion as other broker matters where CBP might detect an
error in entry filings or other submissions by the broker. CBP will
address the issue (in this case, the insufficient number of licensed
brokers) with the broker and state that action needs to be taken by the
broker to correct the issue, such as additional licensed brokers to
exercise responsible supervision and control. Then the broker will have
an opportunity to address the issue and CBP will work with the broker
on a plan of action to resolve the issue. If the broker does not follow
the plan of action, then CBP will issue a warning. A decision by the
BMO regarding the sufficiency of licensed brokers may be challenged by
escalating the issue to a BMO's supervisor, the Assistant Center
Director. Ultimately, however, the broker will need to follow the plan
of action determined necessary by CBP. Continued failure to do so will
warrant escalated CBP remedial actions including, possibly, a penalty,
or suspension or revocation of a license. When the processes for a
penalty, suspension, or revocation are invoked, the broker has the due
process opportunities already afforded by CBP regulations.
Comment: One commenter stated that CBP should consider the number
of
[[Page 63282]]
employees with a Certified Customs Specialist designation as a means to
meet the responsible supervision and control requirement.
Response: CBP disagrees with the commenter's suggestion. The
privately offered Certified Customs Specialist (CCS) certification must
be distinguished from the profession of a licensed customs broker. To
become a CCS, an individual must take the CCS course and an exam at the
end of the course, and have at least one year of customs experience,
but is not required to be a licensed customs broker. A CCS's position
cannot be elevated to that of a licensed customs broker, and therefore,
having a certain number of CCSs in a broker entity will not satisfy the
responsible supervision and control standard. However, the fact that a
broker entity employs numerous CCSs might affect CBP's evaluation of
whether the entity employs a sufficient number of licensed customs
brokers.
Comment: One commenter stated that CBP must provide guidance as to
the responsible supervision and control standard for the broker
community since a failure to comply with the standard could lead to
penalties and suspension or revocation. Any guidance would encourage
brokers to incorporate these standards into their compliance programs.
The commenter further recommended that CBP create a procedure where
brokers can get clearance on whether the number of licensed brokers is
sufficient for a particular broker entity before any change in the
number of brokers requirement is imposed, and create a program, which
would permit brokers to get clearance on this question after the
requirement is imposed.
One commenter stated that the regulation must be clarified, or
otherwise removed, and added that even though CBP stated it will be
providing guidance, this guidance would not be subject to review and
comment, depriving the broker of any input on this issue.
Response: CBP disagrees with the first commenter's request that CBP
should provide prior clearance on the issue of sufficient number of
licensed brokers, or approval of the number of licensed brokers after
employment of a set number of brokers. Prior clearance cannot be given
to a broker entity because it is impossible for CBP to evaluate
beforehand whether a certain number of licensed brokers will be
sufficient to exercise responsible supervision and control. Such a
determination depends on specific facts and circumstances of the
individual broker's or broker entity's customs business. CBP assesses
the sufficiency of licensed brokers in the context of the broker's
business dealings; it is not an abstract decision that can be made.
Further, CBP does not believe that creating a program to provide prior
approval of a set number of licensed brokers for a broker entity would
be beneficial. As with prior clearance, approval after the fact is not
feasible because CBP would not know whether the broker entity will
function properly and exercise responsible supervision and control
until the entity is in fact conducting customs business.
Before CBP issues a suspension or revocation there is usually a
history of a broker's failure to meet the supervision standard; in most
cases, CBP does not automatically suspend or revoke a broker's license.
There will be communication between the broker and CBP regarding the
broker's failure to meet the supervision standard, and ways to mitigate
that failure.
One of the commenters asked that any regulatory changes based on
public comments be subject to review and comment by the public for a
second time. CBP disagrees with this request. Pursuant to the
Administrative Procedure Act (APA) (5 U.S.C. 551 et seq.), CBP
solicited comments from the public regarding the proposed changes to
part 111 and provided a 60-day comment period. Any change from the
proposed regulations is either based on a public comment, a
clarification of the proposed or current regulations, or a change that
results in a benefit or convenience to the broker community without
detriment to existing rights, such as additional automation of certain
processes. CBP will not implement any major changes without seeking
public input first. Thus, CBP does not see the need to provide a second
opportunity for public comments on any guidance that CBP will issue
before finalizing the proposed regulations.
Comment: Several commenters expressed a concern with respect to the
change from the word ``will'', which used to be part of the definition
of responsible supervision and control in Sec. 111.1, to the word
``may'' in Sec. 111.28(a). The commenters stated that this change
indicates that CBP is no longer required to take into consideration all
the listed factors when determining whether a broker exercises
responsible supervision and control, and thus removes the protection
from a broker by not obligating CBP to consider broker compliance
efforts in their totality. One mistake could seemingly result in a
broker penalty without regard to the other factors.
Several commenters urged CBP to continue to consider all enumerated
factors in assessing responsible supervision and control to avoid any
arbitrary and capricious determinations and prevent inconsistent
decisions by different CBP officers. The commenters argued that keeping
``will'' in the regulation provides transparency and uniformity for
brokers in executing operations and procedures, as well as for CBP
officers in administering and enforcing this standard. A change to
``may'' would allow CBP to focus on whichever factor it deems
appropriate to the exclusion of additional factors that are clearly
relevant as to whether a broker is exercising responsible supervision
and control. CBP should be required to review all factors in order to
ensure that a broker receives a full and fair evaluation.
Response: CBP disagrees with the commenters. CBP needs flexibility
in determining whether a broker is exercising responsible supervision
and control over the customs business that it conducts, as this is a
fact-specific assessment. It has been CBP's practice to give greater
weight to the factors that are implicated in a broker's exercise of
responsible supervision and control when making a determination. There
may be instances where one or more factors will be more relevant than
others in determining whether a broker did or did not exercise
responsible supervision and control. While it is possible that CBP's
determination that a customs broker has failed to exercise responsible
supervision and control may be predicated on fewer factors, but ones
that CBP considers relevant, this does not prevent the broker from
presenting in its defense any factors it believes to be mitigating.
Comment: A few of the commenters stated that the change from
``will'' to ``may'' would be contrary to judicial precedent, citing a
court case, United States v. UPS Customhouse Brokerage, Inc., 575 F.3d
1376, 1382 (Fed. Cir. 2009), in which the court decided that CBP's
failure to consider all ten factors to determine whether a broker
exercised responsible supervision and control was improper.\9\ In
addition, a commenter argued that the proposed language is in violation
of Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), because agencies
cannot implement regulations that are arbitrary and capricious.
---------------------------------------------------------------------------
\9\ The cited court case may be found online at https://cite.case.law/f3d/575/1376/.
---------------------------------------------------------------------------
Response: CBP disagrees with the commenters. CBP may only be bound
by judicial precedent if the same regulatory language is still in
place. If CBP decides
[[Page 63283]]
to change the regulation through a process allowed by the APA, judicial
precedent no longer binds CBP in making that change. Further, the
proposed language in Sec. 111.28(a) is not arbitrary and capricious.
CBP proposed in the NPRM to keep the list of factors to determine
responsible supervision and control set forth in Sec. 111.1, and move
it to Sec. 111.28(a), along with some additions and modifications to
reflect the changes brought about by the transition to a national
permit framework. CBP further proposed to consider the relevant factors
from among those listed on a case-by-case basis. No decisions will be
made without a thorough evaluation of the relevant factors present that
apply to an individual broker.
Comment: Several commenters stated that the newly proposed factors
in Sec. 111.28(a)(11) through (15) are vague and decrease a broker's
certainty in adopting and executing the necessary processes to meet the
supervision standard. The commenters suggested that the factors either
be removed or at least incorporated into one general factor, for
instance into factor (10), as an indication that an individually
licensed broker has a real interest in the operations of a broker. In
addition, commenters requested that any guidance as to the factors be
provided as best practices in the Broker Management Handbook.
A few commenters suggested to remove the new factors because the
current ten factors are adequate to determine that a licensed broker
has a real interest in the operations. One commenter referred to COAC
recommendation No. 010021 (April 27, 2016), which recommends that CBP
provide guidance to brokers regarding the ten factors demonstrating
responsible supervision and control, such as how to properly train
employees, issue appropriate written instructions and internal
controls, maintain an adequate ratio of employees to licensed brokers
based on certain factors, and engage in supervisory contact, audit and
review operations. The commenter is of the opinion that CBP has not
done so in the NPRM.
Response: CBP disagrees with the comments to either remove or
consolidate the proposed factors (a)(11) through (15) into existing
factor (10). First, including all proposed factors in one factor would
make the language complex and difficult to follow and enforce. Second,
CBP added factors that reflect their importance in the modern brokerage
environment and their importance in evidencing the proper transaction
of customs business. For instance, filing entries late, paying the
government late, or not returning client or CBP communications, are all
evidence of a broker's failure to exercise responsible supervision and
control. CBP provided an explanation as to each proposed change in the
NPRM, and as mentioned above, has worked with the broker community in
the past and has taken into account their recommendations. As mentioned
above, a new guidance document, that will be published concurrently
with the publication of this final rule, will include information as to
the listed factors in Sec. 111.28(a). In the meantime, brokers may
find additional information and guides on CBP's website at https://www.cbp.gov/trade/programs-administration/customs-brokers regarding the
broker license exam, triennial status reporting requirements for
current brokers, as well as additional information and resources for
brokers.
Comment: One commenter raised a concern regarding proposed factor
(11), i.e., the broker's timeliness of processing entries and payments
of duty, tax, or other debts owed to the government. Two commenters
stated that a broker is not obligated to pay on behalf of an importer
and asked how the timeliness factor can be judged in such a situation.
Both commenters stated that the term ``timeliness'' is vague and does
not provide a benchmark to which a broker can develop and execute
processes, nor can CBP uniformly and transparently evaluate and enforce
the standard. The same concern as to vagueness was raised for the term
``responsiveness'' in proposed factors (13) and (15).
Lastly, commenters stated that the term ``communications'' in
proposed factors (12) (communications between CBP and the broker) and
(14) (communications between the broker and its officer(s)) is too
broad. One commenter explained that proposed factors (12) and (13) (the
broker's responsiveness and action to communications, direction, and
notices from CBP) do not explain what type of communication is covered,
and proposed factors (14) and (15) (the broker's responsiveness and
action to communications and direction from its officer(s)) cover
communications between parties to which CBP would have no visibility.
One commenter posed the question whether CBP will regularly make
available to customs brokers examples of communications relevant for
verification and training purposes.
Response: CBP disagrees that these proposed terms need to be
further defined in the regulation. The timeliness factor looks at a
broker's repeated failures to timely file entries and/or duties, taxes
or other debts owed to the government, not just one incident alone.
``Timely'' generally means doing something by the time it is required
to be done in statute or regulation, which is not a vague concept. If a
broker frequently fails to timely submit entries and/or payments, CBP
will consider the failure to comply with factor (11) in its
determination as to whether a broker is exercising responsible
supervision and control.
With respect to the term ``responsiveness'' in factors (13) and
(15), a broker's failure to respond to any communications, direction
and notices from CBP, and to communication and direction from its
officer(s) or member(s) (i.e., not returning phone calls or emails,
etc.) will reflect negatively on whether a broker is exercising
responsible supervision and control.
The term ``communications'' in the context of responsible
supervision and control is used to assess how well and timely a broker
is communicating with its officer(s) or member(s), and with CBP. CBP
does not agree that examples of communications need to be provided to
brokers for verification and training purposes. Brokers should be able
to determine what, if any, communication is needed in a particular
situation with CBP and officer(s) or member(s) of the broker entity.
To make the proposed language in Sec. 111.28(a) more concise, CBP
combined factors (12) and (13) into one new factor (12), which deals
with the broker-CBP relationship, and combined factors (14) and (15)
into one new factor (13), relating to the broker-officer/member
relationship. In addition, CBP added a reference to ``member(s)'' in
the new factor (13) to account for partnerships, in addition to
associations and corporations as a type of broker entity.
Comment: Several commenters stated that it is unclear what the
terms ``reject rate'' and ``various'' in proposed factor (4) of Sec.
111.28(a) mean under the new supervision standard and argued that,
without clarity, this metric is misleading and could be highly
prejudicial. One commenter stated that the factor should be eliminated
because it appears to be intended to account for a broker's mistakes
(versus an importer's or other third party's mistake). Clear guidelines
are necessary as to what CBP considers an actionable rejection, and
only those instances where the broker is at fault (and not the third-
party importer) should be taken into consideration.
Response: CBP does not agree with the commenters that the terms
``reject rate'' and ``various'' need to be clarified
[[Page 63284]]
in the regulation. The reject rate for the various customs transactions
historically has been a factor in Sec. 111.1 in the definition of
responsible supervision and control. ``Various'' means not just one
rejection, but several, over the course of time. CBP proposed to add
language to this factor when moving it to factor (4) in Sec. 111.28(a)
to clarify that CBP looks at the reject rate by comparing the number of
rejections with the broker's overall volume of entries. This revised
language provides a better context to evaluate the quality of
responsible supervision and control as CBP looks at the totality of the
transactions conducted by the broker to determine whether the broker is
properly filing entries. In addition, CBP relied on COAC recommendation
No. 010020, which suggested a clarification of existing factor (4) to
state that the reject rate resulting from entries or entry summaries be
expressed as a percentage of the broker's overall business for the
various customs transactions, when making this change to the original
factor.
CBP agrees with the commenter who states that this factor is
intended to account for a broker's mistakes, however, a broker's
responsibility includes a duty to verify any information received from
an importer. The broker must exercise due diligence and make sure that
the data from the importer is correct, e.g., that the classification of
goods is correct. The broker must further verify, depending on the
specific facts and circumstances, whether the importer has experience
in gathering and providing the necessary information to the broker,
whether the importer is a new client, and may need more assistance, or
whether the client is experienced in providing the necessary
information. CBP has no way to determine once a filing is made whether
a mistake (and reject) was due to a broker's mistake, or due to
incorrect information provided by the importer. Moreover, any type of
rejection will be communicated to the broker, and the broker has the
opportunity to make a clarification.
Comment: Further, several commenters requested that not all system
rejects in Automated Broker Interface (ABI) should be considered as
rejects as they are often due to contributory factors, such as system
outages, delays in HTSUS updates, and programming changes for Partner
Government Agencies (PGAs) and in the CBP and Trade Automated Interface
Requirements (CATAIR) with short deployment time frames and highly
complex filings causing numerous system rejects. One commenter added
that ACE is too new and there have been problems with CBP processing,
especially drawback filings, thus, this factor (4) in Sec. 111.28(a)
is not appropriate.
Response: In case of system outages or delays, where the broker is
unable to file in ACE, the broker does not receive a reject. A reject
occurs only if the broker successfully submitted a filing in ACE, which
is considered filed, and because of the lack of accuracy of the filing,
is rejected. As to the comment that ACE is too new, ACE has been the
system of record since November 1, 2015, as mentioned above. Both CBP
and the trade community have gained extensive experience over the last
several years working with and in ACE. As to the commenter's second
point, CBP usually announces programming changes, either in a Federal
Register notice, or via a CSMS message, with guidance for the changes
or updates to the process and provides additional time (usually 30
days) after the publication of a notice as to when announced changes or
updates become operational. Lastly, drawback claims have been
successfully filed in ACE since February 2018. The ACE drawback module
has been enhanced significantly to include expanded filing capabilities
for claimants, refined validations that reflect current import
practices, and updated bonding policies for accelerated payments. In
addition, CBP maintains extensive customer service resources for
existing and new drawback filers.
Comment: Another commenter requested clarity about census warnings
and asked that they not constitute rejects. Another commenter stated
that the term ``reject rate'' lacks specificity and asked whether the
term is the same as used in Customs Directive 099-3550-67.\10\
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\10\ The Customs Directive may be found online at https://www.cbp.gov/sites/default/files/documents/3550-067_3.pdf.
---------------------------------------------------------------------------
Response: Census warnings are informational messages that are part
of the entry validation process. The U.S. Census Bureau (Census)
provides CBP with specific data ranges at the HTSUS level that ACE uses
to validate a variety of data elements (e.g., line value, charge). If a
line is transmitted that falls outside of the Census parameters, ACE
will return a warning message to the filer. These warnings are
described in the Appendix H of the CATAIR.\11\ A Census warning is not
a reject, as the entry summary is not incorrect, but the information
provided is unlikely to be accurate, given Census' parameters. The
filer is then required to submit the corrected line data or if the data
is found to be correct as entered, submit the reason code for a Census
``override.''
---------------------------------------------------------------------------
\11\ Appendix H provides a detailed resolution on each warning
so that the party receiving the warning will know what elements are
considered to be ``unlikely'' to be accurate. The appendix may be
found online at https://www.cbp.gov/document/technical-documentation/ace-catair-appendix-h-census-codes.
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With respect to the second commenter, the reject rate pursuant to
Sec. 111.28(a)(4) covers rejections of entry summaries as discussed in
the Customs Directive mentioned above, even though some of the items in
this Directive have become obsolete.
Comment: Another commenter suggested that rejects should only be
counted after a broker has had the opportunity to agree or provide
proof that the originally filed entry was correct. Another commenter
asked whether CBP would consider listing rejected entries in ACE to
allow the broker to review these entries for verification and training
purposes. Lastly, one commenter stated that multiple rejects due to one
problem should not be counted as multiple rejects.
Response: CBP does not agree with these comments. A filer receives
an error message in ACE if there are any issues when filing. If the
submission is rejected, comments are provided as to corrective action
that is necessary. Whether a reject is a system reject or a manual
reject by a CBP employee, the filer is notified either way as to the
reason for the reject. With system rejects, an error code is provided,
and the error codes are described in the ACE CATAIR Error Dictionary
\12\ for the filer to refer to and correct the error. For a manual
reject, a CBP employee enters a message in an ACE user interface
``Notes'' field describing the error, along with instructions as to how
to re-transmit the filing in proper form. This message is transmitted
to the filer in ACE. For either type of reject, the filer is given
sufficient information to re-submit the correct filing, thus, CBP does
not believe that it is necessary for the filer to agree or provide
proof that the originally filed entry was correct.
---------------------------------------------------------------------------
\12\ The ACE CATAIR Error Dictionary is available online at
https://www.cbp.gov/document/guidance/ace-catair-error-dictionary.
---------------------------------------------------------------------------
Lastly, if a filer makes multiple filings, based on the same
incorrect information, the system does count each instance of filing as
a reject. CBP notes that if a broker makes the same mistake in several
filings and receives the same error code or message, and the filings
are rejected, the broker should be aware for future filings as to the
error and how to properly submit an entry. Additionally, the broker may
always
[[Page 63285]]
contact CBP to ask for clarification as to a rejected submission, if
necessary.
Comment: Some commenters stated that CBP should adjust the proposed
language in factor (7) (supervisory visits) and factor (8) (audits and
reviews) for Sec. 111.28(a) to include virtual options for supervisory
visits by an individually licensed broker of another office that does
not have a licensed broker, as well as audits and reviews of the
customs transactions that are handled by an employee of the broker in
order to better reflect today's often virtual business environment. In
addition, one commenter stated that CBP needs to define ``frequency'',
otherwise, a broker cannot ensure compliance.
Response: Virtual options for supervisory visits, and for audits
and reviews, are permissible. The factors, as written in the proposed
regulation, do not limit supervisory visits, and audits and reviews, to
a physical option. CBP understands, especially in the changed
environment brought about by the COVID-19 pandemic, and the move from
district permits to national permits, that both physical and virtual
presence should be allowed for supervisory visits, as well as audits
and reviews. However, whether a virtual supervisory visit or audit and
review is sufficient in any given case to exercise responsible
supervision and control depends on the specific circumstances of a
broker's business, such as the size and complexity of a broker entity
or the type of transactions that are handled by an employee. In
addition, the term ``frequency'' is a fact-specific determination. As
mentioned above, whether a broker exercises responsible supervision and
control depends on how a broker conducts its customs business, and it
is the broker's responsibility to determine how frequent the
supervisory visits, audits and reviews should be. For example, more
supervisory visits, and audits and reviews, may be necessary for new
employees, or employees tasked with more complex transactions.
Comment: Several commenters did not agree with the proposed
requirement in Sec. 111.28(b) that a permit holder submit a list of
the names of persons currently employed by the broker as this
requirement may be too burdensome, especially on large companies. The
commenters argued that CBP should require a list of names only of those
employees who are engaged in customs business, given that the
regulation specifically relates to supervision and control over the
transaction of the customs business. For the same reasons, two
commenters stated that the term ``broker employees'' used in paragraphs
(a) and (b) of Sec. 111.28 should be changed to ``employees who
conduct customs business'' because the term ``broker employees'' could
relate to any employee of the broker, regardless of the employee's
responsibility, and those employees should not be included in the
reporting requirement.
Response: CBP does not agree with the commenters. First, customs
brokers are required to exercise responsible supervision and control
over all of their employees, and in particular any of their employees
who assist with the customs business and transactions of the brokerage.
Requiring the customs broker to identify to CBP all of its employees
contributes to both the customs brokers' and CBP's knowledge and
awareness of the employees' status. Second, CBP requires the
comprehensive information for all persons employed by a broker in order
to be aware of all potential risks that any employee might present to
the revenue of the United States or the public. Only by obtaining
information on all employees can CBP properly engage in a dialogue with
the customs broker to determine that none of the employees of the
broker occupy a position within the brokerage that presents a risk to
the revenue or the public. It is important to note that this final rule
is not changing the reporting requirement for brokers. Brokers already
have an obligation to submit a list of names of persons employed by a
broker, and this obligation continues with this final rule, with the
only change being that brokers have to report less information on their
employees pursuant to the final regulation.
Comment: Two commenters stated that CBP should enhance ACE to
better facilitate the electronic reporting of employee information,
improve the reporting of information included in the triennial
reporting process and the submission of payment of various broker fees.
Specifically, the commenters suggested the addition of a section in the
ACE portal where updates can be easily made for new employees,
terminated employees, or a change of address. Another commenter stated
that the electronic data reporting system within ACE is cumbersome and
CBP should not adopt the proposed language in Sec. 111.28(b) regarding
the use of a CBP-authorized EDI in the final rule until a more modern
system and interface are available, such as blockchain.
Response: Electronic employee reporting for new and terminated
employees has been in place within ACE for several years. At this time,
brokers have several capabilities in ACE to add, remove or edit certain
information related to the license and permit. CBP agrees that the
automation of the broker submission could be further enhanced, and CBP
is continuing to work on technological advancements to streamline and
facilitate the processing of broker submissions. However, it is
important to note that the system is currently functional to receive
employee information from brokers.
In addition, as mentioned above, CBP deployed a new portal for the
electronic submission of and payment for the broker examination
application, and the submission of the triennial report and payment of
the triennial fee. In the case of the triennial reporting, if a broker
files the status report and pays the required fee in the eCBP portal,
CBP will send by email a receipt to the broker (if an email address is
on file) evidencing the completion of the required reporting. A copy of
the receipt and the filed report is maintained in the eCBP portal for
the broker to access at any time. To provide all brokers the ability to
receive an electronic receipt of the completion of the triennial
reporting requirement, CBP added a broker's email address as a
reporting requirement in Sec. 111.30. Specifically, CBP added ``email
address'' in the first sentence of paragraph (a) and added parentheses
after ``address information'' in the third sentence to clarify that the
office of record address, mailing address and email address are all
required for purposes of reporting a change of address. CBP also added
the email address requirement in paragraphs (d)(2)(i)(A) and (d)(2)(ii)
for individual brokers, both actively engaged and not actively engaged.
CBP further included the requirement of an email address for each
licensed member or licensed officer in case of partnership,
corporation, or association reporting in paragraph (d)(3)(i).
During the 2020/2021 triennial reporting period, approximately 90%
of the licensed brokers filed the required report and paid the required
fee through the new reporting tool. During that triennial reporting
period, a broker had to choose to either pay online through the eCBP
portal or at the port and had to submit both the report and the payment
through one of the chosen options; a broker could not submit the report
online and pay the fee at the port, or vice versa. For the next
triennial reporting period in 2023/2024, CBP will continue with the
same practice.
A broker who chooses to pay the fee at a processing Center, i.e.,
at one of the
[[Page 63286]]
41 BMO locations, may either complete the status report in the eCBP
portal and print the draft report or complete a paper copy of the
report, and then submit the report to a processing Center, along with
the payment of the fee. A BMO at a processing Center will accept the
required report and payment and provide a cash receipt. The BMO will
manually enter the information on the report in ACE for the triennial
reporting to be completed.
Comment: One commenter stated that the 30-calendar day requirement
in Sec. 111.28(b)(2) to provide the social security number (SSN) for a
new employee from a foreign country is difficult to comply with as it
typically takes longer for the new employee to receive an SSN, and ACE
does not accept any employee data without also providing the SSN. The
commenters asked CBP to allow the submission of employee information in
ACE without the SSN if it is not available at the time of the
reporting.
Response: Pursuant to the proposed regulation in Sec.
111.28(b)(2), a national permit holder must submit a list of new
employees within thirty (30) calendar days of the start of employment
to a CBP-authorized EDI system. In the rare instance, where an SSN is
not available for a new employee at the time of reporting, the broker
must submit the new employee information to the processing Center,
indicating that the SSN is still missing and that it will be reported
as soon as it is available.
Comment: Two commenters suggested to move paragraphs (b) through
(e) of Sec. 111.28, dealing with the reporting of employee information
and change in broker ownership, to Sec. 111.30. The commenters argued
that while these paragraphs indirectly pertain to supervision and
control, their placement in Sec. 111.28 is confusing as they represent
regulatory requirements regarding administrative issues more akin to
those set forth in Sec. 111.30.
Response: CBP disagrees with the two commenters and believes that
paragraphs (b) through (e) fit appropriately in Sec. 111.28. The
aspect of employee reporting falls under the responsible supervision
and control standard, as CBP will take into consideration a broker's
proper employee reporting when looking at whether the broker exercises
responsible supervision and control. In contrast, Sec. 111.30 includes
instructions for how and when to notify and report to CBP, and what
information to include in the notification and report.
Comment: One commenter stated that the responsibilities in proposed
Sec. 111.19(f) and proposed Sec. 111.28(a) are not consistent and it
is not clear which individual broker has to comply with the responsible
supervision and control standard. Proposed Sec. 111.19(f) talks about
``the individual broker who qualifies for the national permit'',
whereas proposed Sec. 111.28(a) talks about ``every licensed
officer''. In Sec. 111.19, the primary responsibility rests with the
individual broker designated as qualifying for a national permit,
whereas in Sec. 111.28, every licensed officer is included in the
definition of responsibility. The commenter suggested to amend Sec.
111.28 to conform with other sections and limit responsibility to the
specifically designated person as being responsible.
Response: CBP does not agree with the commenter. A license holder
and a national permit holder could be two different individuals
conducting customs business, meaning that the license holder is bound
by Sec. 111.28(a), whereas a national permit holder is held to the
responsibility stated in Sec. 111.19(f). Both requirements are
applicable to different designated individuals. If the license holder
is the same individual as the national permit holder, then that
individual is bound by the standard in Sec. 111.19(f), which also
refers to Sec. 111.28(a) and includes the same standard. This cross-
reference would not cause such an individual to have two types of
responsibilities.
Comment: One commenter asked CBP to define the phrases ``physical
proximity of subordinates'' and ``abilities and skills'' of employees
and managers'' set forth in Sec. 111.28(a). The commenter explained
that the pandemic has resulted in many licensed brokers working from
home, so the physical proximity of subordinates was not always
feasible. Another commenter stated that there should be full alignment
of the modernization efforts under the national permit framework,
meaning that CBP should remove the requirement for a sole
proprietorship, partnership, association, or corporation, to employ
licensed brokers relative to the physical proximity of subordinates
under the responsible supervision and control standard in Sec.
111.28(a).
Response: CBP disagrees with the commenters. Both phrases,
``physical proximity of subordinates'' and ``abilities and skills of
employees'', help a broker entity determine how many licensed brokers
are needed to exercise responsible supervision and control. Physical
proximity pertains to the aspect of an employee being physically
located in the same or different office close to a broker entity to
ensure proper supervision of a subordinate. The level of supervision
and the number of supervising employees depends on the ability and
skill level of each employee within a broker entity. To comply with the
responsible supervision and control standard, a broker entity must take
into consideration the experience, training, and skills of an employee
to make the determination as to how many licensed brokers are needed.
This determination is fact-specific and takes into account the various
factors listed in paragraph (a) of Sec. 111.28.
Comment: One commenter noted that Sec. 111.28(e) does not set
forth any time frames for CBP to make a decision as to whether CBP
wishes to investigate a new principal or render a decision as to the
acceptability of the new principal and notification of the transferring
broker. Without set time frames, a legal transfer of ownership of a
brokerage business could be voided. The commenter added that if the
sale is to another broker or to an employee that CBP had previous
notice of, there should not be an investigation.
Response: CBP will not add a time frame for completing a background
investigation pursuant to Sec. 111.28(e), just as there is no time
frame for the background investigation for a license application
pursuant to Sec. 111.14(a). CBP reserves the right to conduct a
background investigation on a new principal, if deemed necessary. That
said, if the new principal is a current employee of the broker and CBP
had recently completed a background investigation on that particular
individual, then CBP may not complete another investigation, but it is
in CBP's discretion to make that decision. It is important to note that
the new principal does not have to wait to conduct customs business
until CBP completes the background investigation and renders a decision
as to whether the new principal is approved. The new principal may
start conducting customs business as soon as the change of ownership is
completed. If CBP finds a problem during the background investigation,
CBP will address it with the new principal.
Comment: Several commenters asked that CBP change the deadline in
Sec. 111.30(a) for reporting of a broker's address to ten (10)
business days, instead of only ten (10) calendar days, to provide
flexibility with weekends and holidays, or simply unavailability of a
party that provides such information. One commenter suggested that
thirty (30) calendar days would be preferable to align with the
requirement in Sec. 111.28(b).
Response: CBP disagrees with the commenters and will keep the time
frame for reporting an address change at
[[Page 63287]]
ten (10) calendar days. CBP believes that a broker would know at least
ten (10) calendar days in advance when a business address is changing.
Moreover, CBP already added flexibility by changing the requirement
from an immediate written notice to ten (10) calendar days to inform
CBP. CBP believes that this is a sufficient time frame.
Comment: One commenter stated that when a broker changes his or her
name, pursuant to Sec. 111.30(c), the notice of the name change can be
provided to CBP after the fact, but a broker must notify CBP in advance
when he or she proposes to use a trade name in one or more states. The
commenter argued that providing this information in advance was helpful
when there were port licenses and manual records maintained at
individual ports because the port had no way of knowing that a trade
name was the pseudonym for a licensed entity. However, today, the filer
code in ACE represents the licensed entity, thus making this
requirement unnecessary.
The commenter recommended that to the extent that CBP asserts that
this documentation is still required, the regulation should be amended
to be more consistent by requiring submission of both the name change
and fictitious name authorization after the fact, rather than prior to
use, and the requirement should apply only to the licensee's state of
incorporation and office of record.
Response: It is CBP's practice to require proof of a broker's name
change or proposed trade name change prior to issuing a new license
reflecting the new name. While it is true that in many instances, an
individual broker does not provide evidence of a name change (e.g., due
to marriage, divorce, etc.) prior to the actual name change, CBP
believes that a broker entity who is planning on using a trade or
fictitious name for conducting business in one or more states will know
in advance what the new trade or fictitious name will be, thus,
reporting to CBP in advance, along with documentation to be filed in
those states, is not an unreasonable request. That said, in both
instances (the broker's name change and the proposed trade name
change), the broker will not be able to practice under the new name or
trade name until the license reflecting the new name is issued to the
broker. As mentioned in response to a comment above, CBP needs to know
in what state(s) a broker is conducting customs business to be able to
maintain oversight over the broker's business.
Comment: One commenter stated that the failure to file the
triennial report and pay the status report fee pursuant to Sec.
111.30(d)(4) should not result in forfeiture of the right to conduct
customs business, absent an opportunity to cure the failure. The
commenter argued that filing the triennial report is essentially a
ministerial activity with limited impact on CBP operations or revenue,
yet the failure to timely file the report and/or pay seems to have the
same effect of terminating a broker's ability to conduct business, even
if only temporarily. In the case of a violation of a more substantive
regulatory provision, the broker is given an opportunity to address the
violation before the imposition of a penalty, suspension or revocation,
however, the same opportunity is not afforded to the broker who failed
to complete the triennial reporting requirement.
Response: The suspension of a license by operation of law for
failure to timely file the status report in the month of February of
the reporting year pursuant to Sec. 111.30(d)(4) is prescribed by
statute. Section 1641 of 19 U.S.C. states that if a license holder
fails to file the required report by March 1 of the reporting year, the
license is suspended, and may be thereafter revoked under certain
circumstances. Therefore, CBP cannot modify the regulation to allow
brokers an opportunity to address the failure to timely fulfill the
status reporting requirements before a suspension is issued.
Comment: Some commenters stated that the proposed requirement in
Sec. 111.32 that a broker must not give, or solicit, or procure the
giving of, any information or testimony that the broker knew or should
have known was false or misleading in any matter pending before DHS is
a very subjective standard and provides CBP with too much discretion.
The commenters asked that CBP provide some criteria to determine what
the broker should have known, what is considered misleading, and
whether a misunderstanding qualifies.
Response: CBP cannot provide a comprehensive list of facts and
circumstances that a broker should have known. What a broker should
have known is based on a reasonable person standard. Based on a
broker's customs business, and the information the broker has before
him or her, the broker should be able to make the assessment whether
certain information is false or misleading and whether the broker
should have known. ``Misleading'' information is information that could
be deceptive, confusing, misrepresentative or just false. Whether a
misunderstanding qualifies as the broker's having filed, solicited, or
procured the giving of false or misleading information depends on the
facts and circumstances of a broker's knowledge, expertise, and
actions.
Comment: One commenter asked whether a broker must report to CBP
under Sec. 111.32 the mere fact of a separation from or cancellation
of representation of a client as a result of the determination that the
client is intentionally attempting to defraud or otherwise commit any
criminal act against the U.S. Government, or also provide details of
the suspected or known wrongdoing by the client. The commenter argued
that this proposed language goes against the goal of encouraging
confidential communication and effective collaboration with the client,
and improved compliance. Secondly, the commenter asked whether this
notification would be confidential.
Response: CBP needs to not only know the fact that a separation
from or cancellation of representation of the client occurred, but also
the client name, date of separation or cancellation, and the reason(s)
for the separation or cancellation, so CBP can exercise its due
diligence and perform an investigation of the importer's dealings.
Accordingly, CBP amended Sec. 111.32 to require this information in
the report. CBP proposed the change in Sec. 111.32 to ensure that a
broker not only advise a client after discovery that the client has not
complied with the law or made errors or omissions in documents, but
also document and report to CBP when a broker terminates the
representation of the client who directs the broker to continue the
noncompliance, error, or omission. In addition, pursuant to paragraph
(f) of section 1641, CBP has the ability to fill in gaps in the
regulations that CBP considers necessary to protect the revenue of the
United States, specifically, regulations relating to documents and
correspondence, and the furnishing by customs brokers of any other
information relating to their customs business to CBP. As to the second
question, information submitted to CBP is kept confidential within DHS,
and all the components within DHS follow the same information-sharing
rules. CBP will not put information received from brokers on its
website or otherwise publicize it without lawful authority to do so. As
mentioned above, the FOIA rules apply when it comes to disclosure of
such information under certain circumstances.
Comment: A few commenters asked whether a broker's duty to report
under Sec. 111.32 would deprive an importer of the ability to file a
prior disclosure pursuant to 19 U.S.C. 1592(d). One commenter stated
that a broker already
[[Page 63288]]
has the responsibility to advise a client as to any errors and how they
must be corrected, thus, this new requirement goes beyond 19 U.S.C.
1641.
Response: If an importer discloses the circumstances of a violation
under 19 U.S.C. 1592(a) before, or without knowledge of, the
commencement of a formal investigation of such violation (which could
be triggered by a broker's report), then full benefits of prior
disclosure treatment will be afforded. As to the second commenter, a
broker has a general duty to disclose any information that he or she
has learned while exercising customs business which indicates that a
client is attempting to defraud the government. If a broker learns of
any noncompliance or errors, then the broker must not keep this
information to himself or herself but must report it to CBP, which will
assist in combating fraud and other schemes against the government.
Comment: One commenter referred to section 3.5 (`Termination of
Client Relationship') of the economic analysis in the NPRM, where CBP
stated that it is expected that in many cases the report by the broker
under Sec. 111.32 would be drafted by an attorney. The commenter
argued that CBP is recognizing that this process is characteristic of
an ad hoc legal proceeding, evidencing that this reporting
responsibility is more of a legal one and should not be enforced by a
broker. Another commenter stated that the requirement would add a
burden essentially requiring brokers to adjudicate an importer's
actions, which is not the responsibility of a broker.
Response: CBP does not agree with the commenter's reasoning.
Brokers should be knowledgeable enough to identify when a client is
attempting to defraud the government or otherwise commit a criminal act
against the government. CBP is not asking brokers to adjudicate a
client's actions, but if brokers see any wrongdoing on the part of
their clients, and they separate from or cancel representation of their
clients as a result of having identified any wrongdoing, then brokers
must alert CBP. As discussed in the economic analysis further below,
the reporting requirement will cause a minor increase in the burden on
brokers.
Comment: One commenter suggested that the e-Allegations portal on
CBP.gov be used for reporting potential violations of law instead of
imposing a requirement on the broker.
Response: Submitting an allegation online through the e-Allegations
portal is one way of reporting a trade violation, but it is not the
best reporting tool in the broker context. Also, the option to submit
an allegation online does not relieve a broker of the responsibility to
report any information or a client's actions if the broker determines
that the client is attempting to violate the customs laws and
regulations. Brokers should report any attempted violation of customs
laws and regulations to a supervisory point of contact at the
importer's/client's assigned Center as the assigned Center handles all
processes associated with an assigned importer.
Comment: Another commenter stated that the proposed revisions to
Sec. 111.32 appear to exclude civil or non-criminal violations, and if
that was CBP's intent, CBP should clarify the regulation. Also, CBP
should include ``customs laws'' in the regulatory text of Sec. 111.32
to make it clear that the documenting requirement does not include all
Federal law (such as tax law, security laws etc.), but only those laws
with which a broker can be expected to be familiar.
Response: The proposed language of Sec. 111.32 includes civil
actions, such as fraud, as well as criminal acts against the U.S.
Government. To clarify CBP's intent, CBP modified the third sentence to
state that the broker has the duty to document and report if the broker
determines that the client intentionally attempted to use the broker
``to defraud the U.S. Government or commit any criminal act against the
U.S. Government''.
CBP disagrees with the commenter's second request to limit a
broker's responsibility to customs laws and exclude any other laws. A
broker must be knowledgeable as to international trade laws, customs
laws and regulations, and general customs practices that concern entry
filings, admissibility, classification, valuation of merchandise, as
well as duty rates for imported merchandise, and excise tax, among
other areas of expertise. In conducting its business, the customs
broker might become aware of the attempted importation of illegal
merchandise or perhaps import/export schemes violating certain laws,
that reach beyond what might traditionally be thought of as `customs'
laws.
Comment: Two commenters stated that the proposed change in Sec.
111.36(c)(3) to require a power of attorney directly from the importer
or drawback claimant, and not via a freight forwarder, is unreasonable.
The commenters argued that a lot of brokers use their forwarding
divisions to break down language barriers for non-resident importers or
delivery duty paid shipments.
Response: CBP does not prohibit a broker from working with the
forwarding division of a broker entity. The proposed regulation
precludes a broker from obtaining a power of attorney from someone
other than an importer or drawback claimant. The intent of this
proposed provision is to clarify that a freight forwarder cannot serve
as a barrier to communications between the broker and importer or
drawback claimant, to address issues of identity theft, supply chain
security, fee transparency, and to help ensure that an unlicensed
person is not benefitting from the customs business conducted by the
broker. However, a freight forwarder may be included as a third party
in a power of attorney between the broker and the importer or drawback
claimant. CBP does not regulate whether a broker uses foreign agents to
perform work that is not customs business, but CBP does strictly ensure
that persons not actually employed or supervised by a broker do not get
paid a portion of the fee derived from customs business services; such
persons may instead be paid by a flat fee.
Comment: One commenter supported the change to require a power of
attorney directly from the importer but asked that the language in
Sec. 111.36(c)(2)(i) and (ii) align with the proposed language in
(c)(3) for power of attorneys by including the drawback filer in
(c)(2).
Response: CBP does not agree that the language in paragraph (c)(2)
needs to be amended to include drawback claimants. Drawback claimants
are included in the phrase ``or other party in interest''. The term
``drawback claimant'' was specifically included in the proposed
sentence in (c)(3) to emphasize that a broker must execute and obtain a
power of attorney directly from either the importer of record or
drawback claimant, and not a freight forwarder or other third party
that is not part of the broker-importer/drawback claimant relationship.
Comment: Another commenter, a surety association, stated that when
an importer fails to file an entry summary or reconciliation entry or
fails to re-deliver goods, the surety is held responsible; but, the
surety is not authorized to take action to bring the defaulting bond
principal into compliance. Thus, the regulation should allow for a
surety to complete an action initiated by, but also abandoned by, its
bond principal. The commenter recommended to identify sureties, along
with importers and exporters, as parties authorized to file on their
own account under Sec. 111.2(a)(2)(i), and as one of the
[[Page 63289]]
parties from whom brokers may obtain powers of attorney (Sec. 111.36).
Response: CBP does not agree with the commenter's request to
include sureties in Sec. 111.2(a)(2)(i) as a party to file on their
own account, or in Sec. 111.36 as a party from whom brokers may obtain
a power of attorney. It appears from the commenter's reference to Sec.
111.1(a)(2)(i) that the commenter believes that a surety is acting on
behalf of a principal (importer), akin to an importer's authorized
employee/officer, but that is legally not the case. A surety and
importer have rights against each other on a bond. Therefore, sureties
may not be included in Sec. 111.2(a)(2)(i) as a party to file on their
own account.
Although CBP regulates the general requirements applicable to
bonds, which must be met by either the bond principal or the surety,
CBP does not regulate the terms of the relationship between the bond
principal and the surety, and thus a surety is not included as a party
from whom a broker may obtain a power of attorney under Sec. 111.36.
The function of the bond regulations is to protect the revenue and
ensure compliance with the laws and relevant regulations. The
contractual terms agreed upon by a surety and the bond principal, which
relate to matters other than bond coverage, bond conditions etc., are
beyond the purview of CBP. Information sharing between bond principals
and sureties, and their rights against each other over a particular
entry, are thus to be decided by contract, and not by the terms of
customs regulations pertaining to bonds (part 113) or brokers (part
111).
Comment: One commenter stated that CBP should clarify that in a
case where an importer directly provides a broker with a power of
attorney, the broker would not be precluded, in turn, to assign that
power of attorney to another broker in accordance with the original
power of attorney. One of the commenters pointed to the ``Broker A-
Broker B'' process described in the Broker Management Handbook.
Response: A power of attorney must be executed between the importer
of record or drawback claimant and the broker. A power of attorney
cannot be executed between the importer of record or drawback claimant
and the freight forwarder who in turn assigns the power of attorney to
a broker. The reason behind CBP's proposed language in Sec.
111.36(c)(3) is the addition of paragraph (i) in section 1641, based on
section 116 of the Trade Facilitation and Trade Enforcement Act of 2015
(TFTEA),\13\ for CBP to promulgate regulations to require brokers to
verify the identity of the client, and the notion that a broker should
know his or her client. However, the proposed language does not exclude
the assignment of a power of attorney from one broker to another
broker. Assignments of powers of attorney are permissible as long as
the original power of attorney is executed between the importer of
record or drawback claimant and the broker, and Broker A designates
Broker B to act on behalf of the client (importer or drawback claimant)
in accordance with the terms of the original power of attorney. In
other words, a designation by Broker A of Broker B is permitted so long
as the client consented to this designation in the original power of
attorney. Pursuant to Sec. 141.46, a power of attorney must be in
place before a broker acts on behalf of the client. Accordingly, to
clarify CBP's intent, paragraph (c)(3) was slightly modified by
removing the word ``obtain'' and replacing it with ``execute'' in the
first sentence.
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\13\ Public Law 114-125, 130 Stat. 122 (February 24, 2016).
---------------------------------------------------------------------------
Comment: One commenter asked CBP to confirm that electronic
signatures are permissible on powers of attorney.
Response: CBP recently issued Headquarters ruling H297978 (July 16,
2021), responding to a requester on this same question. CBP determined
that whether an electronic signature is permitted for use on a customs
broker power of attorney is determined by the applicable state's law
governing the execution of powers of attorney. In addition, CBP stated
in the Headquarters ruling that neither the applicable customs statute
nor regulations prohibit the use of an electronic signature on a power
of attorney, provided that it otherwise constitutes a valid power of
attorney between the broker and client and may be produced upon CBP's
request.
Comment: One commenter supported the changes in Sec. 111.36(c)(3)
but asked for additional changes in paragraphs (a), (b), and (c). The
commenter asked CBP to add language in paragraph (a) that sets forth
that the broker and importer or drawback claimant come to an agreement
as to how documents will be transmitted to the importer or drawback
claimant, and as to how payments will be made for services and other
expenses, and to add a sentence at the end of paragraph (b) stating
that nothing in the regulation would prohibit brokers from compensating
sales representatives in a manner that is agreeable to both. The
commenter further suggested to revise paragraph (c)(2) to state that
the broker shall transmit directly to the importer or drawback claimant
a copy of the power of attorney and terms and conditions to be signed
and returned to the broker, and to revise paragraph (c)(3) to provide
that the broker, freight forwarder, and importer or drawback claimant,
shall make arrangements as to how documents and payments will be made
for services and other expenses.
Response: CBP does not agree with the commenter's suggestion to
change paragraph (a). This paragraph sets forth an affirmative
obligation for the broker to provide a detailed statement to the
importer of the services rendered. This obligation is in place to
prevent misfeasance and fraud. CBP further does not agree with an
additional sentence in paragraph (b) to allow for the compensation of
sales representatives who are unlicensed in a manner that is agreeable
to both. Such an arrangement would prevent transparency of the billing
of services rendered and goes against the overarching principle that
brokers must not share fees generated from customs business with
unlicensed parties.
In addition, CBP does not agree with the suggested revisions to
paragraph (c)(2). Existing paragraphs (c)(2)(i) and (ii) set forth
minimum requirements for a broker to communicate certain information to
an importer or other party in interest to allow for transparent
billing. These requirements may be included in an agreement between the
parties involved in a transaction, but also need to be spelled out in
the regulation to emphasize that the conditions regarding the
compensation of a freight forwarder for referring a brokerage business
need to be made known and available to the importer. Lastly, CBP does
not agree with the revision in paragraph (c)(3) for the reasons
mentioned above. Brokers must fulfill the requirements in the
regulations; the conditions as to document submission and payments to
the broker may be spelled out in an agreement between the parties, but
it is important to have regulatory requirements that bind parties.
Comment: One commenter stated that the fee-splitting requirements
are antiquated, unclear and unrealistic. CBP should consider revoking
the fee-splitting prohibitions in (b) and the conditions under (c), but
at the very least create an additional carveout to (b) for ``unlicensed
related business entities of the broker whether located in the United
States or a foreign country''.
Response: CBP does not agree with the commenter. Brokers are
prohibited from creating fee arrangements whereby
[[Page 63290]]
the fees or other benefits resulting from the customs business services
rendered by a broker will directly benefit an unlicensed person or
entity. Thus, agreements wherein unlicensed persons acting as
independent agents receive a commission for marketing or selling
customs services on behalf of a brokerage company are generally
prohibited. However, in Headquarters ruling H302355 (January 29, 2019),
CBP had carved out a distinction between a commission paid to
unlicensed independent agents contracted by a broker, and the
unlicensed employees of a broker. The function of this distinction is
to preserve the regulation's underlying policy concern of preventing
unlicensed persons from improperly benefitting from the transaction of
customs business. Commission payments to an employee are permitted, but
not to independent agents who may or may not be operating outside of
the United States. Instead, a flat fee, not tied to a particular
transaction, would be permissible to compensate third-party agents for
selling customs services.
Comment: One commenter pointed out that according to language in
the preamble of the NPRM, a broker is required to have direct
communication with the importer. The commenter hoped that CBP
understands that, at times, clients/importers designate third parties,
e.g., attorneys and consultants, to engage with the brokers. As such,
brokers may communicate directly with third parties that represent the
importer and such circumstances, controlled by the importer's
preference, should be compliant and sufficient.
Response: CBP wants to clarify that there is no prohibition on the
communication between the broker and third parties that the client has
designated, but there is a prohibition on brokers executing a power of
attorney with a third party acting as an intermediary instead of
directly with the client. As mentioned above, CBP clarified the
distinction between clients/brokers and third parties/brokers and
replaced the word ``obtain'' with the word ``execute''. In addition, to
provide more clarity, CBP added a reference to ``other third party''
after ``and not via a freight forwarder''.
Comment: One commenter stated that the proposed change in Sec.
111.39(c) to require the broker to advise the client on a proper
corrective action and retain a record of the communication with the
client, in addition to the existing duty to advise the client if the
broker knows that the client has not complied with the law or has made
an error, is a shift of responsibility from the importer to the broker
who does not possess the same information that the importer does.
Another commenter stated that the proposed language in Sec. 111.39(c)
greatly increases a broker's responsibilities in an area that should be
the domain of the importer and pointed to 19 U.S.C. 1484 and 19 CFR
141.1(b) that place the responsibility for corrective action and
liability for duties and other debt on the importer. Accordingly, the
commenter is of the opinion that the proposed regulation is in conflict
with the cited law and regulation, and, thus, should be removed.
Response: CBP does not agree that the proposed regulation imposes
an additional burden on brokers. Brokers have an existing duty pursuant
to Sec. 111.39(b) to advise a client promptly of noncompliance, an
error or an omission of which the broker has knowledge. If a broker
continues to engage in customs business which then repeats such
noncompliance, error or omission, then a broker is violating Sec.
111.32 because a broker is now filing documents with CBP that the
broker knows contain false information. In addition, brokers should
already have a good practice in place for documenting any communication
with a client, and specifically any advice provided to a client on a
corrective action. Adding this proposed language in the regulation is
merely clarifying and codifying this responsibility.
Comment: Several commenters asked for clarification as to what type
of record must be retained as evidence of a corrective action, what
should be included in the ``communication'' with the client, and what
constitutes ``corrective action.'' The commenters suggested to add a
sentence to paragraph (c) to state that a copy of a corrected entry
demonstrating and/or communication explaining specific corrective
action(s) shall serve as an adequate record of such communication.
Response: CBP disagrees with the suggested sentence that a copy of
a corrected entry or communication could be sufficient to show that the
broker has advised its client of a corrective action. CBP does not want
to limit the types of records that qualify as evidence that the broker
advised the client of a corrective action. The record could be an email
or letter sent by the broker, or a written note summarizing a phone
call between the broker and client, to name a few. CBP is open to
accepting any record that the broker thinks would be sufficient in
evidencing the communication that took place between the broker and
client. Corrective action is the action that the broker took to
remediate the noncompliance or error; an action that the broker in his
or her good judgment understands needs to be taken.
Comment: One commenter referenced a statement in the economic
analysis in the NPRM (page 34848, 1st row in the table listing Sec.
111.39), which stated that the change in Sec. 111.39(c) is considered
neutral as it reflects CBP's current practice. The commenter disagreed
with that statement, noting that current part 111 does not explicitly
require customs brokers to provide clients with corrective action
measures reflective of the client's errors/violations.
Response: CBP believes that the statement in the economic analysis
is correct. A broker has an existing responsibility to advise the
client of any noncompliance and errors and suggest a corrective action,
even though it has not been stated expressly in the regulation.
Advising a client and documenting such advice should be a broker's good
practice, to protect the client's as well as the broker's interests, in
case of any litigation or complaint by the client. Further, a broker
has the responsibility pursuant to Sec. 111.21(a) to document any
correspondence with the client, which includes the documentation of any
corrective action(s) that the broker advised the client to take. CBP
wishes to take the opportunity to make clear that this communication
from the broker to the client is a record under Sec. 111.21. Thus, CBP
considers this responsibility a current practice, and determined that
the proposed language in Sec. 111.39(c) is deemed neutral in the
economic analysis.
Comment: Two commenters stated that brokers frequently refer
clients to consultants or attorneys for a proper course of action, and
CBP should recognize that a referral to a more qualified expert may be
the proper corrective action and should reflect that in the regulation.
Response: CBP understands that part of a broker's normal business
practice, in some situations where corrective action is needed, could
be a referral to a more qualified expert with regard to certain
corrective actions. However, that does not mean that a referral is the
only proper course of action. It is a reasonable person standard that
the broker must employ to determine what type of corrective action is
appropriate in a specific situation.
Comment: One commenter stated that the requirement that a broker
document the advice to a client under Sec. 111.39(c) serves no purpose
to CBP. If CBP has a concern with a broker's performance, then CBP
should conduct an audit. The commenter requested that CBP create a
standard reporting requirement and advise the importing community of
its
[[Page 63291]]
intention of collecting data and how the benefits of the data
collection do not cause the broker or importer to act without conflict
in its importing partnership with the importer of record.
Response: CBP disagrees with the commenter. The documentation
requirement does serve a purpose, which is evidencing that the broker
provided advice to the client, and that documentation is considered a
record pursuant to Sec. 111.21. The second sentence of Sec. 111.21(a)
states that a broker must keep and maintain on file copies of all of
his or her correspondence and other records relating to the customs
business. This is a recordkeeping requirement for all brokers; the
requirement in proposed paragraph (c) of Sec. 111.39 is merely
reiterating that a broker must keep a record of communication with the
client regarding the advice on a corrective action. To make this
existing requirement clearer, CBP included a reference to Sec. 111.21
in addition to the reference to Sec. 111.23 in paragraph (c) of Sec.
111.39. Since there are recordkeeping requirements in place, CBP
believes that there is no need for an additional reporting requirement.
Comment: Several commenters stated that CBP should allow for an
extension of time, extenuating circumstances, or an opportunity to
mitigate pursuant to Sec. 111.45 if the broker can show a good faith
effort to prevent the revocation of the license and permit. The
commenters argued that the effect of losing a single national permit is
much more detrimental than losing a district permit. The commenters
suggested language to add at the end of the first two sentences of
paragraph (a), preventing a suspension or revocation if a broker
demonstrates good cause or commits to corrective action, warranting an
extension of time.
Response: The statutory requirements in paragraphs (b)(5) and
(c)(3) of section 1641 set forth the reasons for a lapse of a broker's
license and permit. If a broker entity that is licensed as a
corporation, association or partnership fails to have, for any
continuous period of 120 days, at least one licensed officer of the
corporation or association, or at least one licensed member of the
partnership, the entity's license will be revoked by operation of law
under paragraph (b)(5). If a broker who was granted a permit fails to
employ, for any continuous period of 180 days, at least one individual
who is licensed, the permit will be revoked by operation of law under
paragraph (c)(3). Neither paragraph in the statute provides for a good
cause exception. Thus, the regulation, which mirrors the language in
the statute and mandates a revocation by operation of law, cannot be
changed to include such an exception. Moreover, CBP already provides
for the possibility for reinstatement of a license once the triennial
status report and associated fee are filed as required, as well as for
reinstatement of a permit. Moreover, there is no prejudice to a broker
if a license or permit is suspended or revoked by operation of law;
brokers are not barred from reapplying.
Comment: Other commenters suggested that there be an administrative
process prior to revoking a license and permit, such as providing prior
notice in case of a failure to pay the annual broker permit fee in
Sec. 111.45(b). Such process would allow for a less burdensome
resolution if the failure to pay was due to an administrative or
clerical mistake.
Response: The broker permit user fee is an annual fee that brokers
must pay for each permit they hold. CBP issues a Federal Register
notice to announce the amount of the fee, as well as the deadline to
pay the fee, on an annual basis. CBP also posts this information on its
website. CBP believes that there is sufficient notice for a broker to
timely pay the permit user fee. In addition, with the effectiveness of
the final rule, there will be only one permit user fee to pay per year
for a broker's national permit. Thus, CBP does not believe that the
timely payment of the fee is burdensome.
Subpart D--Cancellation, Suspension, or Revocation of License or
Permit, and Monetary Penalty in Lieu of Suspension or Revocation
CBP received supporting comments regarding the proposed changes to
subpart D of part 111. Specifically, one commenter supported the
proposal in Sec. 111.53 to add a new paragraph (g) to provide an
additional ground for the suspension or revocation of a license or
permit to cover convictions of committing or conspiring to commit an
act of terrorism as described in section 2332b of title 18 of the
United States Code (see 19 U.S.C. 1641(d)(1)(G)). Another commenter
supported the proposal in Sec. 111.62(e) to remove the requirement for
the broker to file his or her verified answer in duplicate prior to a
suspension or revocation hearing as it better reflects the current
electronic business environment. In addition, a commenter supported the
proposal in Sec. 111.76 to remove the requirement for a broker to file
an application to CBP to reopen a case in writing and in duplicate, if
an appeal is not filed, and instead to allow for electronic
communication.
Subpart E--Monetary Penalty and Payment of Fees
Comment: One commenter voiced the concern that the increase of the
license application fee will deter individuals from applying for a
broker's license.
Response: CBP conducted a fee study on the costs associated with
the broker license application, and CBP determined that the current
fees are no longer sufficient to cover the costs of servicing brokers.
The fee study showed that a fee of $463 for individuals and $815 for
business entities would be necessary to recover the costs associated
with the review of the license application and the necessary vetting
for individuals and business entities. However, to minimize the
financial burden on prospective brokers and not disincentivize those
who are pursuing a career as a broker, while also recovering some of
the increasing costs, CBP proposed to not increase the fees to the
level of cost needed, but to increase the application fee to $300 for
individuals and $500 for business entities. The economic analysis
explains the reasons for the increase of the application fee and
emphasizes the cost savings as a result of eliminating the district
permit requirement and other changes to part 111. Once the final
regulations are effective, a national permit applicant has to pay for
only one permit application to be able to conduct customs business
throughout the U.S. customs territory, in addition to the annual permit
user fee for only one national permit.
Comment: One commenter expressed disagreement with the increase of
the permit fee, pointing to CBP's ACE system and other electronic
platforms used for receiving payments and submissions of information
and argued that the use of those tools should reduce costs. In
addition, the commenter noted that the automatic transition from
district permits to national permits should not cause any additional
cost.
Response: As mentioned above, CBP proposed to increase the license
application fee to cover expenses related to the review of license
applications and vetting of applicants. CBP did not propose to change
the amount of the permit fee, and this final rule is not changing the
fee of $100 for a broker to apply for a national permit. In response to
the second comment, CBP is transitioning the district permits to
national permits at no cost to brokers.
Comment: One commenter stated that CBP should consider automating
the fee collection and management functions, and charge a set fee per
port, not district. The commenter further noted
[[Page 63292]]
that ``district'' is a term used by CBP, which is not as relevant for
brokers filing entries, thus, districts should be disregarded when
charging fees.
Response: CBP did not propose to change the current fee structure
for filing entries, moreover, the commenter's suggestion is not
considered a natural outgrowth of the NPRM's proposals. Therefore, CBP
is not adopting a new fee structure based on port activity.
Other General Comments
Comment: One commenter stated that CBP did not provide sufficient
notice of the proposed amendments as they were not mentioned on CBP's
website, but only announced in the Federal Register. The commenter
further maintained that the NPRM did not mention whether CBP had
reached out to the trade for input on specific issues. In addition, the
commenter asked that CBP provide a fuller explanation of the proposed
changes and provide further opportunities for public comment before
finalizing the regulations. Another commenter suggested to issue a
revised NPRM, or, at least, hold a public hearing to discuss the
proposed changes.
Response: Pursuant to the APA, CBP published the NPRM to propose
changes in an effort to modernize the customs broker regulations. The
NPRM provided 60 days for public comment, in compliance with the APA.
In addition, CBP announced the publication of the NPRM (as well as the
concurrent NPRM proposing the elimination of broker district permit
user fees) on CBP's website.\14\ Moreover, CBP had been socializing the
proposed changes to part 111 for numerous years at many public forums,
including COAC meetings and various broker association meetings. As
mentioned in the preamble of the NPRM, CBP had conducted outreach to
the broker community through webinars, port meetings and broker
association meetings to solicit feedback on various broker matters and
the modern business environment. The trade community had many
opportunities to share their opinions, throughout the outreach as well
as during the 60-day public comment period. CBP does not believe that
there is a need for a public hearing or a revised NPRM to provide a
fuller explanation of the proposed changes, other than the explanations
included in this final rule.
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\14\ The announcement of the NPRMs, as well as COAC's
recommendations regarding the modernization, may be found online on
CBP's website at https://www.cbp.gov/trade/programs-administration/customs-brokers by clicking on the tab titled ``Modernization of the
Customs Broker Regulations''.
---------------------------------------------------------------------------
Comment: One commenter recommended a minimum percentage of U.S.
ownership in a brokerage. The commenter explained that CBP Form 3124
does require the notation of all officers who are licensed, as well as
other officers and principals with controlling interest who are not
licensed.
Response: CBP thanks the commenter for its contribution but
believes that this comment is outside of the scope of this final rule
as there is no U.S. ownership requirement in 19 U.S.C. 1641 or the
corresponding regulations in 19 CFR part 111.
Comment: One commenter strongly recommended that CBP establish a
dedicated, independent ombudsman-type position with the Office of Trade
Relations to ensure that customs brokers are treated the same as CBP
employees would be treated for similar types of mistakes. The commenter
argued that this would be especially important considering the
increased level of responsibility continually being transferred from
CBP to customs brokers.
Response: CBP does not believe that the creation of an ombudsman-
type position is necessary. CBP disagrees that a broker's mistake
should be treated in the same fashion as a CBP official's mistake.
Brokers are not Federal employees, so different paths are available for
brokers and CBP officials to take in case of mistakes. Brokers have the
opportunity to appeal certain decisions by CBP if brokers are of the
opinion that those decisions are erroneous, such as the rejection of a
license or permit, the suspension/revocation of a license or permit, or
the imposition of a penalty. Other applicable avenues are in place for
Federal employees.
Comment: Three commenters urged CBP, especially in light of
Executive Order 13924 (May 19, 2020), which instructed the government
to provide regulatory relief and flexibility on a temporary, as well
as, permanent basis, where appropriate, and due to the current
challenges businesses are facing during the pandemic, to grant the
brokerage industry at least one year, and upon showing of need,
additional time beyond the one-year period to comply with the new
regulations. The commenters argued that brokers will need time to
adjust, and in some cases, restructure their businesses, to the new
national permit framework and the new criteria for responsible
supervision and control.
Response: CBP does not believe that one year is necessary to
implement the final regulations to allow a broker to adjust, and maybe
even restructure, its business. A lot of the changes that are being
implemented with this final rule are simplifying processes or updating
or clarifying regulations. For instance, the updated supervision
framework is simply codifying what brokers should have already been
doing, such as the employment of sufficient licensed brokers, broker's
responsiveness to CBP's communications and notices, as well as to the
partner's or member's communication and direction, and updated
recordkeeping requirements. None of these changes is significant in the
sense that it would require brokers to re-structure their businesses. A
lot of the requirements that are being codified in the regulations
should have been best practices already for brokers to provide high
quality service to their clients.
However, CBP does agree that a 60-day delayed effective date is
beneficial for both the brokers to make any needed changes to the
business, and for CBP to transition all district permit holders to a
national permit and to ensure that CBP personnel are aware of and ready
to work with the new changes imposed by the final rule.
In the NPRM, CBP proposed to revise Sec. 111.2(b) by removing the
four exceptions to the district permit requirement in order to
transition to a national permit system. As part of the proposed
revision, CBP will remove the cross-reference in Sec.
111.2(b)(2)(i)(C) to subpart B of part 143 of the CBP regulations,
which sets forth the regulations regarding remote location filing
(RLF). No comments were submitted by the public regarding these
proposed changes, whereby the use of a national permit would obviate
the need for standalone RLF regulations. It should be noted that the
RLF requirements that are mandated by 19 U.S.C. 1414 are captured in
the proposed transition to national permits for all licensed brokers,
as the national permit framework includes the expansion of the scope of
a national permit to all customs business within the United States and
would allow filings to be made electronically from anywhere in the
United States. Once the final rule becomes effective, customs brokers
will not be subject to the RLF regulations and, in a future rulemaking,
CBP will propose amending the standalone RLF regulations in subpart B
of part 143 to remove those provisions which have become moot and make
any other changes that may be needed.
[[Page 63293]]
III. Technical Changes and Clarifications to the Existing Regulations
In reviewing the proposed changes to the regulations, as well as
existing regulations, CBP identified certain technical changes that
would provide more flexibility to the brokers, clarify CBP's intent of
certain regulatory language, and improve the electronic submission
process, which are set forth below.
In Sec. 111.12(a), CBP added the option for electronic submission
of license applications. CBP is in the process of developing the
capability for the submission of license applications to the eCBP
portal and wants the regulatory language to accommodate this future
change. In addition, CBP added the option for electronic submission of
withdrawals of license applications in redesignated paragraph (b) as an
alternative to the current method of submission to the processing
Center. As soon as CBP deploys this additional capability, applicants
will have two options for the submission of application withdrawals.
To reflect in the regulation the option of a remote exam, as
explained above, CBP modified the language in the last sentence of
Sec. 111.13(b) to state that CBP will give notice of the exact time
and place for the examination, including whether alternatives to on-
site testing will be available. In Sec. 111.14(a)(3), CBP corrected a
minor error that occurred in the published NPRM in the phrase
``(including a member or a partnership or an officer of an association
or corporation)''. With this final rule, CBP replaced the first
instance of ``or'' in the above phrase with the word ``of'' to
accurately reflect the meaning of the phrase.
In Sec. 111.17(c), CBP slightly modified the language for clarity
and replaced ``the date of entry of the Executive Assistant
Commissioner's decision'' with ``the decision date by the Executive
Assistant Commissioner''. This technical change does not change the
meaning or substance of the sentence.
CBP slightly modified the language in the fifth sentence of Sec.
111.19(b) to clarify that a broker has two options for submitting the
permit application, by submitting a letter either to the processing
Center or electronically through a CBP-approved EDI system.
In the first sentence of Sec. 111.19(e)(1), CBP replaced the
phrase ``in support of the denied application'' with the phrase ``in
support of the application'', removing the word ``denied.'' This
technical change does not change the meaning or substance of the
sentence. Moreover, this change better aligns the regulatory language
in Sec. 111.19(e)(1) with (e)(2). The proposed term ``denied
application'' is not used anywhere else in the regulation, thus, it is
replaced for clarity purposes.
Further, in Sec. 111.19(e)(2), CBP slightly modified the language
for clarity at the end of the sentence and replaced ``the date of entry
of the decision'' by the Executive Assistant Commissioner with ``the
decision date'' by the Executive Assistant Commissioner. This technical
change does not change the meaning or substance of the sentence.
In Sec. 111.19(d), CBP added the phrase ``the application'' after
``will review'' to further clarify that the processing Center that
receives the application will review the application to determine
whether the applicant meets the eligibility requirements for a national
permit to be issued. This clarification does not change the meaning or
substance of the sentence.
In Sec. 111.28 (responsible supervision and control), CBP revised
the language in (a)(3) and (5) to provide more clarity. Factor (3) is
revised to read as ``The volume and type of business conducted by the
broker'', and factor (5) is revised to read as ``The level of access a
broker's employees have to current editions of CBP regulations, the
Harmonized Tariff Schedule of the United States, and CBP issuances.''
There is no change to any of the substantive regulatory requirements
for customs brokers. In addition, CBP replaced the word ``broker'' with
``brokerage'' at the end of the sentences in (a)(9) and (a)(10) to
better reflect the meaning of the factors.
In Sec. 111.28(b)(2) and (3), CBP replaced the word ``employees''
with ``employee(s)'', where appropriate, for consistency throughout the
two paragraphs. This technical change does not change any of the
substantive reporting requirements for customs brokers.
Further, in Sec. 111.30(d)(1), CBP removed the proposed language
``accompanied by payment or valid proof of payment of the triennial
status report fee prescribed in Sec. 111.96(d).'' and replaced it with
simpler language that reflects the current and future process of
submissions of triennial status reports to CBP, i.e., the status report
must be filed through a CBP-authorized EDI system. There is no option
for a broker to attach valid proof of payment in the eCBP portal, or
when submitting the report at one of the 41 BMO locations. Further, CBP
added clarifying language that the status report is not considered
received by CBP until payment of the triennial status report fee
prescribed in Sec. 111.96(d) is received. This is not a new
requirement; CBP always required the submission of both the triennial
status report and the triennial status fee, as evidenced by the
existing regulatory language ``the report must be accompanied by the
fee.'' A similar message as the one in the final regulation is
displayed in the eCBP portal when submitting the triennial report,
alerting the broker that the filing is not completed until payment of
the fee has been submitted.
In addition, CBP did not adopt the proposed language of ``submits
payment or proof of payment of'' in the third sentence of Sec.
111.30(d)(4) but kept the existing language of ``pays'' as it better
reflects CBP's practice, as explained above. CBP added ``and pay the
required fee'' in the fourth sentence of Sec. 111.30(d)(4) to align
the language with the language in the prior sentence that talks about
filing the required report and paying the required fee for the license
to be reinstated. The fourth sentence sets forth the consequence of
revocation by operation of law if the broker does not file the required
report and pay the required fee.
CBP also amended the first sentence of Sec. 111.30(e) and added
phone number and email address to the already required information of
name and address for the individual who has legal custody of the
records after the termination of the brokerage business. Adding the
email address and telephone number to the methods for communicating
with CBP will expedite communication and facilitate resolution of any
questions. Communication in current times is typically conducted by
phone or email, thus, adding these two options will benefit both CBP
and the recordkeeping individual. Moreover, an email address and
telephone number are often already included when brokers provide
information to CBP, as those are preferred methods of communication.
In Sec. 111.39(a), covering advice to a client, in the first
sentence, CBP added the phrase ``it conducts on behalf of'' for
clarification, but this change will not have an impact on the
substantive regulatory requirement for customs brokers to not withhold
any information relative to the customs business that the broker is
conducting on behalf of a client.
In addition, CBP revised the last sentence of paragraph (a) of
Sec. 111.96 and removed references to a CBP fingerprint processing fee
since this is not a fee that CBP collects. The only fee that is
collected for the processing of fingerprints is one charged by the
Federal Bureau of Investigation.
CBP simplified the proposed language in Sec. 111.96(d) regarding
the triennial
[[Page 63294]]
status report fee to state that a fee of $100 is required to defray the
costs of administering the status reporting requirement prescribed in
Sec. 111.30(d)(1). The method of submission by a CBP-authorized EDI
system is already mentioned in Sec. 111.30(d)(1), thus, it is
sufficient that paragraph (d) of Sec. 111.96 simply deals with the fee
payment.
Finally, while the general topic of this rulemaking covers customs
revenue functions delegated to the Secretary of Homeland Security by
the Secretary of the Treasury, this document also includes certain fees
over which the Secretary of the Treasury retains authority, as provided
for in 19 CFR 0.1(a) and paragraph 1(a)(i) of Treasury Department Order
100-16. Accordingly, this final rule is also being signed by the
Secretary of the Treasury (or his or her delegate).
IV. The Benefits of CBP's New Payment and Submission System, the eCBP
Portal, for Licensed Customs Brokers
In addition to finalizing the proposed regulations, CBP announces
in this final rule the deployment of a new payment and submission
system, the eCBP portal. The development of the eCBP portal is part of
CBP's Electronic Payment Options (ePO) effort that addresses the
revenue collections capability gaps of limited payment options,
inefficient manual processes, and disparate revenue systems. This
effort's goal is to eliminate manual processes and standardize
processes, reduce cash and check collections at ports of entry and
provide more online payment options, integrate data with cargo systems,
reduce wait times at ports of entry, and provide better and more
accessible data, all of which aligns with recommendations by COAC and
other trade stakeholders.
This new payment and submission system streamlines and validates
data, which in turn reduces errors and provides data to support
security-related decision making by CBP personnel. Using the eCBP
portal means fewer cash transactions, which means lower risk of cash
losses. Additionally, this technological advancement enhances CBP
revenue collection capability and permits greater focus on law
enforcement and trade facilitation.
The eCBP portal's electronic submission and payment options offer
brokers the flexibility and convenience to easily and efficiently
manage their reporting responsibilities. Currently, the eCBP portal is
being used for the submission and payment of broker examination
applications and triennial status reports. Additional enhancements,
such as the electronic submission of and payment for broker license
applications and permit applications, and the payment of annual user
permit fees, will follow, and CBP will announce those additional eCBP
functionalities in the Federal Register, as needed.
CBP deployed eCBP's functionality to receive broker examination
applications on August 19, 2019. CBP announced this new payment system
through CSMS messages, on CBP's website, through tweets, and in
webinars offered to the broker community. This new payment portal was
well received by the broker community, and by the end of fiscal year
2019, CBP had successfully processed more than 1,300 broker examination
applications in the eCBP portal, resulting in a significant reduction
of personnel hours in CBP Headquarters and at ports processing
applications and withdrawals of applications.
After a successful testing phase between December 2017 and May
2018, on December 15, 2020, CBP deployed the capability to file the
triennial status report in the eCBP portal by completing the online
form and submitting the triennial fee. Approximately 90% of the status
reports for the 2020/2021 reporting period were submitted
electronically. It is important to note that with this new
functionality, customs brokers now have two options to file the
triennial report and fee: they may use the new portal or submit the
report and fee at a location where their broker license was issued. An
additional current functionality of the new eCBP portal is the
automatic processing of license suspensions and revocations for unpaid
triennial status reports, which was deployed to the portal in February
2021. However, even though this is an automatic process, the list of
unpaid reports is manually validated by CBP personnel prior to
suspension or revocation. As the eCBP portal is tied to ACE, this new
interface also allows ACE to receive the triennial report data and
apply any updates regarding the triennial report information and
payment information to the broker account in ACE.
Customs brokers who want to use the eCBP portal, found on CBP's
website, must create a Login.gov account as a first-time user.\15\
Instructions and training resources, such as user and quick reference
guides, for brokers on how to create a Login.gov account and use the
eCBP portal can be found on CBP's website.\16\
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\15\ The link to the eCBP portal may be found online at https://e.cbp.dhs.gov/brokers/#/home.
\16\ Resources for brokers on how to use the eCBP portal are
available online at https://www.cbp.gov/trade/ecbp.
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V. Conclusion
Based on the analysis of the comments received and further
consideration, CBP has decided to adopt as final the proposed
regulations published in the Federal Register (85 FR 34836) on June 5,
2020, as modified by the changes noted in the discussion of the
comments section above.
VI. Statutory and Regulatory Requirements
A. Executive Orders 13563 and 12866
Executive Orders 13563 and 12866 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. This rule is not a ``significant regulatory action'' under
section 3(f) of Executive Order 12866. Accordingly, the Office of
Management and Budget (OMB) has not reviewed this regulation.
This rule will result in costs to licensed customs brokers in the
form of additional fees and reporting requirements. CBP estimates that
these costs total $88,850. This rule will also result in benefits to
licensed customs brokers in the form of reduced fees and reduced time
burdens. CBP will also benefit from time savings. CBP estimates that
the monetized savings of the rule total $1,277,116. The five-year total
monetized net benefit of the rule ranges from $973,616 discounted at 7
percent to $1,088,308 discounted at 3 percent. In addition, unmonetized
benefits include increased professionalism of the broker industry,
greater clarity for brokers in understanding the rules and regulations
by which they must abide, better data security, and better reporting of
potential fraud to CBP.
As mentioned above, CBP published the proposed rule titled,
``Modernization of the Customs Brokers Regulations,'' on June 5, 2020,
and received 55 comments from the public.\17\ CBP adopts the regulatory
[[Page 63295]]
amendments specified in the proposed rule with some changes, outlined
below. With the adoption of the proposed regulatory amendments, CBP
applies the 2020 NPRM's economic analysis approach to this rule,
updating the data as necessary and making certain changes in accordance
with the public comments.
---------------------------------------------------------------------------
\17\ Both the NPRM (85 FR 34836) and the public comments in
response to the NPRM may be found online at https://www.regulations.gov/document/USCBP-2020-0009-0001.
---------------------------------------------------------------------------
CBP has prepared the following analysis to help inform stakeholders
of the impacts of this rule.
Table 1--Summary of Changes as a Result of the Rule
----------------------------------------------------------------------------------------------------------------
Provision Section Change Cost/benefit
----------------------------------------------------------------------------------------------------------------
111.1........................ Subpart A.................... Update/eliminate Neutral--changes reflect
definitions; change current practice and
primary point of statutory changes.
contact to processing
Center.
111.2........................ Subpart A.................... Eliminate district $122,000 annualized net
permits and require benefit. See section
national permits. 3.11.
111.3........................ Subpart A.................... Requires customs Neutral--clarifies
business to be current regulations and
conducted within the reflects current
customs territory of practice.
the US; brokers must
maintain a point of
contact.
111.11....................... Subpart A.................... Adds that the processing Benefit--increases
Center may reject an efficiency.
incomplete application.
111.12(a).................... Subpart B.................... Update the place of Benefit--increases
submission for efficiency and reduces
applications and allows the burden on
for electronic applicants.
submission or
withdrawal; removes
requirement that
applications are
submitted under oath.
111.12(b).................... Subpart B.................... Remove requirement to Benefit--reduces the
post notice of burden on CBP.
applications.
111.13....................... Subpart B.................... Revisions to reflect new Neutral--the costs of
national permit system; the new fee system are
written and electronic addressed in section
notification of 3.11.
examination results;
remote exam option.
111.14....................... Subpart B.................... Clarifies that CBP may Neutral--reflects
use information from current practice.
the interview in
background
investigation.
111.16....................... Subpart B.................... Expansion of the grounds Benefit--increases
to justify the denial professionalism.
of a license.
111.17....................... Subpart B.................... Adds new method to Benefit--greater
communicate further flexibility.
information to CBP for
appeal of an
application denial.
111.18....................... Subpart B.................... Requires applicants to Benefit--fewer
provide new or application appeals
corrected information will be rejected for
when re-applying. lack of new
information.
Cost--applicants will
need to expend time in
collecting and
submitting information.
111.19....................... Subpart B.................... Replacing district $122,000 annualized net
permits with national benefit. See section
permits. 3.11.
111.19(b).................... Subpart B.................... Revision of the Neutral--the process is
procedures to apply for very similar, but with
a permit to account for a national permit.
the switch from
district to national
permits.
111.19(c).................... Subpart B.................... Revision of permit fees. See ``Elimination of
Customs Broker District
Permit Fee'' RIN 1515-
AE43.
111.19(d).................... Subpart B.................... Elimination of the Benefit--allows for
requirement to maintain greater flexibility and
a place of business in efficiency for brokers
each port where a and CBP.
district permit is held.
111.19(e).................... Subpart B.................... Language updates to See above.
reflect the change to
national permits and
processing Centers.
111.19(g).................... Subpart B.................... Clarifies applicants Benefit--increases
must provide additional professionalism and
information or decreases time spent by
arguments in support of CBP acquiring
a denied application; information.
allows information to Cost--requires
be provided through applicants to expend
various communication time in providing
methods. additional information.
111.21....................... Subpart C.................... Requires brokers to Benefit--enhances CBP's
notify CBP of any risk management
electronic records approach. See section
breach and to provide 3.3/section 3.7.2.
CBP a designated point
of contact for
recordkeeping in
addition to the current
contact provided for
financial queries.
111.23....................... Subpart C.................... Requires that electronic Benefit--increases
records be stored security. See section
within the U.S. customs 3.3.
territory \18\.
111.24....................... Subpart C.................... Clarifies disclosure Benefit reduces
rules. confusion. See section
3.7.3.
111.25....................... Subpart C.................... Revises guidelines for Neutral--see section
CBP inspection of 3.4.
broker records with the
elimination of broker
districts.
111.27....................... Subpart C.................... Update of language to Neutral--reflects the
reflect the transition current environment.
of responsibilities
from Treasury to DHS
following the creation
of DHS.
111.28....................... Subpart C.................... Clarifies requirements Benefit--increases
in relation to flexibility. See
responsible supervision section 3.7.4.
and control and allows
for electronic
submission of employee
lists.
111.30....................... Subpart C.................... Modification to the Benefit--increases
timing requirement for professionalism, keeps
when a broker notifies CBP better informed,
CBP of information and allows greater
changes, including a efficiency for broker's
new requirement for changing status.
inactive brokers to Cost--inactive brokers
provide CBP with up-to- will expend time to
date contact submit their
information. information.
[[Page 63296]]
111.32....................... Subpart C.................... Places an affirmative Cost--$8,185 annually.
burden on the broker to Benefit--improves CBP's
report to CBP when a awareness of potential
broker terminates a illegal activity. See
client relationship as section 3.5.
a result of determining
that the client is
attempting to defraud
the U.S. Government.
111.36....................... Subpart C.................... Modifies the Neutral--time spent does
requirements for not change. See section
brokers when dealing 3.6.
with freight forwarders.
111.39....................... Subpart C.................... Guidelines for how Neutral--reflects
brokers may behave with current practice. See
clients; requires section 3.7.4.
brokers to advise
clients of corrective
actions and maintain
communication records.
111.45....................... Subpart C.................... Updates to reflect the Neutral--specifies
change to national national permit.
permits.
111.53....................... Subpart D.................... Adds conviction of Benefit--increases
committing or professionalism.
conspiring to commit an
act of terrorism to the
grounds for suspension
or revocation of a
license or permit.
111.55....................... Subpart D.................... Updates to reflect the Neutral--reflects
current practice of not current practice.
referring all
complaints to a special
agent.
111.56....................... Subpart D.................... Updates to reflect Neutral--reflects
current practice in the current practice.
investigation of a
complaint.
111.62....................... Subpart D.................... Updates to requirements Neutral--reflects
for notification of improved technology.
charges to reflect new
electronic options.
111.63....................... Subpart D.................... Removes the requirement Benefit--increases
that a return card be efficiency.
signed solely by the
addressee; permits CBP
to rely upon the
mailing address
provided by the broker.
111.67....................... Subpart D.................... Updates to reflect the Neutral--reflects
current practice of current practice.
Office of Chief Counsel
representing the
Government.
111.74....................... Subpart D.................... Eliminates the Neutral--such
requirement to publish announcements are
suspension, revocation, published in the
or penalty notices in Federal Register and
the Customs Bulletin. automatically included
in the Customs
Bulletin.
111.76....................... Subpart D.................... Allows for electronic Benefit--increases
communication when efficiency.
filing an appeal.
111.77....................... Subpart D.................... Eliminates the Neutral--such
requirement that CBP announcements are
provide notice of a published in the
vacated or modified Federal Register and
order in the Customs automatically included
Bulletin. in the Customs
Bulletin.
111.81....................... Subpart D.................... Updates to the signing Neutral--reflects
requirement for a delegation of existing
settlement to reflect authority.
delegation of
authorities.
111.96....................... Subpart E.................... Updates to the user See above.
application fee.
----------------------------------------------------------------------------------------------------------------
As stated above in Section II, Discussion of Comments, one
commenter disagreed with CBP's assessment that the change to Sec.
111.39(c) has a neutral effect on cost, as it reflects current
practice. CBP believes that this assessment is correct. A broker has an
existing responsibility to advise the client of any noncompliance and
errors and suggest a corrective action, even though it has not been
stated expressly in the regulation. Advising a client and documenting
such advice should be a broker's good practice, to protect the client's
as well as the broker's interests, in case of any litigation or
complaint by the client.
---------------------------------------------------------------------------
\18\ Duplicate or backup records may be stored outside the U.S.
customs territory so long as the recordkeeping requirements for the
original records are met. See CBP's Headquarters ruling H292868.
---------------------------------------------------------------------------
1. Need and Purpose of Rule
The primary purpose of this final rule is to formalize recent
changes in the permitting of licensed customs brokers. To take
advantage of new technologies and reflect a changing trade environment,
CBP is switching from a district permit system to a national permit
system. Licensed brokers who have traditionally been required to apply
for and operate under a permit for each district in which they do
business may now work under a single, national permit.
The rule also finalizes changes in the license application fee
charged by CBP, which CBP will increase to cover a greater portion of
the costs CBP has always faced. Because these costs are being moved
from CBP to brokers, they are considered a transfer. The rule contains
several provisions meant to professionalize the broker industry,
formalize current practices into regulations, and adapt regulations to
reflect technological advancements. Finally, in this final rule, CBP
announces the deployment of a new payment and submission system, the
eCBP portal.\19\ Testing initially began in 2017 and continued into
2020. The eCBP portal allows applicants and brokers to electronically
submit the broker exam application, the triennial status report and
associated fees, with additional enhancements to be announced in the
Federal Register as needed. The majority of brokers already follow many
of the practices described above, like storing records electronically
within the customs territory of the United States and reporting clients
the broker knows have attempted to commit fraud. Furthermore, 80
percent of applicants and 90 percent of brokers have already adopted
the eCBP portal. This rule provides better and more concrete guidance
in these matters, at little or no cost to CBP or customs brokers.
---------------------------------------------------------------------------
\19\ See The Benefits of CBP's New Payment and Submission
System, the eCBP Portal, for Licensed Customs Brokers above.
---------------------------------------------------------------------------
In this final rule, CBP is making several changes to address
comments received from the public in response to the NPRM, as well as
clarifying existing regulatory language. These include:
Changing the definition of ``Designated Center'' by
changing the name to ``Processing Center;'' and explaining that
processing Center means the broker management operations of a Center;
Removing references to a ``director,'' to reflect the fact
that other
[[Page 63297]]
Center employees may process broker submissions;
Updating Sec. 111.12 to allow the electronic submission
and withdrawal of the customs broker license application;
Updating Sec. 111.13 to account for a remote option for
the customs broker exam;
Updating Sec. 111.21 to require brokers to report a
breach as well as any known compromised importer identification numbers
within 72 hours, in addition to requiring submission of any additional
known compromised importer identification numbers within 10 business
days;
Consolidation of proposed responsible supervision and
control factors 12 and 13 in Sec. 111.28(a) into a single factor (12),
and factors 14 and 15 into a single factor (13);
Addition of an email address requirement to Sec. 111.30.
Monetized costs for customs brokers will result from no longer
receiving a first district permit concurrent with a broker's license,
and the requirement for brokers to notify CBP when separating from a
client relationship due to attempted fraud or criminal acts. Customs
brokers who do not concurrently receive their first district permit
with their broker's license will save the cost of district permit fees.
Additionally, CBP and customs brokers will save time applying for and
reviewing district permit applications and waivers. The five-year total
monetized net benefit of the rule ranges from $973,616 discounted at
seven percent to $1,088,308 discounted at three percent. The annualized
cost is approximately $237,500 using both three and seven percent.
Customs brokers are private individuals and/or business entities
(partnerships, associations, or corporations) licensed and regulated by
CBP to assist importers in conducting customs business. Customs brokers
have an enormous responsibility to their clients and to CBP, requiring
them to properly prepare importation documentation, file documents
accurately and on-time, correctly classify and value goods, pay duties,
taxes, and fees, safeguard their clients' information, and protect
their licenses from misuse.
In an effort to perform these duties efficiently, customs brokers
have embraced recent technological advances such as making the
programming and business process changes necessary to use ACE, thus
providing a single, centralized access point to connect CBP and the
trade community. Through ACE, manual processes are streamlined and
automated, and the international trade community is able to more easily
and efficiently comply with U.S. laws and regulations.
CBP has also endeavored to embrace these technological advances to
not only more efficiently perform its duties of facilitating legitimate
trade while making sure that proper revenue is collected, but also to
provide more efficient tools for customs brokers to file and monitor
the information submissions necessary for a timely and accurate entry
filing. One of the central developments that will allow CBP to perform
its operational trade functions more effectively is the transition to
the Centers.
Beginning in 2012, CBP developed a test to incrementally transition
the operational trade functions that traditionally reside with port
directors to the Centers. The Centers were established in strategic
locations around the country to focus CBP's trade expertise on
industry-specific issues and provide tailored support for importers.
CBP established these Centers to facilitate trade, reduce transaction
costs, increase compliance with applicable import laws, and achieve
uniformity of treatment at the ports of entry for the identified
industries. On December 20, 2016, CBP published an interim final rule
in the Federal Register (81 FR 92978) ending the Centers test and
establishing the Centers as a permanent organizational component of
CBP.
Current broker regulations are based on a district system in which
entry, entry summary, and post-summary activity are all handled by the
ports within a permit district. With the transfer of trade functions to
the Centers, a significant portion of these activities, including entry
summary and post-summary, are now handled directly by the Centers. The
Center structure is based on subject matter expertise, as opposed to
geographic location, placing them outside of the district system as it
currently exists. With this rule, CBP will modernize the regulations
governing customs brokers to better reflect the current work
environment and streamline the customs broker permitting process.
2. Background
It is the responsibility of CBP to ensure that only qualified
individuals and business entities can perform customs business on
behalf of others. CBP accomplishes this task by only issuing broker
licenses to individuals and business entities that meet the below
criteria: \20\
---------------------------------------------------------------------------
\20\ See 19 CFR part 111.
---------------------------------------------------------------------------
Must submit a customs broker license application within
three years of taking and passing the customs broker license
examination;
Must be a U.S. citizen and attain the age of 21 prior to
submitting the license application;
Must possess good moral character; and
Must pay the requisite fee.
Business entity customs broker license eligibility:
Partnerships
Must have at least one member of the partnership who is a
licensed customs broker; and
Must pay the requisite fee.
Associations and Corporations
Must have at least one officer who is a licensed customs
broker;
Must be empowered under its articles of association or
articles of incorporation to transact customs business as a broker; and
Must pay the requisite fee.
Currently, CBP requires all prospective brokers, both individuals
and business entities, to submit CBP Form 3124: Application for Customs
Broker License to the port of entry at which they intend to conduct
customs business. CBP Form 3124 is used to verify that prospective
customs brokers satisfy the requirements for receiving a customs
broker's license.
The customs territory of the United States is divided into seven
customs regions. Within each region, the customs territory of the
United States is further divided into districts; there are currently
approximately 40 customs districts.\21\ Currently, a district permit is
required for each district in which a customs broker intends to conduct
customs business. Each district permit requires a one-time permit fee
of $100 and an annual user fee.\22\ A customs
[[Page 63298]]
broker has the option of receiving his/her first district permit
concurrently with the receipt of the customs broker license, in which
case the $100 permit fee is waived. Even if this option is used, the
customs broker is still responsible for the annual user fee. However,
this option is not exercised often for individual customs broker
license holders. Currently, according to a CBP Broker Management Branch
estimate, approximately two percent of individual customs broker
license holders get their first district permit concurrently issued
with the receipt of their broker's license. The majority of individuals
do not take advantage of this benefit. Most licensed brokers file
exclusively under a corporate permit and do not need to get an
individual permit, saving them the annual user fee. On the other hand,
according to CBP's Broker Management Branch, 100 percent of current
corporate license holders get their first district permit concurrently
issued with their customs broker license.
---------------------------------------------------------------------------
\21\ Customs districts are not evenly divided amongst the seven
customs regions (one region may have more or fewer customs districts
than another). In addition to the 40 geographically defined customs
districts, there are three special districts that are responsible
for specific types of imported merchandise. According to the Broker
Management Branch, these special districts include districts 60, 70
and 80. District 60 refers to entries made by vessels under their
own power. District 70 refers to shipments with a value under $800.
District 80 refers to mail shipments. These three special districts
do not require the use of a licensed broker with a specific district
permit and as a result are not affected by this provision.
\22\ The annual user fee payable for calendar year 2022 is
$153.19 (86 FR 66573). Information on the fee can be found in 19 CFR
24.22(h). The user fee is subject to adjustment based on inflation.
Amendments to the regulatory provisions regarding the district
permit user fee are found in the companion Department of the
Treasury final rule entitled, ``Elimination of Customs Broker
District Permit Fee.'' RIN 1515-AE43.
---------------------------------------------------------------------------
A broker who intends to conduct customs business at a port within a
district for which the broker does not have a permit must submit an
application for a district permit in a letter to the director of the
port at which the broker intends to conduct customs business. Each
application for a district permit must set forth or attach the
following:
The applicant's broker license number and date of
issuance;
The address where the applicant's office will be located
within the district and the email address and telephone number of that
office;
A copy of a document which reserves the applicant's
business name with the State or local government;
The name, broker license number, office address(es),
telephone number, and email address of the individual broker who will
exercise responsible supervision and control over the customs business
transacted in the district;
A list of all other districts for which the applicant has
a permit to transact customs business;
The place where the applicant's brokerage records will be
retained and the name of the applicant's designated recordkeeping
contact; and
A list of all persons who the applicant knows will be
employed in the district with all the required employee information.
The applicant for the district permit must have a place of business
at the port where the application is filed or must have made firm
arrangements satisfactory to the port director to establish a place of
business and must exercise responsible supervision and control of that
place of business once the permit is granted. Instead of a customs
broker getting multiple district permits, he or she could also apply
for a national permit for the purpose of transacting customs business
in all districts within the customs territory of the United States as
defined in 19 CFR 101.1. The national permit application may be
submitted concurrently with or after the submission of an application
for a broker's license.
CBP first introduced national permits in 2000 to allow a broker to
conduct a limited set of activities in districts for which the broker
does not have a district permit. When it was first introduced, a
national permit allowed licensed brokers to place an employee in the
facility of a client for whom the broker is conducting customs
business; file electronic drawback claims; participate in remote
location filing; and make representations after the entry summary has
been accepted. In the years since the national permit was introduced,
and with the full implementation of ACE, almost every activity
performed under a district permit was added to the national permit.
Only those activities, such as the filing of paper entries and certain
payment submissions that require physical presence at a port, currently
require a district permit instead of a national permit. With the
national permit system, these restrictions will no longer apply. This
rule will allow a national permit holder to conduct any type of customs
business in all districts within the customs territory of the United
States. This represents a full expansion of the activities allowed
under a national permit. CBP has determined that in the increasingly
automated environment brokers may need to make contact with CBP
personnel across the customs territory and there is no longer a reason
to restrict national permit holders.
Currently, an applicant for a national permit must submit payment
of the application fee and user fee to the port where the license was
issued, and then submit the national permit application in the form of
a letter, including evidence of payment, to the Broker Management
Branch.\23\ An applicant has to further include the following:
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\23\ In the published NPRM, CBP incorrectly stated the current
submission process of a national permit application (submission to
the director of the designated Center), but this technical error did
not have an impact on the outcome of the economic analysis. See the
published NPRM (85 FR 34836), at page 34850.
---------------------------------------------------------------------------
The applicant's broker license number and date of
issuance;
If the applicant is a partnership, association, or
corporation, the name and title of the national permit qualifier;
The address, telephone number, and email address of the
office designated by the applicant as the broker's office of record;
that office will be noted in the national permit when issued;
A copy of a document which reserves the applicant's
business name with the State or local government;
The name, telephone number, and email address of the
licensed broker or knowledgeable employee to be available to CBP to
respond to issues related to the transaction of customs business;
The name, broker license number (if designated), office
address, telephone number, and email address of each individual broker
who will exercise responsible supervision and control over the customs
business of the applicant under the national permit;
A supervision plan describing how the broker will exercise
responsible supervision and control, including compliance with Sec.
111.28 (see 19 CFR 111.28);
The place where the applicant's brokerage records relating
to customs business conducted under the national permit will be
retained and the name of the applicant's designated recordkeeping
contact (see 19 CFR 111.22 and 111.23);
The name, telephone number, and email address of the
knowledgeable employee responsible for broker-wide records maintenance
and financial recordkeeping requirements;
A list of all employees of the broker, together with the
specific employee information prescribed in Sec. 111.28(b) for each of
those employees (19 CFR 111.28(b)); and
A receipt or other evidence showing that the fees
specified in Sec. 111.96(b) and (c) have been paid (19 CFR 111.96(b)
and (c)).
In an effort to modernize the permitting process for customs
brokers, this rule eliminates the district permitting process and
automatically grants each current district permit holder a national
permit.\24\ Upon adoption of this final rule, the transition for a
district permit holder to become a national permit will be a one-time,
automatic process, without any actions
[[Page 63299]]
to be taken by the permit holders. Using data from ACE, CBP will
automatically create a national permit for each broker currently
holding a district permit and not yet holding a national permit, though
CBP will not cancel active district permits until all national permits
are issued. Permit holders will be notified via email, or mail, that a
new national permit will be issued. These notifications will be part of
the day-to-day work of the Broker Management Branch and will not add to
the cost of the rule.
---------------------------------------------------------------------------
\24\ For more information, see the clarification above in
Subpart A. General Provisions.
---------------------------------------------------------------------------
Currently, customs brokers who do not have a national permit must
maintain an office and have a separate district permit for each
district in which the broker wants to conduct customs business. For
some brokers, this means having many small offices across the country.
This rule removes the requirement to have a separate local office in
each district in which customs brokers do business. Since, under a
national permitting structure, customs brokers are no longer required
to have a representative in each district in which they conduct customs
business, brokers could organize themselves to better suit their
specific business needs. While some brokers may consolidate their
office locations and save on overhead costs, which may also involve
laying off local staff, others may expand their business operations or
staffing needs as they will now be able to serve more ports without
needing a local office. CBP cannot predict whether customs brokers as
whole would experience net savings as a result of these changes. For
the purposes of this analysis, CBP does not believe that brokers will
greatly expand or contract their holdings as a result of the rule. In
the case that some brokers do ultimately close offices, they will
likely experience cost savings and the net benefit estimated in this
analysis would increase. Since national permits were first issued,
there has not been a noticeable change in the number of brokers hired
as a result of national permits, so CBP does not believe there will be
a significant change due to this rule.
In response to the NPRM, one commenter predicted that a national
permit system would lead to reduced competition and lost revenue at
ports. However, because this rule will not reduce the volume of trade,
and goods must still physically arrive at various ports, CBP does not
believe this to be the case. Another commenter noted that a national
permit system would devalue the broker license and force small
businesses to close. CBP disagrees with this assertion. In fact, small
businesses may benefit more from a national permit, allowing them to
work in ports across the country and in which they could not previously
afford to maintain a physical presence. Brokers who find they are more
competitive with a physical presence at a given port may still maintain
a local office.
Projection of Customs Broker Licenses and Permits
CBP's Broker Management Branch provided historical data from 2015-
2021. As of January 2022, there are 15,226 active, licensed customs
brokers. CBP also issued new broker licenses each year to both
individuals and corporations.\25\ From 2015 to 2019, the annual number
of licenses issued has declined by one percent for corporate licenses
while from 2017 to 2021, the annual number of licenses declined by four
percent for individual licenses (see Table 2).\26\
---------------------------------------------------------------------------
\25\ A partnership or association may also hold a corporate
permit. At least one member of the licensed organization must hold
an individual broker license.
\26\ The closures and delays related to the COVID-19 pandemic
resulted in anomalous data for corporate licenses in 2020 and 2021.
The number of licenses issued in 2020 was significantly smaller than
previous trends, while 2021 represented a catch-up year and saw an
inordinately high number of corporate licenses issued. Therefore, to
calculate the corporate license growth rate, CBP used data from
2015-2019, which we believe more accurately reflects future growth.
Individual licenses, while also affected by the COVID-19 pandemic,
returned to previous trends in 2021, allowing CBP to use a standard
5-year period from 2017-2021.
Table 2--Historical Licensing
----------------------------------------------------------------------------------------------------------------
Total licenses Corporate Individual
Year issued licenses licenses
----------------------------------------------------------------------------------------------------------------
2015............................................................ 770 16 754
2016............................................................ 653 21 632
2017............................................................ 580 16 564
2018............................................................ 558 27 531
2019............................................................ 464 15 449
2020............................................................ 187 7 180
2021............................................................ 496 31 465
----------------------------------------------------------------------------------------------------------------
As of January 2022, there are 2,365 permitted brokers holding a
combined total of 3,345 active district permits. These 2,365 brokers
represent about 15.5 percent of all brokers, as the majority of brokers
never apply for their own permit and work under the auspices of a
corporate permit. Approximately two percent of brokers hold a corporate
permit, meaning 13.5 percent of brokers hold individual permits. The
brokers who do hold permits average approximately 1.4 district permits
per permit holder. Using these figures and historic rates of decline,
we can project how many licenses and district permits licensed brokers
will be issued over the period of the analysis, under the baseline
condition (i.e., if this rule is not promulgated). This is shown in
Table 3 below.
Table 3--Projection of New Individual and Corporate Permits
----------------------------------------------------------------------------------------------------------------
New corporate New corporate Individual
licenses issued permits (100% of New individual permits (13.5% of
Year (1% annual new corporate licenses (4% individual
decline) licenses * 1.4) decline) licenses * 1.4)
----------------------------------------------------------------------------------------------------------------
2022................................ 15 21 447 86
[[Page 63300]]
2023................................ 15 21 430 82
2024................................ 15 21 414 79
2025................................ 15 21 398 76
2026................................ 15 21 383 73
---------------------------------------------------------------------------
Total........................... 75 105 2,072 396
----------------------------------------------------------------------------------------------------------------
Note: Values may not sum to total due to rounding.
3. Rule Amendments: Costs, Benefits, and Transfer Payments
In this rule, CBP is finalizing regulatory changes that include:
increasing fees for the customs broker license application; eliminating
district permits so each customs broker only needs one national permit
to conduct customs business; mandating that each broker must provide
notification to CBP of any known breach of records within 72 hours of
discovery; \27\ requiring that upon request by CBP to examine records,
brokers make all records available to CBP within thirty (30) calendar
days at the location specified by CBP; requiring that customs brokers
obtain a customs power of attorney directly from the importer of record
or drawback claimant--not a freight forwarder or other third party--to
transact customs business for that importer or drawback claimant; and
requiring that a broker document and report to CBP when the broker
separates from or cancels a client as a result of the broker's
determination that the client is intentionally attempting to use the
services of the broker to defraud or otherwise commit any criminal act
against the U.S. Government. Finally, this rule allows CBP to make
numerous non-substantive changes and conforming edits in an effort to
modernize the regulations governing customs brokers and to clarify
existing language in the regulations to better reflect what is already
occurring.
---------------------------------------------------------------------------
\27\ Additionally, within ten (10) business days, a broker must
provide an updated list of any additional known compromised importer
identification numbers. To the extent that additional information is
discovered, a broker must provide that information within 72 hours
of discovery.
---------------------------------------------------------------------------
3.1 Broker License Fee
CBP currently charges $200 fees per individual or business entity
for the broker license application. These fees are used to offset the
costs associated with servicing the brokers. Based on a fee study,
entitled ``Customs Broker License Application Fee Study,'' CBP has
determined that these fees are no longer sufficient to cover its
costs.\28\
---------------------------------------------------------------------------
\28\ The fee study is included in the docket of this rulemaking
(docket number USCBP-2020-0009).
---------------------------------------------------------------------------
The study found that fees of $463 and $815 are necessary to recover
the costs associated with reviewing the customs broker license
application for individuals and business entities, respectively. These
fees, however, are significantly higher than the current fees of $200
for both individuals and business entities and, if implemented, these
fee rates could become an economic disincentive to those pursuing a
career as a customs broker. Therefore, in an effort to minimize the
financial burden to prospective customs brokers while also recovering a
larger portion of the costs associated with reviewing and vetting the
license application, CBP has decided to limit the license application
fee to $300 for individuals and $500 for business entities; the
remainder of the costs would continue to be covered by appropriated
funds. In response to the NPRM, one commenter expressed concern that
raising application fees would reduce the number of qualified
candidates applying for broker licenses. CBP has considered this factor
in deciding to limit the amount by which the fee will increase in order
to cover more of CBP's costs and account for inflation without adding
too much to the cost burden for brokers. CBP considers this increase in
the fee to be a reasonable compromise position between not raising the
fee at all and raising it to a level necessary to recover the full
costs.
In response to the NPRM, one commenter noted that automation and
improved technology should obviate the need for a fee increase. The fee
increase is necessary, however, because CBP has not been covering costs
for many years. Technology improvements and automation also require
initial investments and ongoing maintenance costs for computer systems
and databases, which were included in CBP's estimation of appropriate
fees. Another commenter suggested that fees should be charged on port
activity, not district. As discussed above in Section II, Discussion of
Comments, CBP disagrees with the commenter's suggestion, as the fees as
currently outlined are independent of broker size or location. Although
these fee increases represent an increased expense for prospective
customs brokers, these fee increases do not increase overall costs to
society as these costs are already being paid by CBP's appropriated
funds.
When assessing costs of final rules, agencies must take care to not
include transfer payments in their cost analysis. As described in OMB
Circular A-4, transfer payments occur when ``. . . monetary payments
from one group [are made] to another [group] that do not affect total
resources available to society.'' Examples of transfer payments include
payments for insurance and fees paid to a government agency for
services that an agency already provides. CBP's processing of the
customs broker license application is an established service that
already requires a fee payment. As such, adjustments to the fee
associated with providing each service is considered a transfer
payment. Currently, any costs not covered by fees are paid via funds
appropriated to and expended by CBP. The increased fees paid by brokers
would replace appropriated funds. CBP recognizes that the fee changes
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 rule in
section ``3.12 Distributional Impacts.''
3.2 Permit Application Fee
Currently, brokers are required to pay a $100 permit application
fee in connection with each permit application by either an individual
or corporation. The applicant has the option of concurrently receiving
its first
[[Page 63301]]
district permit with its customs broker's license and therefore
forgoing the $100 permit application fee for its first district permit.
However, some brokers do not request an initial district permit at the
time they get their license. When this is the case and the broker later
applies for a district permit, or if brokers make a request to obtain a
permit for additional districts, then they must submit the following
information to CBP as set forth in Sec. 111.19(b):
(1) The applicant's broker license number and date of issuance;
(2) The address where the applicant's office will be located within
the district and the telephone number of that office;
(3) A copy of a document which reserves the applicant's business
name with the State or local government;
(4) The name of the individual broker who will exercise responsible
supervision and control over the customs business transacted in the
district;
(5) A list of all other districts for which the applicant has a
permit to transact customs business;
(6) The place where the applicant's brokerage records will be
retained and the name of the applicant's designated recordkeeping
contact; and
(7) A list of all persons who the applicant knows will be employed
in the district, together with the specific employee information for
each of those prospective employees.
As a result of this rule, the options above pertaining to district
permits will no longer exist and all permitted brokers will have to get
a single national permit to conduct customs business. That means that
brokers will pay the $100 permit application fee and receive a single
national permit; brokers who, absent this rule, paid to hold multiple
district permits will save the $100 district permit fee for each
additional permit. This is considered a cost savings, and not the
elimination of a transfer payment, because the $100 district permit fee
reflects the economic activity undertaken by CBP to issue those
permits. The elimination of the fee represents a savings both to the
individual brokers as well as to society as a whole as the underlying
work to process the additional district permits is eliminated.
As shown in Table 3 above, absent this rule, there would be 2,147
total new broker licenses (75 corporate + 2,072 individual) issued over
the period of analysis from 2022 through 2026. Of these 2,147 licenses,
75 would be issued to corporations which would result in 105 corporate
district permits (as mentioned above, each customs broker permit holder
currently has 1.4 district permits on average). Additionally, as
mentioned above, 100 percent of corporations exercise the option of
concurrently receiving their first district permit with their customs
broker's license, therefore saving the $100 permit application fee for
their first district permit. This means that, absent this rule,
corporations would get 75 permits for free and would then have to pay
for the remaining 30 permits for a cost of $3,000 ($100 permit
application fee * 30 corporate permits). As a result of this rule,
these 75 corporate brokers will each have to get a single national
permit and pay the $100 permit application fee for each national permit
for a total cost of $7,500 (75 national permits * $100 permit
application fee). This results in an additional cost to these corporate
brokers of $4,500 ($7,500 - $3,000) over the period of the analysis
from 2022 through 2026. Please see Table 4 below for a breakdown of
these costs.
Table 4--Costs for Corporate Permit Holders
[2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
New corporate Costs absent Costs with the Cost of the
Year licenses Permits the rule rule rule
----------------------------------------------------------------------------------------------------------------
2022............................ 15 21 $600 $1,500 $900
2023............................ 15 21 600 1,500 900
2024............................ 15 21 600 1,500 900
2025............................ 15 21 600 1,500 900
2026............................ 15 21 600 1,500 $900
-------------------------------------------------------------------------------
Total....................... 75 105 3,000 7,500 4,500
----------------------------------------------------------------------------------------------------------------
Note: Values may not sum to total due to rounding.
As shown above in Table 3, if this rule were not in effect there
would be 2,072 new individual broker licenses resulting in 396 new
individual permits over the period of analysis. According to CBP's
Broker Management Branch, individual brokers do not get their first
district permit issued concurrently with their customs broker's
licenses nearly as often as corporations. Approximately two percent of
individual customs broker license holders, or 42 of the estimated 2,072
new brokers, get their first district permit issued concurrently with
their broker's license, saving the $100 permit application fee charged
for the first district permit. Using the average of 1.4 district
permits per customs broker permit holder, we estimate that these 42
individual customs brokers would get 59 district permits over the
period of the analysis if this rule did not go into effect. Since,
under the baseline, the brokers would get 42 out of the 59 permits for
free, brokers would have to pay for the remaining 17 permits for a cost
of $1,700 ($100 permit application fee * 17 permits). Under this rule,
these 42 individual brokers would each need a single national permit
for a total of 42 permits resulting in a total cost of $4,200 ($100
national permit application fee * 42 national permits). As a result of
this rule, two percent of individual brokers will bear an additional
total cost of $2,500 ($4,200 - $1,700) over the period of analysis.
Please see Table 5 below for a breakdown of these costs.
[[Page 63302]]
Table 5--Costs for Two Percent of Individual Permit Holders
[2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Individual
licenses for Number of Costs for 2% Costs for 2% Rule's costs
Year 2% of permit permits issued without rule with rule for 2%
holders
----------------------------------------------------------------------------------------------------------------
2022............................ 9 13 $400 $900 $500
2023............................ 9 13 400 900 500
2024............................ 8 11 300 800 500
2025............................ 8 11 300 800 500
2026............................ 8 11 300 800 500
-------------------------------------------------------------------------------
Total....................... 42 59 1,700 4,200 2,500
----------------------------------------------------------------------------------------------------------------
Note: Values may not sum to total due to rounding.
The remaining 98 percent of individual customs broker license
holders do not get their first district permit concurrently with their
broker's license, if they get any permits at all. Of the 15,226 active
licensed brokers, approximately 15.5 percent hold at least one permit.
Because only 15.5 percent of license holders hold a permit, and two
percent of those are corporate license holders and only two percent are
individuals who get a permit concurrently with their license, the
remaining 11.5 percent are individual licensed brokers who apply for
and receive a permit after their license is issued. Accordingly, under
the current permit system, using an average of 1.4 permits per broker,
238 individual customs broker permit holders pay $33,600 for 336
permits because they pay the $100 fee for every permit.\29\ With the
national permit system, these brokers would pay $23,800 for 238
national permits, resulting in a savings of $9,800. Please see Table 6
below for an itemization of these costs.
---------------------------------------------------------------------------
\29\ About 15.5 percent of all brokers, corporate and
individual, hold a permit. Of those, 2 percent are corporate brokers
and 2 percent are individual brokers who get their permit
concurrently with their license. Therefore, about 11.5 percent of
brokers are individuals who will get a permit at some point in their
careers after receiving a license. Based on the projections
described above, CBP estimates that 2,072 indiviudal licenses will
be issued from 2022-2026. Approximately 11.5 percent of those
individuals results in 238.
Table 6--Savings for 11.5 Percent of Individual Permit Holders
[2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Number of
licenses for Number of Costs for Costs for Rule's savings
Year 11.5% of permits issued 11.5% without 11.5% with for 11.5%
permit holders rule rule
----------------------------------------------------------------------------------------------------------------
2022............................ 51 72 $7,200 $5,100 $2,100
2023............................ 49 69 6,900 4,900 2,000
2024............................ 48 68 6,800 4,800 2,000
2025............................ 46 65 6,500 4,600 1,900
2026............................ 44 62 6,200 4,400 1,800
-------------------------------------------------------------------------------
Total....................... 238 336 33,600 23,800 9,800
----------------------------------------------------------------------------------------------------------------
Note: Values may not sum to total due to rounding.
Any brokers who apply for more than one permit will experience a
time savings as a result of this rule because they will only need to
apply for a single permit. According to CBP's Broker Management Branch,
currently, brokers spend approximately three hours to collect and
submit the appropriate documentation to CBP.\30\ The rule's elimination
of these applications will result in time savings for the brokers as
well as for CBP. The estimated number of permits requested separately
from individual licenses for the entire period of the analysis is taken
from Tables 5 and 6. Table 5 implies there are 17 permits for which two
percent of individual customs brokers currently pay $100 ($1,700 permit
costs without rule/$100 per permit). Table 6 shows that 11.5 percent of
individual customs brokers currently pay $100 for 336 permits. Summing
these two figures, we find that all individual customs brokers will pay
$100 for 353 permits. Table 7 shows the removal of the application for
these permits will result in a monetized time savings worth $36,864.
This benefit is based on CBP's estimated fully loaded hourly time value
for customs brokers of $34.81.\31\
---------------------------------------------------------------------------
\30\ Source: CBP's Broker Management Branch on May 16, 2019.
\31\ CBP calculated this loaded wage rate by first multiplying
the Bureau of Labor Statistics' (BLS) 2021 median hourly wage rate
for Cargo and Freight Agents ($22.55), occupation code 43-5011,
which CBP assumes best represents the wage for brokers, by the ratio
of BLS' average 2021 total compensation to wages and salaries for
Office and Administrative Support occupations (1.4819), the assumed
occupational group for brokers, to account for non-salary employee
benefits. Sources: U.S. Bureau of Labor Statistics. Occupational
Employment Statistics, ``May 2021 National Occupational Employment
and Wage Estimates United States.'' Updated March 31, 2022.
Available at https://www.bls.gov/oes/2021/may/oes_nat.htm#43-0000.
Accessed May 25, 2022; U.S. Bureau of Labor Statistics. Employer
Costs for Employee Compensation. ``ECEC Civilian Workers--2004 to
Present.'' March 2022. Available at https://www.bls.gov/web/ecec.supp.toc.htm. Accessed May 25, 2022. CBP assumes an annual
growth rate of 4.15% based on the prior year's change in the
implicit price deflator, published by the Bureau of Economic
Analysis.
[[Page 63303]]
Table 7--Application Time Savings for Individual Brokers
[2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Number of Hourly time
permits issued burden for Rule's savings
Year separate from permit for individual
license application brokers
----------------------------------------------------------------------------------------------------------------
2022............................................................ 76 3 $7,937
2023............................................................ 73 3 7,623
2024............................................................ 71 3 7,415
2025............................................................ 68 3 7,101
2026............................................................ 65 3 6,788
-----------------------------------------------
Total....................................................... 353 3 36,864
----------------------------------------------------------------------------------------------------------------
Note: Values may not sum to total due to rounding.
Corporate brokers would also see time savings resulting from fewer
permit applications prepared and submitted. Table 4 shows that
corporate brokers currently apply for, receive, and pay $100 for 30
permits after their licenses have been issued. Table 8 shows the
removal of the application for these permits will result in a monetized
time savings worth $3,133, based on CBP's estimated fully loaded hourly
time value for customs brokers of $34.81.
Table 8--Application Time Savings for Corporate Brokers
[2022 U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
Number of Hourly time
permits issued burden for Rule's savings
Year separate from permit for corporate
license application brokers
----------------------------------------------------------------------------------------------------------------
2022............................................................ 6 3 $627
2023............................................................ 6 3 627
2024............................................................ 6 3 627
2025............................................................ 6 3 627
2026............................................................ 6 3 627
-----------------------------------------------
Total....................................................... 30 3 3,133
----------------------------------------------------------------------------------------------------------------
Note: Values may not sum to total due to rounding.
Relatedly, CBP would see benefits due to the elimination of the
district permit application review process. CBP estimates that it takes
two hours of CBP processing, including time to review and approve an
application and create and deliver the permit to the applicant.\32\
Given the wage rate, CBP estimates that processing costs approximately
$164 per permit. The applicant pays a $100 fee, which compensates CBP
for a portion of the economic activity undertaken to process the
application. CBP currently funds the remaining portion from
appropriated funds. Therefore, with the rule in place, CBP will
experience a cost savings of approximately $64 per permit no longer
applied for, as the remaining $100 is saved by the broker applicant and
accounted for in Tables 5 and 6 above. Going forward, CBP believes that
a $100 fee recovers a reasonable portion of its costs for the national
permit application. Table 9 shows CBP's total estimated benefits of
$24,573 over the period of analysis. This is based on a CBP fully
loaded wage rate of $82.08 for CBP staff reviewing applications.\33\
---------------------------------------------------------------------------
\32\ Source: CBP's Broker Management Branch on May 16, 2019.
\33\ CBP bases this wage on the FY 2022 salary and benefits of
the national average of CBP Trade and Revenue positions, which is
equal to a GS-12, Step 10. Source: Email correspondence with CBP's
Office of Finance on June 27, 2022.
Table 9--Time Savings for CBP
[2022 U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
Hourly time
Number of burden for
Year permits issued permit Rule's savings
separate from application for CBP
license review
----------------------------------------------------------------------------------------------------------------
2022............................................................ 82 2 $5,261
2023............................................................ 79 2 5,069
2024............................................................ 77 2 4,940
2025............................................................ 74 2 4,748
2026............................................................ 71 2 4,555
-----------------------------------------------
Total....................................................... 383 2 24,573
----------------------------------------------------------------------------------------------------------------
[[Page 63304]]
Lastly, the district permit waiver described in current Sec.
111.19(d)(2) would be eliminated with the rule. Currently, requests for
a waiver of the requirement for an individual broker in the district
must be submitted to the port director and include a description of
responsible supervision and control procedures and information on the
volume and type of customs business conducted. The port director
reviews the request and makes a recommendation to headquarters.
Headquarters reviews and issues the decision.\34\ According to the CBP
Broker Management Branch, this process takes two hours for brokers,
including application processing and mailing paper documents to CBP. It
takes an hour and a half for CBP to review the waiver analysis, prepare
the recommendation memorandum, and for headquarters to make the final
decision.\35\ As shown in Tables 11 and 12 there is a total benefit of
$3,579 ($1,293 + $2,286), as this entire process is eliminated under
the national permit framework. Waiver estimates for calendar years 2022
to 2026 are based on compound annual growth rate from calendar years
2017-2021, found in Table 10 below.
---------------------------------------------------------------------------
\34\ See 19 CFR 111.19(d)(2).
\35\ Source: CBP's Broker Management Branch on May 16, 2019.
Table 10--Permit Waivers 2017-2021
------------------------------------------------------------------------
Broker
Year district
permit waivers
------------------------------------------------------------------------
2017.................................................... 14
2018.................................................... 13
2019.................................................... 7
2020.................................................... 10
2021.................................................... 6
---------------
Total............................................... 50
------------------------------------------------------------------------
Table 11--Time Savings for Brokers Seeking Waivers
[2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Hourly time Rule's savings
Broker burden for for brokers
Year district waiver seeking
permit waivers application waivers
----------------------------------------------------------------------------------------------------------------
2022............................................................ 5 2 353
2023............................................................ 4 2 298
2024............................................................ 4 2 251
2025............................................................ 3 2 212
2026............................................................ 3 2 179
-----------------------------------------------
Total....................................................... 19 .............. 1,293
----------------------------------------------------------------------------------------------------------------
Table 12--Time Savings for CBP Reviewing Waivers
[2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Hourly time
Broker burden for
Year district waiver Rule's savings
permit waivers application for CBP
review
----------------------------------------------------------------------------------------------------------------
2022............................................................ 5 1.5 $624
2023............................................................ 4 1.5 526
2024............................................................ 4 1.5 444
2025............................................................ 3 1.5 375
2026............................................................ 3 1.5 317
-----------------------------------------------
Total....................................................... 19 1.5 2,286
----------------------------------------------------------------------------------------------------------------
Table 13 provides a summary of the costs and savings resulting from
the removal of the district permit application and $100 fee over the
period of analysis.
Table 13--Summary of Costs and Savings to All Parties
[2022 U.S. dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs/savings for Costs/savings for corporations Savings for CBP
individuals ----------------------------------------------------------------
Savings for -------------------------- Waivers
11.5% Costs for applications Time Review of Review
Costs for Time corporation time savings permits waivers
the 2% savings savings
--------------------------------------------------------------------------------------------------------------------------------------------------------
2022............................................ $2,100 $500 $7,937 $900 $353 $627 $5,261 $624
2023............................................ 2,000 500 7,623 900 298 627 5,069 526
2024............................................ 2,000 500 7,415 900 251 627 4,940 444
2025............................................ 1,900 500 7,101 900 212 627 4,748 375
2026............................................ 1,800 500 6,788 900 179 627 4,555 317
-------------------------------------------------------------------------------------------------------
Total....................................... 9,800 2,500 36,864 4,500 1,293 3,133 24,573 2,286
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 63305]]
3.3 Record of Transactions
Each broker must keep current, in a correct and itemized manner,
records of accounts reflecting all of his or her financial transactions
as a broker. The broker must keep and maintain on file copies of all
correspondence and other records relating to customs business. With
this rule, each broker must provide notification to the processing
Center of any known breach of electronic or physical records relating
to customs business. Notification to CBP must be provided within 72
hours of the discovery of the breach with a list of all known
compromised importer identification numbers. CBP received several
comments on the potential difficulty of reporting a breach and
compromised importer numbers within this time frame. As explained above
in Section II, Discussion of Comments, in response, CBP has revised the
requirement such that brokers must report the breach within 72 hours,
and, within ten (10) business days, must provide an updated list of any
additional known compromised importer identification numbers. To the
extent that additional information is discovered, a broker must provide
that information within 72 hours of discovery. Brokers already compile
this information through their normal course of business, and they can
report the information to CBP in any format they choose. CBP assumes
data breaches are rare but includes this requirement as a preventive
measure. CBP assumes this provision has virtually no cost to the
brokers due to the infrequency of data breaches. CBP will use this
information in its targeting of imports for inspection, which will help
make imports safer.
3.4 Records Availability
Currently, during the period of retention (five years after the
date of entry), the broker must maintain its records in such a manner
that they can be readily examined by CBP when necessary. Records
required to be maintained under this provision must be made available
upon reasonable notice for inspection, copying, reproduction or other
official use by representatives of the Department of Homeland Security.
Additionally, customs brokers currently have the option to store
records offsite. Under the rule, upon request by CBP to examine
records, the designated recordkeeping contact must make all records
available to CBP within thirty (30) calendar days, or any longer
timeframe as specified by CBP, at the location specified by CBP. This
change in the regulations is necessary to ensure brokers continue to
give CBP the requested information and to specifically state for
clarity that brokers need to keep records in the customs territory of
the United States. As this is an existing requirement newly stated for
the sake of clarity, this will result in no additional burden for
customs brokers.
CBP received comments regarding the requirement to maintain records
within the customs territory of the United States. As further discussed
above in Section II, Discussion of Comments, CBP has clarified that
while primary records must be stored within the customs territory of
the United States, duplicates or backups may be stored outside it.
3.5 Termination of Client Relationship
The rule requires that a broker document and report to CBP when it
separates from a client relationship as a result of the broker's
determination that the client is intentionally attempting to use the
broker's services to defraud or otherwise commit any criminal act
against the U.S. Government. This is an entirely new provision, so CBP
does not have data on how often clients may use a broker's services to
defraud or otherwise commit criminal acts against the U.S. Government.
However, based on stakeholder feedback during the development of the
NPRM, CBP subject matter experts do not expect this to happen often.
CBP's Broker Management Branch estimates this to occur approximately
five times per year and each resulting report will take brokers
approximately four hours to draft. CBP requested public comment on this
assumption and did not receive any comments. CBP did receive some
comments regarding this provision and the responsibility of the broker,
which are discussed in greater detail in the comment responses above.
CBP expects that, in most cases, the necessary information will be
submitted by customs brokers employing in-house or external attorneys
to draft the report. CBP received one comment in response to the
attorney wage rate used in the NPRM stating that while attorney
compensations may be accurately reported by the Bureau of Labor
Statistics, actual costs of employing an attorney are significantly
higher than estimated by CBP. CBP agrees and has updated the cost
estimates to reflect a higher wage. The loaded wage rate for an
attorney is $94.15, which accounts for regional differences as well as
differences in experience and specialty.\36\ CBP assumes this wage
reflects the average wage of an in-house attorney. Using data and
estimates compiled by the American Intellectual Property Law
Association (AIPLA), CBP estimates the hourly wage for an external
attorney to be $466.38.\37\ CBP assumes that, generally, large
companies employing licensed customs brokers will also employ in-house
attorneys, while small companies employ attorneys outside the business.
Approximately 6 percent of brokerages are considered large (see the
Regulatory Flexibility Act section, below), while 94 percent are
considered small. A weighted average wage, therefore, is $443.85 per
hour. Five reports represent an additional burden to the broker and
will result in a total annual cost of $8,877 or a total cost of $44,385
over the five-year period of analysis.
---------------------------------------------------------------------------
\36\ CBP calculated this loaded wage rate by first multiplying
the Bureau of Labor Statistics' (BLS) 2021 median hourly wage rate
for Lawyers, occupation code 23-1011 ($61.54), which CBP assumes
best represents the wage for attorneys, by the ratio of BLS' average
2021 total compensation to wages and salaries for Professional and
related occupations (1.4689), the assumed occupational group for
brokers, to account for non-salary employee benefits. Sources: U.S.
Bureau of Labor Statistics. Occupational Employment Statistics,
``May 2021 National Occupational Employment and Wage Estimates
United States.'' Updated March 31, 2022. Available at https://www.bls.gov/oes/2021/may/oes_nat.htm#23-0000. Accessed May 25, 2022;
U.S. Bureau of Labor Statistics. Employer Costs for Employee
Compensation. ``ECEC Civilian Workers--2004 to Present.'' March
2022. Available at https://www.bls.gov/web/ecec.supp.toc.htm.
Accessed May 25, 2022. CBP assumes an annual growth rate of 4.15%
based on the prior year's change in the implicit price deflator,
published by the Bureau of Economic Analysis.
\37\ AIPLA's study surveyed intellectual property (IP) lawyers
that were used in the 2017 Report of the Economic Survey. The median
hourly billing rate for these lawyers was $400 in 2016 dollars,
which is the most recent data available, and ($447.78) after
adjustment to 2021 dollars. CBP assumes an annual growth rate of
4.15% based on the prior year's change in the implicit price
deflator, published by the Bureau of Economic Analysis. Source:
American Intellectual Property Law Association. 2017 Report of the
Economic Survey. ``Billable Hours, Billing Rate, Dollars Billed
(Q29, Q30, Q27).'' June 2017.
---------------------------------------------------------------------------
3.6 Customs Power of Attorney
A customs broker is required to have a customs power of attorney
prior to transacting any customs business on behalf of the importer of
record.\38\ Currently, an agent of the importer of record, who could be
a freight forwarder that is properly designated by the importer of
record, may issue a power of attorney on behalf of the importer of
record to a customs broker. In such instances, the customs broker may
never have any contact with the importer of record, only its agent (the
forwarder). With this rule, the broker must secure a customs power of
attorney directly from the importer of record or drawback
[[Page 63306]]
claimant and not via the freight forwarder or any other third-party
agent. This gives the broker direct access to the importer of record
when entering into the power of attorney, which increases transparency
in the verification process. Since brokers are currently required to
execute a customs power of attorney, and importers already provide a
power of attorney, this provision would not result in any additional
burden to brokers. The new provision only requires direct contact
between the broker and the importer of record. CBP received several
comments on this provision, which are discussed in greater detail in
the Discussion of Comments section above. In reviewing the concerns
raised in these comments, CBP has decided to retain its proposed new
policy requiring contact directly between the importer of record and
the broker.
---------------------------------------------------------------------------
\38\ See 19 CFR 141.46
---------------------------------------------------------------------------
According to CBP's Broker Management Branch, it takes approximately
1.75 hours, on average, for the broker to obtain a customs power of
attorney from the freight forwarder, a time estimate CBP believes will
also apply to securing a power of attorney from the importer of record
or drawback claimant. CBP received two comments disputing this
estimation in response to the NPRM, both noting that it may take
substantially longer to acquire a power of attorney under the rule,
though neither commenter provided an estimated time burden. However,
this estimation is an average across all clients and over time. While
it may initially take slightly longer to secure a power of attorney
directly from certain clients, for others it will be faster than
dealing with the freight forwarder. Additionally, as brokers regularly
work directly with importers of record and drawback claimants, the
process will likely move faster. Furthermore, CBP based this average on
subject matter expertise and information from discussions between the
Broker Management Branch and representatives of trade associations and
individual brokers. CBP therefore believes the average time to procure
a power of attorney will not change once the intermediary is removed
and the broker must obtain the customs power of attorney directly from
the importer of record or drawback claimant instead of allowing a
freight forwarder or other third party to do so on their behalf.
3.7 Professionalism
A number of the changes contained in this rule are meant to
increase professionalism and clarify what brokers should already be
doing. CBP recognized this need given the volume of routinely fielded
questions about these topics. The next several sections describe the
current process, and what is changing as a result of this rule, for new
requirements related to Customs Business, Records Confidentiality,
Responsible Supervision and Control, and Advice to Client.
3.7.1 Customs Business
Currently, customs business must be conducted within the customs
territory of the United States as it is defined in 19 CFR 101.1.
Furthermore, each brokerage or company employing brokers must designate
a licensed broker or knowledgeable employee to be available to CBP to
respond to issues related to the transacting of customs business. CBP
received several comments regarding this requirement. As discussed
above in Section II, Discussion of Comments, CBP is not requiring 24-
hour on-call coverage by brokers. Instead, CBP requires that a broker
provide a knowledgeable point of contact covering all ports where the
broker does business, which could encompass ports with business hours
extending beyond a regular business day. Each broker must maintain
accurate and current point of contact information for that employee
with CBP and may update that information in a CBP-authorized EDI
system, instead of submitting on paper. Under this rule, the
requirements related to contact information are not changing; the
regulations now recognize that use of the EDI satisfies the requirement
and mandates that brokers use an EDI, unless one is unavailable. CBP
fields questions on this provision from the public, so adding this
additional language to the regulation will clarify the provision for
the public. There are no costs to this provision because it does not
change the requirement. The public will benefit as the public now has
more clarity regarding the requirement without needing to contact CBP.
3.7.2 Records Confidentiality
Currently, records pertaining to the clients of the broker are to
be considered confidential and the broker must not disclose their
contents, or any information connected with the records to any other
persons except the relevant surety, other than specifically described
Government representatives with regard to a particular entry or due to
a subpoena. This is not changing under the rule. However, this
description is clarified to state that these records may not be
disclosed to any persons other than the ones mentioned above and to the
representatives of the Department of Homeland Security except by court
order, subpoena (as mentioned above), or when authorized in writing by
the client. This has been the practice but has been the subject of
confusion. Finally, the revised language clarifies that the
confidentiality provision does not apply to information that is in the
public domain, which has been a point of confusion for some brokers.
CBP received several comments on this provision, discussed in greater
detail in the comment responses above, but is not revising the
requirements for this final rule or the analysis of costs and benefits.
3.7.3 Responsible Supervision and Control
Brokers often have employees working for them who are not licensed
brokers. These employees help with information collection and
submission of entry documentation to CBP. Each broker is responsible
for exercising responsible supervision and control over the transaction
of the customs business done under his or her broker license. This
requirement currently exists and is not changing as a result of this
rule. However, this rule moves the list of factors CBP considers when
determining whether a customs broker is exercising responsible
supervision and control from the definition of ``responsible
supervision and control'' in Sec. 111.1 to Sec. 111.28. This list is
of a substantive nature and is more appropriately located in the
section on responsible supervision and control as opposed to the
definitions section. CBP has always maintained that the current factors
are not exhaustive, and in the rule, CBP is simply clarifying existing
requirements that brokers, for the most part, are already complying
with in practice.\39\ This is not a change of practice as these factors
for responsible supervision already exist and are just being moved and
formally stated in the regulations to clarify what already should be
occurring.
---------------------------------------------------------------------------
\39\ Brokers looking for more information beyond what is stated
in CBP regulations can consult the CBP website at https://www.cbp.gov/trade/programs-administration/customs-brokers. The
website is updated more frequently than the regulations themselves.
CBP provides guides on how to become a broker, broker exam
information, validating the power of attorney, broker compliance,
employing convicted felons, fees, national permits, and triennial
reports, as well as webinars and informed compliance publications.
---------------------------------------------------------------------------
In this final rule, CBP has also made some clarifying changes. In
Sec. 111.28(a), CBP combined factors (12) and (13) into one new factor
(12), which deals with the broker-CBP relationship, and combined
factors (14) and (15) into one new factor (13), relating to the broker-
officer/member relationship. In
[[Page 63307]]
addition, CBP added a reference to ``member(s)'' in the new factor (13)
to account for partnerships, in addition to associations and
corporations as a type of broker entity. The factors themselves are not
new; only their position in the list has been changed.
CBP received many comments regarding the responsible supervision
and control factors and their use in evaluating broker performance.
These comments are discussed in greater detail above in Section II,
Discussion of Comments. CBP did not revise the analysis of costs and
benefits based on these comments.
Additionally, CBP is clarifying some of the requirements on the
reporting of employee information by brokers, for consistency. This
rule removes the requirement for the broker to report each employee's
last home address, email address, the name and address of each former
employer, and, if the employee had been employed by the broker for less
than three years, the dates of employment for the three-year period
preceding current employment with the broker. This rule retains the
requirement that brokers report other information, including employee
names, social security numbers, dates and places of birth, dates of
hire, and current home addresses. An updated list must be submitted to
the processing Center and updated in ACE if any of the information
required changes, including notation of new or terminated employees.
This update must be submitted within thirty (30) calendar days of the
change. However, brokers already have an up-to-date list of their
employees' contact information. This new requirement amounts to a
routine submission each month in ACE with data that the brokers already
routinely keep. They are likely to do this at the same time as making
their other filings or routine reports so submitting one more existing
document is not an additional measurable burden on customs brokers.
3.7.4 Advice to Client
Currently, if a broker knows that a client has not complied with
the law or has made an error in, or omission from, any document,
affidavit, or other record which the law requires the client to
execute, the broker must advise the client promptly of that
noncompliance, error, or omission. This rule also requires the broker
to advise the client on the proper corrective actions and retain a
record of the broker's communication with the client for potential
review by CBP on a routine visit to the broker. Brokers will not have
to report errors, omissions or noncompliance discovered by the broker
each time one is discovered, and the client is counseled. However, if
CBP identifies the error, omission or noncompliance and brings it to
the broker's attention, the broker should provide the documentation of
the communication with the client. These additions clarify the level of
professionalism that is expected in the broker/importer relationship.
Most brokers are already in compliance with this requirement, so this
provision will not add a significant burden to customs brokers. CBP
received a few comments on this provision, which are further discussed
above in Section II, Discussion of Comments. However, CBP maintains the
requirement that brokers provide and document advice given to clients
on corrective actions and has not revised the analysis of costs and
benefits as a result. The discussion of comments above clarifies how a
broker can achieve proper documentation.
3.8 CBP's New Payment Platform, the eCBP Portal
In this final rule, CBP is also announcing the deployment of the
eCBP portal, a new payment and submission system. The eCBP portal is
part of an ongoing effort by CBP to eliminate manual processes, reduce
cash and check collections at ports of entry, standardize processes,
integrate data with cargo systems, reduce wait times at ports of entry,
provide more online payment options, and provide better and more
accessible data. As described above in The Benefits of CBP's New
Payment and Submission System, the eCBP Portal, for Licensed Customs
Brokers under Section IV, the eCBP portal streamlines and validates
data, which in turn reduces errors and provides data to support
security-related decision making by CBP personnel. Additionally, the
eCBP portal allows for fewer cash transactions, lowering the risk of
cash losses, and allows CBP to shift resources from revenue collection
to law enforcement and trade facilitation.
As further discussed above, CBP tested the eCBP portal for use in
filing the triennial status report between December of 2017 and May
2018. The new portal was then deployed for the following filing period
of the triennial report beginning in December of 2020 and will be used
for the next filing in December 2023 into early 2024. The portal was
also deployed to accept license exam application fees in August of
2019. As a part of regular announcements, CBP announced the new payment
system through CSMS messages, a message on CBP's website, tweets, and
in webinars for the broker community. Finally, CBP added the automatic
suspension and revocation processing of licenses for unsubmitted
triennial status reports as a portal functionality in February 2021,
though a CBP employee still reviews all license records with
unsubmitted reports prior to suspension or revocation.
CBP saw significant savings resulting from reduced processing and
personnel hours, discussed further below, with the deployment of the
eCBP portal. The portal also required some initial investment in
programming and technical development. However, those costs are part of
a long-term project within CBP called Revenue Modernization, which
touches on several different areas of CBP's payment processing systems.
The Revenue Modernization team is not able to easily identify an exact
allocation of its development costs for the eCBP-specific initiatives
at this time. The development costs are intertwined with back-end
development shared with another Revenue Modification project's
solution, as well as development that serves as a front-end platform
for numerous other fee collection efforts. The eCBP portal will
eventually encompass a variety of different fees, so full development
costs are not limited to broker-related projects. The program plans to
allocate the costs once it is closer to the solutions being complete.
CBP estimates that, as of FY 2021, development costs have amounted to
less than $3 million for the broker fees deployed in the eCBP portal to
date.
The eCBP portal currently allows brokers and broker exam applicants
to submit paperwork and fees for the broker exam and the triennial
status report electronically. According to CBP data, between 80 and 90
percent of the brokers required to submit applications and fees did so
via the portal following the introduction of both functionalities,
resulting in significant time savings for applicants, brokers, and CBP
personnel. To access the portal, users must first create a login.gov
account, which takes about three-five minutes. However, an account must
only be created once.
In 2019, the first year that broker exam applicants were able to
use the portal, 1,327 applicants successfully paid their fees for the
fall exam via the eCBP portal, saving an average of 43 minutes relative
to a paper form.\40\ CBP
[[Page 63308]]
offers the exam twice per year; once in April and again in October.
Applicants were again able to use the portal for two exams each in 2020
and 2021.\41\ An average of 1,291.4 applicants used the portal for each
exam. See Table 14. CBP estimates an average time burden of 60 minutes
for a paper form, which includes the time needed to print, fill-in, and
submit the form and pay either in-person at the port or by mail.\42\
---------------------------------------------------------------------------
\40\ CBP estimates a time burden of approximately 60 minutes for
a paper submission, while an electronic submission takes an average
of 17 minutes. Without access to live timings from the public, CBP's
Revenue Modernization team relied on a testing team to set up two
common scenarios for applicants making their customs broker license
examination (CBLE) registration. The basic elements of the
registration process include establishing a login.gov ID for first
time users, login in, filling in the form and making payment.
\41\ The spring exam in 2020 was cancelled due to the COVID-19
pandemic. The exam was offered twice in October to make up for the
cancellation.
\42\ See https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202010-1651-013 for more information on the time
burden to submit a paper form. Before electronic submission options
were available, filers needed to obtain and fill in a paper form,
and mail the form and their payment to the appropriate port.
Alternatively, filers could submit in person at the port, sometimes
compelling them to wait in line to submit the form and payment and
receive their receipt. Beginning in 2015, filers could use a
fillable PDF form on pay.gov to submit their form along with their
payment. Using pay.gov required typing in all the information,
providing an electronic signature, and submitting the form and
payment. The one-hour time burden is an average accounting for both
paper submission by mail or in person, or electronic submission.
---------------------------------------------------------------------------
In 2021, brokers were able to use the portal to file their
triennial status reports and related fees. Approximately 91 percent of
brokers, or 13,772 filers, did so, with 1,406 brokers preferring to
file a paper report. The electronic filers saved an average of 19
minutes relative to paper filers.\43\
---------------------------------------------------------------------------
\43\ CBP estimates a 30-minute time burden for the filing of a
paper triennial report and fee payment. After testing using the same
methodology as described above, the Revenue Modernization team
estimates an electronic filing to take an average of 11 minutes.
Before the eCBP portal was available, brokers filed their triennial
reports in paper form by mailing them along with payment to the
port, or by submitting the report and payment in person. For the
2015 and 2018 reporting cycles, brokers could use a fillable PDF on
pay.gov to submit their triennial reports. In 2015, 15 percent of
brokers did so. In 2018, 85 percent used pay.gov. The 30-minute time
burden is an average accounting for those brokers filing in person
or by mail on paper.
---------------------------------------------------------------------------
With information and payments submitted electronically in 2019, CBP
subject matter experts estimate that CBP saved approximately 280 hours
of exam fee processing time, in addition to about 430 hours of time
processing withdrawals and mailing out results, for a total savings of
710 hours in 2019, implying a time savings of 32 minutes per
applicant.\44\ CBP also saved approximately 1,836 hours of processing
of triennial status reports and fees in 2021.\45\
---------------------------------------------------------------------------
\44\ Time savings compiled and provided by CBP's Broker
Management Branch and CBP's Revenue Modernization team based on a
comparison of the time spent on paper submissions vs electronic
submissions. Much of the time savings resulted from reduced
administrative burden, like filling envelopes, payment data entry,
and cross-checking paper forms with electronic databases.
\45\ As discussed below, CBP saved 1,500 hours of processing
time over 11,254 brokers in the 2018 reporting cycle, implying a
savings on 8 minutes per payment. In 2021, CBP processed 13,772
payments. A savings of 8 minutes over 13,772 payments results in
1,836 hours in 2021.
Table 14--CBP Time Savings From Exam Applicants Using the eCBP Portal
----------------------------------------------------------------------------------------------------------------
CBP minutes saved/
Year Applicants CBP hours saved applicant
----------------------------------------------------------------------------------------------------------------
2019................................................... 1,327 710 32
2020 (1)............................................... 1,372 734 32
2020 (2)............................................... 1,421 760 32
2021 (1)............................................... 1,312 702 32
2021 (2)............................................... 1,025 548 32
--------------------------------------------------------
Total.............................................. 6,457 3,455 .................
----------------------------------------------------------------------------------------------------------------
Applicants, brokers, and CBP will save time with the eCBP portal
over the period of analysis from 2022-2026. CBP will offer the broker
exam twice per year, meaning approximately 1,292 applicants will use
the portal at each exam, for a total of 2,583 applicants per year.\46\
As Table 15 shows, those broker exam applicants will save about
$284,728 over the course of five years, accounting for time spent
creating a login.gov account as well as time saved in using the portal
relative to a paper submission.\47\ CBP assumes the number of
applicants will stay largely the same over the period of analysis, and
that the wage rate for brokers most closely approximates the wage
earned by applicants.\48\ Over the period of analysis, there will only
be one triennial reporting year (2024). In that year, brokers using the
eCBP portal can expect to save approximately $160,909, as shown in
Table 16. CBP assumes that about 91 percent of newly licensed
applicants will elect to file their triennial status reports via the
portal, in line with the 91 percent of already licensed brokers who
chose to do so in 2021. Therefore, accounting for the new licenses
issued each year, as described above in Table 3, about 14,597 brokers
will use the portal to submit their report fees. Those brokers will
have already created a login.gov account, either to submit the exam
application fees, participate in the testing or original deployment of
the portal, or in the course of their customs business.
---------------------------------------------------------------------------
\46\ The eCBP portal is a relatively new tool and is only now
becoming required in certain instances. Because we do not have very
many years worth of data, an average is a more accurate estimate of
the number of future applicants.
\47\ For the purposes of calculating a time burden, CBP assumes
that all exam applicants will need to create a login.gov account.
Although some applicants will take the test multiple times, CBP does
not have data on the frequency.
\48\ Many applicants for the broker exam already work in the
brokerage industry. However, because CBP does not have specific wage
data for non-licensed brokerage employees, nor can we estimate the
average wage for those working outside the brokerage industry, we
have approximated using the broker wage rate.
---------------------------------------------------------------------------
Savings for CBP over the period of analysis amount to $716,066,
incorporating savings from the processing of payments, paper forms,
exam withdrawals, results, and suspensions. CBP will also require less
data entry, resulting in fewer mistakes, reduced time fixing errors,
and more time on tasks other than administration. The automation of
payments also allows for greater efficiency and speed in payment
processing, and reduced cash losses. CBP did incur some unquantified IT
and development costs. As stated above, these costs are part of a
larger modernization effort by CBP and cannot be separated out by
program. Table 17 summarizes these savings.
[[Page 63309]]
Table 15--Time Savings for Exam Applicants
[Undiscounted 2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Time savings Login.gov
per account Total net
Year Applicants submission creation Wage rate savings
(minutes) (minutes)
----------------------------------------------------------------------------------------------------------------
2022............................ 2583 43 5 34.81 $56,946
2023............................ 2583 43 5 34.81 56,946
2024............................ 2583 43 5 34.81 56,946
2025............................ 2583 43 5 34.81 56,946
2026............................ 2583 43 5 34.81 56,946
-------------------------------------------------------------------------------
Total....................... 12,914 .............. .............. .............. 284,728
----------------------------------------------------------------------------------------------------------------
Table 16--Time Savings for Brokers
[Undiscounted 2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Time savings
per
Year Broker filers submission Wage rate Total savings
(minutes)
----------------------------------------------------------------------------------------------------------------
2022............................................ .............. .............. .............. 0
2023............................................ .............. .............. .............. 0
2024............................................ 14,597 19 $34.81 $160,909
2025............................................ .............. .............. .............. 0
2026............................................ .............. .............. .............. 0
---------------------------------------------------------------
Total....................................... 14,597 .............. .............. 160,909
----------------------------------------------------------------------------------------------------------------
Table 17--Cost Savings for CBP
[Undiscounted 2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Total time
Year Applications savings Wage rate Total savings
(hours)
----------------------------------------------------------------------------------------------------------------
2022............................................ 2,583 1,378 82.08 $113,073
2023............................................ 2,583 1,378 82.08 113,073
2024............................................ 17,180 3,214 82.08 263,772
2025............................................ 2,583 1,378 82.08 113,073
2026............................................ 2,583 1,378 82.08 113,073
---------------------------------------------------------------
Total....................................... 27,512 8,724 .............. 716,066
----------------------------------------------------------------------------------------------------------------
In the course of the eCBP portal test, both CBP and brokers/
applicants experienced significant time savings. CBP's time savings
throughout the test resulted primarily from greater efficiency in
electronic processing of payments, an increase in the number of on-time
payments, reduction in time spent on administrative tasks in processing
withdrawals and results, and the introduction of automatic suspension.
CBP personnel saved 1,500 hours across the 2017/2018 reporting cycle--
savings from which are reported in 2018 in Table 18. CBP saved 710
hours across a single exam in 2019, as well as 1,494 hours across two
exams in 2020, as shown in Table 14 above. CBP also saved 1,836 hours
across the 2020/2021 reporting cycle, reported in 2021 in Table 18, and
1,250.4 hours across two exams.\49\ CBP also incurred some non-
quantified IT and development costs, as described earlier.
---------------------------------------------------------------------------
\49\ The triennial status report is due on the 28th of February,
every three years. To allow adequate time for brokers submitting the
reports, CBP begins accepting reports and payments at the end of the
year prior to the due date. For ease of presentation, and because
the majority of submissions occur in January and February, CBP
presents these costs in a single year.
---------------------------------------------------------------------------
Brokers and applicants also saved time if they chose to
participate. In the 2017/2018 reporting cycle, 11,254 participating
brokers saved 19 minutes per submission. Those savings are reported in
2018 in Table 18 below. In 2019, 1,327 exam applicants saved 43 minutes
each, while in 2020, 2,793 exam applicants saved the same. In 2021,
2,337 exam applicants saved 43 minutes each. In the 2020/2021 reporting
cycle, 13,772 brokers saved 19 minutes each, the savings from which are
reported in 2021 in Table 18.
Brokers did experience a time cost in creating their Login.gov
account. About 80 percent of brokers filing that year, or 11,254
people, chose to use the portal in the 2017/2018 reporting cycle, and
in doing so, spent about three-five minutes creating a Login.gov
account, the costs of which are reported in 2018 in Table 18 below. For
the 2020/2021 reporting cycle, 13,772 brokers, or about 90 percent used
the electronic option, costs for which are reported in 2021 in Table
18. This represents 2,518 more brokers than in the previous reporting
cycle. Those 2,518 brokers also faced the three-five-minute cost of
creating a Login.gov account. In 2019, 2020, and 2021, exam applicants
also spent three-five minutes creating an account. As stated above,
there were 1,327 applicants in 2019, 2,793 applicants
[[Page 63310]]
across two exams in 2020, and 2,337 applicants across two exams in
2021. Although the costs and benefits of the test deployment of the
eCBP portal are not recoverable, they are reported here for
transparency and excluded from the total costs and benefits of the
rule. See Table 18 for a description of these costs and benefits.
Table 18--Costs and Benefits of the eCBP Portal Test
[Undiscounted 2022 U.S. dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Broker/
Year Activity CBP costs CBP savings applicant Login.gov Total savings
savings costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
2018................................. Triennial Report........ IT Costs............... $123,120 $124,055 $32,646 $214,529
2019................................. License Exam............ IT Costs............... 58,277 33,105 3,849 87,532
2020................................. 2 License Exams......... IT Costs............... 122,658 69,677 8,102 184,233
2021................................. Triennial Report; 2 IT Costs............... 253,331 $210,113 14,084 449,360
License Exams.
----------------------------------------------------------------------------------------
Total............................ ........................ ....................... 557,386 436,950 58,681 935,654
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Totals may not sum due to rounding.
3.9 Total Costs
The total monetized costs for customs brokers include a $100 fee
that two percent of individual customs brokers who receive their first
district permit concurrently with their broker's license will need to
pay for their permit and the costs resulting from the new requirement
that a broker document and report to CBP when it separates from a
client relationship as a result of attempted fraud or criminal acts.
The costs also include the 5 minute time costs broker license exam
applicants will experience in creating their Login.gov accounts. Table
18 shows the total annual cost of the rule. Over the five-year period
of analysis, this rule will cost brokers about $88,850.
Table 19--Total Annual Costs for Brokers
[2022 U.S. dollars]
------------------------------------------------------------------------
Total
Year costs
------------------------------------------------------------------------
2022........................................................ $17,770
2023........................................................ 17,770
2024........................................................ 17,770
2025........................................................ 17,770
2026........................................................ 17,770
-----------
Total..................................................... 88,850
------------------------------------------------------------------------
Note: Values may not sum to total due to rounding.
Table 20 shows the present value and annualized costs of the rule
over the period of analysis at a three and seven percent discount rate.
Total costs range from $72,860 to $81,381, depending on the discount
rate used. Annualized costs are $17,770.
Table 20--Total Present Value and Annualized Costs
[2022 U.S. dollars]
------------------------------------------------------------------------
Total present value costs Annualized costs
------------------------------------------------------------------------
3% 7% 3% 7%
------------------------------------------------------------------------
$81,381 $72,860 $17,770 $17,770
------------------------------------------------------------------------
3.10 Total Benefits
The total annual monetized savings for customs brokers are the
result of monetary savings from switching from a district permitting
system to a national permitting system. Namely, there is a time savings
and fee savings of $100 per permit application for individual customs
brokers who do not concurrently receive their first district permit
with their broker license. There is also a time savings to CBP due to
the removal of the district permit waiver application reviews. Brokers,
potential brokers applying to take the broker exam, and CBP also
experience time savings resulting from use of the eCBP portal. As shown
in Table 21, total undiscounted savings over the period of analysis are
$1,277,116.
In addition to these quantified benefits, there are unquantified
benefits resulting from this rule's updates. These benefits include
increased professionalism of the broker industry, greater clarity for
brokers in understanding the rules and regulations by which they must
abide, greater data security, and better reporting of potential fraud
to CBP. The eCBP portal also increases the efficiency of payment
processing, reduces errors, and allows a shift of resources from
paperwork and administration to other CBP priorities.
Table 21--Total Annual Undiscounted Savings for Brokers and CBP
[2022 U.S. dollars]
------------------------------------------------------------------------
Year Total benefits
------------------------------------------------------------------------
2022.................................................... $194,412
2023.................................................... 193,655
2024.................................................... 504,797
2025.................................................... 192,475
2026.................................................... 191,777
---------------
Total................................................. 1,277,116
------------------------------------------------------------------------
Note: Values may not sum to total due to rounding.
Table 22 shows the present value and annualized savings of the rule
over the period of analysis at a three and seven percent discount rate.
Total savings range from $1,046,477 to $1,169,689, depending on the
discount rate used. Annualized savings total approximately $255,000.
[[Page 63311]]
Table 22--Total Present Value and Annualized Benefits
[2022 U.S. dollars]
------------------------------------------------------------------------
Total present value benefits Annualized Benefits
------------------------------------------------------------------------
3% 7% 3% 7%
------------------------------------------------------------------------
$1,169,689 $1,046,477 $255,407 $255,226
------------------------------------------------------------------------
3.11 Net Benefits
Table 23 summarizes the monetized costs and benefits of this rule
to individual and business entity customs brokers. As shown, the total
monetized present value net benefits of this rule over a five-year
period of analysis ranges from $973,616 to 1,088,308 and the annualized
net benefit is approximately $237,500.
Table 23--Present Value and Annualized Net Benefit of Rule
[2022 U.S. dollars]
----------------------------------------------------------------------------------------------------------------
3% Discount rate 7% discount rate
---------------------------------------------------------------
Present value Annualized Present value Annualized
----------------------------------------------------------------------------------------------------------------
Total Cost...................................... $81,381 $17,770 $72,860 $17,770
Total Benefit................................... 1,169,689 255,407 1,046,477 255,226
Total Net Benefit............................... 1,088,308 237,637 973,616 237,456
----------------------------------------------------------------------------------------------------------------
3.12 Distributional Impact
Under the rule, the customs broker license application will change
from $200 for both individuals and business entities to $300 for
individuals and $500 for business entities. Consequently, CBP's fee
would increase by $100 for individuals and $300 for business entities.
As discussed in section 2, CBP estimates that over the next five years,
2,072 individuals and 75 business entities will be issued a new customs
broker license (See Table 3). Using these estimates and the fee
increases, CBP estimates that the rule will result in increased
transfer payments from brokers to the government of approximately
$229,700 over the next five years (2,072 individual applications * $100
fee increase = $207,200; 75 business entity applications * $300 fee
increase = $22,500; $207,200 + $22,500 = $229,700).
Although the fee changes will increase costs for individuals and
business entities, CBP has determined that these increases are
necessary in order to recover some of the costs to provide the services
necessary to facilitate the customs broker license application process.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as amended
by the Small Business Regulatory Enforcement and Fairness Act of 1996,
requires agencies to assess the impact of regulations on small
entities. 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 concern per the Small Business Act);
a small organization (defined as any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field); or
a small governmental jurisdiction (defined as a locality with fewer
than 50,000 people).
In an effort to modernize the regulations governing customs
brokers, CBP is finalizing regulatory changes that include: eliminating
district permits so each customs broker only needs one national permit,
which reduces the time submitting permit applications and the fees
owed; mandating that each broker provide notification to CBP of any
known breach of its records within 72 hours of discovery; \50\
requiring brokers to make all records available to CBP, upon request
within thirty (30) calendar days at the location specified by CBP;
mandating that customs brokers now obtain a customs power of attorney
directly from the importer of record or drawback claimant, not a
freight forwarder or other third party, to transact customs business
for that importer or drawback claimant; and requiring that a broker
must document and report to CBP when it separates from or terminates
representation of a client as a result of the broker's determination
that the client is intentionally attempting to use the services of a
broker to defraud or otherwise commit any criminal act against the U.S.
Government. Furthermore, CBP is also making various non-substantive
changes and conforming edits to clarify the existing language in the
regulations to better reflect what is already occurring.
---------------------------------------------------------------------------
\50\ Additionally, within ten (10) business days, a broker must
provide an updated list of any additional known compromised importer
identification numbers. To the extent that additional information is
discovered, a broker must provide that information within 72 hours
of discovery.
---------------------------------------------------------------------------
The rule would apply to all customs brokers, regardless of size.
Accordingly, the rule would affect a substantial number of small
entities, as a small business within the Freight Transportation
Arrangement industry (NAICS code 448510), the industry in which brokers
are employed, is defined as one whose annual receipts are less than
$17.5 million.\51\ The rule would result in an average annualized cost
per customs broker of $0.08 ($36 annualized costs/429 average brokers
per year), excluding savings resulting from the use of the eCBP
portal.\52\ The time savings resulting from the eCBP portal's
introduction accrue to both broker license exam applicants who may or
may not be in the Freight Transportation Arrangement industry as well
as to all
[[Page 63312]]
existing, active licensed brokers. Those two groups will only
experience the net cost savings provided by the eCBP portal.
---------------------------------------------------------------------------
\51\ Small business size standards are defined in 13 CFR 121.
\52\ A large part of the savings in this rule accrue to CBP.
Therefore, to calculate the impact on small businesses, CBP
considered only the costs and savings of the rule for customs
brokers. This includes the savings for 11.5% of brokers reported in
Table 6, application time savings for individuals reported in Table
7, application time savings reported for coprorations in Table 8,
waiver request time savings as reported in Table 11, costs for
corporate brokers reported in Table 4, costs for the 2 percent of
brokers reported in Table 5, and the costs of an attorney as
described above. Over the period of analysis, the net costs total
$296, or about $36 annualized at a discount rate of three percent.
---------------------------------------------------------------------------
Additionally, as discussed above, the customs broker license
application fee increase for the 2,147 new customs brokers over the
period of analysis would result in a distributional impact of $229,700,
with 2,072 individual applicants paying an additional $100 and 75
corporate applicants paying an additional $300 over a 5-year period.
Including distributional impacts, the rule costs individual brokers
$100 or costs corporate brokers $300 per year, or less than one percent
of annual revenue for brokers of any size. Please see Table 23 for a
breakdown of brokerages by size. Because the distributional impact and
saving are relatively small on a per broker basis, this rule will not
have a significant economic impact on customs brokers. Accordingly, CBP
certifies that this rule does not have a significant economic impact on
a substantial number of small entities.
Table 24--Annual Revenue by Firm Size \53\
----------------------------------------------------------------------------------------------------------------
Receipts per
Enterprise size (number of employees) Number of Receipts firm (in Small business?
firms ($1,000s) millions)
----------------------------------------------------------------------------------------------------------------
01: Total............................ 15,104 64,643,370 $243,761 .........................
02: <100............................. 1,856 95,206 51,296 Yes.
03: 100-499.......................... 4,655 1,247,577 268,008 Yes.
04: 500-999.......................... 2,459 1,769,394 719,558 Yes.
05: 1,000-2,499...................... 2,706 4,244,215 1,568,446 Yes.
06: 2,500-4,999...................... 1,327 4,572,835 3,445,995 Yes.
07: 5,000-7,499...................... 589 3,454,385 5,864,830 Yes.
08: 7,500-9,999...................... 317 2,627,240 8,287,823 Yes.
09: 10,000-14,999.................... 281 3,180,898 11,319,922 Yes.
10: 15,000-19,999.................... 176 2,698,956 15,334,977 Yes.
11: 20,000-24,999.................... 105 2,068,177 19,696,924 No.
12: 25,000-29,999.................... 67 1,582,086 23,613,224 No.
13: 30,000-34,999.................... 49 1,313,422 26,804,531 No.
14: 35,000-39,999.................... 45 1,282,808 28,506,844 No.
15: 40,000-49,999.................... 49 1,536,283 31,352,714 No.
16: 50,000-74,999.................... 85 3,198,608 37,630,682 No.
17: 75,000-99,999.................... 54 2,825,197 52,318,463 No.
18: 100,000+......................... 284 26,946,083 94,880,574 No.
----------------------------------------------------------------------------------------------------------------
C. Paperwork Reduction Act
---------------------------------------------------------------------------
\53\ U.S. Census Bureau, 2017 SUSB Annual Data Tables by
Establishment Industry, ``The Number of Firms and Establishments,
Employment, Annual Payroll, and Receipts by Industry and Enterprise
Receipts Size: 2017, NAICS 4885 Freight Transportation Arrangement.
https://www.census.gov/data/tables/2017/econ/susb/2017-susb-annual.html. Accessed June 7, 2021.
---------------------------------------------------------------------------
In accordance with the Paperwork Reduction Act of 1995 (Pub. L.
104-13, 44 U.S.C. 3507), an agency may not conduct, and a person is not
required to respond to, a collection of information unless the
collection of information displays a valid control number assigned by
OMB. The collections of information contained in these regulations are
provided for by OMB control number 1651-0034 (CBP Regulations
Pertaining to Customs Brokers) and by OMB control number 1651-0076
(Recordkeeping Requirements).
The final rule formalizes the use of the eCBP portal as an option
for applicants and brokers to submit the Application for Broker License
Exam and payment and the Triennial Status Report and payment. The eCBP
portal reduces the time burden to submit these forms and fees. CBP
would submit to OMB for review the following adjustments to the
previously approved Information Collection under OMB control number
1651-0034 to account for this rule's changes.
CBP Regulations Pertaining to Customs Brokers
Application for Broker License Exam
Estimated Number of Respondents: 2,583.
Estimated Number of Responses per Respondent: 1.
Estimated Number of Total Annual Responses: 2,583.
Estimated Time per Response: 17 minutes (0.283 hours).
Triennial Status Report
Estimated Number of Respondents: 4,866 (14,597 every 3-years).
Estimated Number of Responses per Respondent: 1.
Estimated Number of Total Annual Responses: 4,866.
Estimated Time per Response: 11 minutes (0.183 hours).
Estimated Total Annual Burden Hours: 1,621.47 hours.
VII. Signing Authority
This document is being issued in accordance with 19 CFR 0.1(b)(1),
which provides that the Secretary of the Treasury delegated to the
Secretary of Homeland Security the authority to prescribe and approve
regulations relating to customs revenue functions on behalf of the
Secretary of the Treasury for when the subject matter is not listed as
provided by Treasury Department Order No. 100-16. Accordingly, this
final rule amending such regulations may be signed by the Secretary of
Homeland Security (or his or her delegate). Additionally, while the
general topic of this rulemaking covers customs revenue functions
delegated to the Secretary of Homeland Security by the Secretary of the
Treasury, this document also includes certain fees over which the
Secretary of the Treasury retains authority, as provided for in 19 CFR
0.1(a)(1) and paragraph 1(a)(i) of Treasury Department Order 100-16.
Accordingly, this final rule is also being signed by the Secretary of
the Treasury (or his or her delegate).
List of Subjects
19 CFR Part 24
Accounting, Claims, Customs duties and inspection, Harbors,
Reporting and recordkeeping requirements, Taxes.
19 CFR Part 111
Administrative practice and procedure, Brokers, Customs duties and
inspection, Penalties, Reporting and recordkeeping requirements.
[[Page 63313]]
Regulatory Amendments to the CBP Regulations
For the reasons given above, parts 24 and 111 of title 19 of the
Code of Federal Regulations (19 CFR parts 24 and 111) are amended as
set forth below:
PART 24--CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE
0
1. The general authority citation for part 24 continues to read as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 58a-58c, 66, 1202 (General
Note 3(i), Harmonized Tariff Schedule of the United States), 1505,
1520, 1624; 26 U.S.C. 4461, 4462; 31 U.S.C. 3717, 9701; Pub. L. 107-
296, 116 Stat. 2135 (6 U.S.C. 1 et seq.).
* * * * *
Sec. 24.1 [Amended]
0
2. In Sec. 24.1, paragraph (a)(3)(i) is amended by removing the
phrases ``who does not have a permit for the district (see the
definition of ``district'' at Sec. 111.1 of this chapter) where the
entry is filed,'' and ``which is unconditioned geographically'' from
the third sentence.
PART 111--CUSTOMS BROKERS
0
3. The authority citation for part 111 is revised 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 111.2 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.
0
4. In Sec. 111.1:
0
a. Add a definition for ``Appropriate Executive Director, Office of
Trade'' in alphabetical order;
0
b. Remove the definition of ``Assistant Commissioner'';
0
c. Add a definition for ``Broker's office of record'' in alphabetical
order;
0
d. Remove the definition of ``District'';
0
e. Add a definition for ``Executive Assistant Commissioner'' in
alphabetical order;
0
f. Amend the definition of ``Permit'' by removing the word ``any'' and
adding in its place the word ``a'';
0
g. Add a definition for ``Processing Center'' in alphabetical order;
0
h. Remove the definition of ``Region''; and
0
i. Revise the definition of ``Responsible supervision and control''.
The additions and revisions read as follows:
Sec. 111.1 Definitions.
* * * * *
Appropriate Executive Director, Office of Trade. ``Appropriate
Executive Director, Office of Trade'' means the Executive Director
responsible for broker management.
* * * * *
Broker's office of record. ``Broker's office of record'' means the
office designated by a customs broker as the broker's primary location
that oversees the administration of the provisions of this part
regarding all activities conducted under a national permit.
* * * * *
Executive Assistant Commissioner. ``Executive Assistant
Commissioner'' means the Executive Assistant Commissioner of the Office
of Trade at the Headquarters of U.S. Customs and Border Protection.
* * * * *
Processing Center. ``Processing Center'' means the broker
management operations of a Center of Excellence and Expertise (Center)
that process applications for a broker's license under Sec. 111.12(a),
applications for a national permit under Sec. 111.19(b) for an
individual, partnership, association, or corporation, as well as
submissions required in this part for an already-licensed broker.
* * * * *
Responsible supervision and control. ``Responsible supervision and
control'' means that degree of supervision and control necessary to
ensure the proper transaction of the customs business of a broker,
including actions necessary to ensure that an employee of a broker
provides substantially the same quality of service in handling customs
transactions that the broker is required to provide. See Sec. 111.28
for a list of factors which CBP may consider when evaluating
responsible supervision and control.
* * * * *
0
5. In Sec. 111.2:
0
a. Amend the section heading by removing the word ``district'';
0
b. Amend paragraph (a)(2)(ii)(A)(1) by removing ``the port director''
and ``Customs'' and adding in their place the term ``CBP'';
0
c. Amend paragraph (a)(2)(ii)(A)(2) by removing the words ``port
director'' and adding the words ``processing Center'' in their place
and by removing the last sentence.
0
d. Amend paragraph (a)(2)(ii)(B) by removing the words ``port
director'' wherever they appear and adding in their place the words
``processing Center''; and
0
e. Revise paragraph (b).
The revision reads as follows:
Sec. 111.2 License and permit required.
* * * * *
(b) National permit. A national permit issued to a broker under
Sec. 111.19 will constitute sufficient permit authority for the broker
to conduct customs business within the customs territory of the United
States as defined in Sec. 101.1 of this chapter.
0
6. Add Sec. 111.3 to read as follows:
Sec. 111.3 Customs business.
(a) Location. Customs business must be conducted within the customs
territory of the United States as defined in Sec. 101.1 of this
chapter.
(b) Point of contact. A licensed customs broker, or partnership,
association, or corporation, conducting customs business under a
national permit must designate a knowledgeable point of contact to be
available to CBP during and outside of normal operating hours to
respond to customs business issues. The licensed customs broker, or
partnership, association, or corporation, must maintain accurate and
current point of contact information in a CBP-authorized electronic
data interchange (EDI) system. If a CBP-authorized EDI system is not
available, then the information must be provided in writing to the
processing Center.
0
7. Revise Sec. 111.12 to read as follows:
Sec. 111.12 Application for license.
(a) Submission of application and fee. An application for a
broker's license must be timely submitted to the processing Center
after the applicant attains a passing grade on the examination. The
application must be executed on CBP Form 3124. The application must be
accompanied by the application fee prescribed in Sec. 111.96(a) and
one copy of the appropriate attachment required by the application form
(Articles of Agreement or an affidavit signed by all partners, Articles
of Agreement of the association, or the Articles of Incorporation). If
the applicant proposes to operate under a trade or fictitious name in
one or more States, evidence of the applicant's authority to use the
name in each of those States must accompany the application. The
application, application fee and any additional documentation as
required above may be submitted to a CBP-authorized electronic data
interchange (EDI) system. If a CBP-authorized EDI system is not
available, then the information must be submitted in writing to the
processing Center. An application for an individual license must be
submitted within the 3-year period after the applicant took and passed
the examination referred to in Sec. Sec. 111.11(a)(4) and 111.13. The
[[Page 63314]]
processing Center may require an individual applicant to provide a copy
of the notification that the applicant passed the examination (see
Sec. 111.13(e)) and will require the applicant to submit fingerprints
at the time of the interview. The processing Center may reject an
application as improperly filed if the application is incomplete or, if
on its face, the application demonstrates that one or more of the basic
requirements set forth in Sec. 111.11 has not been met at the time of
filing; in either case the application and fee will be returned to the
filer without further action.
(b) Withdrawal of application. An applicant for a broker's license
may withdraw the application at any time prior to issuance of the
license by providing written notice of the withdrawal to the processing
Center or through a CBP-authorized EDI system, if available. However,
withdrawal of the application does not entitle the applicant to a
refund of the application fee set forth in Sec. 111.96(a).
0
8. In Sec. 111.13:
0
a. Amend paragraph (b) by removing ``$390'' and revising the last
sentence;
0
b. Amend paragraph (c) by:
0
i. Removing the words ``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)'' and adding in their place the words ``the transaction
of customs business''; and
0
ii. Removing ``$390'' in the last sentence;
0
c. Amend paragraph (d) by removing ``$390'';
0
d. Amend paragraph (e) in the first sentence by adding the words ``or
electronic'' after the word ``written''; and
0
e. Revise paragraph (f).
The revisions read as follows:
Sec. 111.13 Examination for individual license.
* * * * *
(b) * * * CBP will give notice of the time and place for the
examination, including whether alternatives to on-site testing will be
available, which is at CBP's sole discretion.
* * * * *
(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 or electronic
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 or electronic notice provided for in
paragraph (e) of this section. CBP will provide to the examinee written
or electronic 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 submitting a written or
electronic request to the appropriate Executive Director, Office of
Trade, U.S. Customs and Border Protection, within 60 calendar days
after the date of the notice on that decision.
0
9. Revise Sec. 111.14 to read as follows:
Sec. 111.14 Background investigation of the license applicant.
(a) Scope of background investigation. A background investigation
under this section will ascertain facts relevant to the question of
whether the applicant is qualified and will cover, but need not be
limited to:
(1) The accuracy of the statements made in the application and
interview;
(2) The business integrity and financial responsibility of the
applicant; and
(3) When the applicant is an individual (including a member of a
partnership or an officer of an association or corporation), the
character and reputation of the applicant, including any association
with any individuals or groups that may present a risk to the security
or to the revenue collection of the United States.
(b) Referral to Headquarters. The processing Center will forward
the application and supporting documentation to the appropriate
Executive Director, Office of Trade. The processing Center will also
submit the recommendation for action on the application.
(c) Additional inquiry. The appropriate Executive Director, Office
of Trade, may require further inquiry if additional facts are deemed
necessary to evaluate the application. The appropriate Executive
Director, Office of Trade, may also require the applicant (or in the
case of a partnership, association, or corporation, one or more of its
members or officers) to appear in person or by another approved method
before the appropriate Executive Director, Office of Trade, or his or
her representatives, for the purpose of undergoing further written or
oral inquiry.
0
10. Revise Sec. 111.15 to read as follows:
Sec. 111.15 Issuance of license.
If the appropriate Executive Director, Office of Trade, finds that
the applicant is qualified and has paid all applicable fees prescribed
in Sec. 111.96(a), the Executive Assistant Commissioner will issue a
license. A license for an individual who is a member of a partnership,
or an officer of an association or corporation will be issued in the
name of the individual licensee and not in his or her capacity as a
member or officer of the organization with which he or she is
connected. The license will be forwarded to the processing Center,
which will deliver it to the licensee.
0
11. Revise Sec. 111.16 to read as follows:
Sec. 111.16 Denial of a license.
(a) Notice of denial. If the appropriate Executive Director, Office
of Trade, determines that the application for a license should be
denied for any reason, notice of denial will be given by him or her to
the applicant and to the processing Center. The notice of denial will
state the reasons why the license was not issued.
(b) Grounds for denial. The grounds sufficient to justify denial of
an application for a license include, but need not be limited to:
(1) Any cause which would justify suspension or revocation of the
license of a broker under the provisions of Sec. 111.53;
(2) The failure to meet any requirement set forth in Sec. 111.11;
(3) A failure to establish the business integrity and financial
responsibility of the applicant;
(4) A failure to establish the good character and reputation of the
applicant;
(5) Any willful misstatement or omission of pertinent facts in the
application or interview for the license;
(6) Any conduct which would be deemed unfair or detrimental in
commercial transactions by accepted standards;
(7) A reputation imputing to the applicant criminal, dishonest, or
unethical conduct, or a record of that conduct; or
(8) Any other relevant information uncovered over the course of the
background investigation.
0
12. Revise Sec. 111.17 to read as follows:
Sec. 111.17 Review of the denial of a license.
(a) By the appropriate Executive Director, Office of Trade. Upon
the denial of an application for a license, the applicant may file with
the appropriate Executive Director, Office of Trade, in writing,
additional information or arguments in support of the application and
may request to appear in person, by telephone, or by
[[Page 63315]]
other acceptable means of communication. This filing and request must
be received by the appropriate Executive Director, Office of Trade
within sixty (60) calendar days of the denial.
(b) By the Executive Assistant Commissioner. Upon the decision of
the appropriate Executive Director, Office of Trade, affirming the
denial of an application for a license, the applicant may file with the
Executive Assistant Commissioner, in writing, a request for any
additional review that the Executive Assistant Commissioner, deems
appropriate. This request must be received by the Executive Assistant
Commissioner within sixty (60) calendar days of the affirmation by the
appropriate Executive Director, Office of Trade, of the denial of the
application for a license.
(c) By the Court of International Trade. Upon a decision of the
Executive Assistant Commissioner affirming the denial of an application
for a license, the applicant may appeal the decision to the Court of
International Trade, provided that the appeal action is commenced
within sixty (60) calendar days after the decision date by the
Executive Assistant Commissioner.
Sec. 111.18 [Amended]
0
13. Amend Sec. 111.18 by adding the phrase ``and addressing how
deficiencies have been remedied'' after the term ``Sec. 111.12''.
0
14. In Sec. 111.19:
0
a. Revise the section heading;
0
b. Revise paragraphs (a) and (b);
0
c. Remove paragraph (d);
0
d. Redesignate paragraph (e) as paragraph (d) and revise it;
0
e. Revise paragraph (f); and
0
f. Redesignate paragraph (g) as paragraph (e) and revise it.
The revisions read as follows:
Sec. 111.19 National permit.
(a) General. A national permit is required for the purpose of
transacting customs business throughout the customs territory of the
United States as defined in Sec. 101.1 of this chapter.
(b) Application for a national permit. An applicant who obtains a
passing grade on the examination for an individual broker's license may
apply for a national permit. The applicant will exercise responsible
supervision and control (as described in Sec. 111.28) over the
activities conducted under that national permit. The national permit
application may be submitted concurrently with or after the submission
of an application for a broker's license. An applicant applying for a
national permit on behalf of a partnership, association, or corporation
must be a licensed broker employed by the partnership, association, or
corporation. An application for a national permit under this paragraph
must be submitted in the form of a letter to the processing Center or
to a CBP-authorized electronic data interchange (EDI) system. The
application must set forth or attach the following:
(1) The applicant's broker license number and date of issuance if
available;
(2) If the applicant is applying for a national permit on behalf of
a partnership, association, or corporation: the name of the
partnership, association, or corporation and the title held by the
applicant within the partnership, association, or corporation;
(3) If the applicant is applying for a national permit on behalf of
a partnership, association, or corporation: a copy of the documentation
issued by a State, or local government that establishes the legal
status and reserves the business name of the partnership, association,
or corporation;
(4) The address, telephone number, and email address of the office
designated by the applicant as the office of record as defined in Sec.
111.1. The office will be noted in the national permit when issued;
(5) The name, telephone number, and email address of the point of
contact described in Sec. 111.3(b) to be available to CBP to respond
to issues related to the transaction of customs business;
(6) If the applicant is applying for a national permit on behalf of
a partnership, association, or corporation: the name, broker license
number, office address, telephone number, and email address of each
individual broker employed by the partnership, association, or
corporation;
(7) A list of all employees together with the specific employee
information prescribed in Sec. 111.28 for each employee;
(8) A supervision plan describing how responsible supervision and
control will be exercised over the customs business conducted under the
national permit, including compliance with Sec. 111.28;
(9) The location where records will be retained (see Sec. 111.23);
(10) The name, telephone number, and email address of the
knowledgeable employee responsible for broker-wide records maintenance
and financial recordkeeping requirements (see Sec. 111.21(d)); and
(11) A receipt or other evidence showing that the fees specified in
Sec. 111.96(b) and (c) have been paid in accordance with paragraph (b)
of this section.
* * * * *
(d) Action on application; list of permitted brokers. The
processing Center that receives the application will review the
application to determine whether the applicant meets the requirements
of paragraphs (a) and (b) of this section. If the processing Center is
of the opinion that the national permit should not be issued, the
processing Center will submit written reasons for that opinion to the
appropriate Executive Director, Office of Trade, CBP Headquarters, for
appropriate instructions on whether to grant or deny the national
permit. The appropriate Executive Director, Office of Trade, CBP
Headquarters, will notify the applicant if his or her application is
denied. CBP will issue a national permit to an applicant who meets the
requirements of paragraphs (a) and (b) of this section. CBP will
maintain and make available to the public an alphabetical list of
permitted brokers.
(e) Review of the denial of a national permit--(1) By the Executive
Assistant Commissioner. Upon the denial of an application for a
national permit under this section, the applicant may file with the
Executive Assistant Commissioner, in writing, additional information or
arguments in support of the application and may request to appear in
person, by telephone, or by other acceptable means of communication.
This filing and request must be received by the Executive Assistant
Commissioner within sixty (60) calendar days of the denial.
(2) By the Court of International Trade. Upon a decision of the
Executive Assistant Commissioner affirming the denial of an application
for a national permit under this section, the applicant may appeal the
decision to the Court of International Trade, provided that the appeal
action is commenced within sixty (60) calendar days after the decision
date by the Executive Assistant Commissioner.
(f) Responsible supervision and control. The individual broker who
qualifies for the national permit will exercise responsible supervision
and control (as described in Sec. 111.28) over the activities
conducted under that national permit.
0
15. In Sec. 111.21:
0
a. Redesignate paragraphs (b) and (c) as paragraphs (c) and (d);
0
b. Add a new paragraph (b); and
0
c. Revise newly redesignated paragraph (d).
The addition and revision read as follows:
[[Page 63316]]
Sec. 111.21 Record of transactions.
* * * * *
(b) Each broker must provide notification to the CBP Office of
Information Technology Security Operations Center (CBP SOC) of any
known breach of electronic or physical records relating to the broker's
customs business. Notification must be electronically provided
([email protected]) within 72 hours of the discovery of the breach,
including any known compromised importer identification numbers (see 19
CFR 24.5). Within ten (10) business days of the notification, a broker
must electronically provide an updated list of any additional known
compromised importer identification numbers. To the extent that
additional information is subsequently discovered, the broker must
electronically provide that information within 72 hours of discovery.
Brokers may also call CBP SOC at a telephone number posted on CBP.gov
with questions as to the reporting of the breach, if any guidance is
needed.
* * * * *
(d) Each broker must designate a knowledgeable employee as the
party responsible for brokerage-wide recordkeeping requirements. Each
broker must maintain accurate and current point of contact information
in a CBP-authorized electronic data interchange (EDI) system. If a CBP-
authorized EDI system is not available, then the information must be
provided in writing to the processing Center.
0
16. In Sec. 111.23, revise paragraph (a) to read as follows:
Sec. 111.23 Retention of records.
(a) Place of retention. A licensed customs broker must maintain
originals of the records referred to in this part, including any
records stored in electronic formats, within the customs territory of
the United States and in accordance with the provisions of this part
and part 163 of this chapter.
* * * * *
0
17. Revise Sec. 111.24 to read as follows:
Sec. 111.24 Records confidential.
The records referred to in this part and pertaining to the business
of the clients serviced by the broker are to be considered
confidential, and the broker must not disclose their contents or any
information connected with the records to any persons other than those
clients, their surety on a particular entry, and representatives of the
Department of Homeland Security (DHS), or other duly accredited
officers or agents of the United States, except on subpoena or court
order by a court of competent jurisdiction, or when authorized in
writing by the client. This confidentiality provision does not apply to
information that properly is available from a source open to the
public.
0
18. Revise Sec. 111.25 to read as follows:
Sec. 111.25 Records must be available.
(a) General. During the period of retention, the broker must
maintain the records referred to in this part in such a manner that
they may readily be examined. Records required to be maintained under
the provisions of this part must be made available upon reasonable
notice for inspection, copying, reproduction or other official use by
representatives of the Department of Homeland Security (DHS) within the
prescribed period of retention or within any longer period of time
during which they remain in the possession of the broker.
(b) Examination request. Upon request by DHS to examine records,
the designated recordkeeping contact (see Sec. 111.21(d)), must make
all records available to DHS within thirty (30) calendar days, or such
longer time as specified by DHS, at the location specified by DHS.
(c) Recordkeeping requirements. Records subject to the requirements
of part 163 of this chapter must be made available to DHS in accordance
with the provisions of that part.
Sec. 111.27 [Amended]
0
19. Amend Sec. 111.27 by removing the phrase ``the port director and
other proper officials of the Treasury Department'' and adding in its
place the phrase ``DHS, or other duly accredited officers or agents of
the United States,''.
0
20. In Sec. 111.28:
0
a. Revise the section heading;
0
b. Revise paragraphs (a) and (b);
0
c. Redesignate paragraphs (c) and (d) as paragraphs (d) and (e);
0
d. Add a new paragraph (c);
0
e. Amend newly redesignated paragraph (d) by:
0
i. Removing the words ``Assistant Commissioner'' and adding in their
place the words ``appropriate Executive Director, Office of Trade,'';
and
0
ii. Removing the phrase ``director of each port through which a permit
has been granted to the partnership, association, or corporation'' and
adding in its place the words ``processing Center''; and
0
f. Revise newly redesignated paragraph (e).
The addition and revisions read as follows:
Sec. 111.28 Responsible supervision and control.
(a) General. Every individual broker operating as a sole
proprietor, every licensed member of a partnership that is a broker,
and every licensed officer of an association or corporation that is a
broker must exercise responsible supervision and control (see Sec.
111.1) over the transaction of the customs business of the sole
proprietorship, partnership, association, or corporation. A sole
proprietorship, partnership, association, or corporation must employ a
sufficient number of licensed brokers relative to the job complexity,
similarity of subordinate tasks, physical proximity of subordinates,
abilities and skills of employees, and abilities and skills of the
managers. While the determination of what is necessary to perform and
maintain responsible supervision and control will vary depending upon
the circumstances in each instance, factors which CBP may consider in
its discretion and to the extent any are relevant include, but are not
limited to, the following:
(1) The training provided to broker employees;
(2) The issuance of instructions and guidelines to broker
employees;
(3) The volume and type of business conducted by the broker;
(4) The reject rate for the various customs transactions relative
to overall volume;
(5) The level of access broker employees have to current editions
of CBP regulations, the Harmonized Tariff Schedule of the United
States, and CBP issuances;
(6) The availability of a sufficient number of individually
licensed brokers for necessary consultation with employees of the
broker;
(7) The frequency of supervisory visits of an individually licensed
broker to another office of the broker that does not have an
individually licensed broker;
(8) The frequency of audits and reviews by an individually licensed
broker of the customs transactions handled by employees of the broker;
(9) The extent to which the individually licensed broker who
qualifies the permit is involved in the operation of the brokerage and
communications between CBP and the brokerage;
(10) Any circumstances which indicate that an individually licensed
broker has a real interest in the operations of a brokerage;
(11) The timeliness of processing entries and payment of duty, tax,
or other debt or obligation owing to the Government for which the
broker is
[[Page 63317]]
responsible, or for which the broker has received payment from a
client;
(12) Communications between CBP and the broker, and the broker's
responsiveness and action to communications, direction, and notices
from CBP;
(13) Communications between the broker and its officer(s) or
member(s), and the broker's responsiveness and action to communications
and direction from its officer(s) or member(s).
(b) Employee information--(1) Current employees. Each national
permit holder must submit to the processing Center a list of the names
of persons currently employed by the broker. The list of employees must
be submitted prior to issuance of a national permit under Sec. 111.19
and before the broker begins to transact customs business. For each
employee, the broker must provide the name, social security number,
date and place of birth, date of hire, and current home address. After
the initial submission, an updated list must be submitted to a CBP-
authorized electronic data interchange (EDI) system if any of the
information required by this paragraph changes. If a CBP-authorized EDI
system is not available, then the information must be provided in
writing to the processing Center. The update must be submitted within
thirty (30) calendar days of the change.
(2) New employees. Within thirty (30) calendar days of the start of
employment of a new employee(s), the broker must submit a list of new
employee(s) with the information required under paragraph (b)(1) of
this section to a CBP-authorized EDI system. The broker may submit a
list of the new employee(s) or an updated list of all employees,
specifically noting the new employee(s). If a CBP-authorized EDI system
is not available, then the information must be provided in writing to
the processing Center.
(3) Terminated employees. Within thirty (30) calendar days after
the termination of employment of an employee, the broker must submit a
list of terminated employee(s) to a CBP-authorized EDI system. The
broker may submit a list of the terminated employee(s) or an updated
list of all employees, specifically noting the terminated employee(s).
If a CBP-authorized EDI system is not available, then the information
must be provided in writing to the processing Center.
(c) Broker's responsibility. Notwithstanding a broker's
responsibility for providing the information required in paragraph (b)
of this section, in the absence of culpability by the broker, CBP will
not hold the broker responsible for the accuracy of any information
that is provided to the broker by the employee.
* * * * *
(e) Change in ownership. If the ownership of a broker changes and
ownership shares in the broker are not publicly traded, the broker must
immediately provide written notice of that fact to the appropriate
Executive Director, Office of Trade, and must send a copy of the
written notice to the processing Center. When a change in ownership
results in the addition of a new principal to the organization, and
whether or not ownership shares in the broker are publicly traded, CBP
reserves the right to conduct a background investigation on the new
principal. The processing Center will notify the broker if CBP objects
to the new principal, and the broker will be given a reasonable period
of time to remedy the situation. If the background investigation
uncovers information which would have been the basis for a denial of an
application for a broker's license and the principal's interest in the
broker is not terminated to the satisfaction of the processing Center,
suspension or revocation proceedings may be initiated under subpart D
of this part. For purposes of this paragraph, a ``principal'' means any
person having at least a five (5) percent capital, beneficiary or other
direct or indirect interest in the business of a broker.
0
21. In Sec. 111.30:
0
a. Paragraphs (a) and (b) are revised;
0
b. The first sentence of paragraph (c) is revised;
0
c. Paragraph (d) is revised; and
0
d. The first sentence of paragraph (e) introductory text is revised.
The revisions read as follows:
Sec. 111.30 Notification of change in address, organization, name, or
location of business records; status report; termination of brokerage
business.
(a) Change of address. A broker is responsible for providing CBP
with the broker's current addresses, which include the broker's office
of record address as defined in Sec. 111.1, an email address, and, if
the broker is not actively engaged in transacting business as a broker,
the broker's non-business address. If a broker does not receive mail at
the broker's office of record or non-business address, the broker must
also provide CBP with a valid address at which he or she receives mail.
When address information (the broker's office of record address,
mailing address, email address) changes, or the broker is no longer
actively engaged in transacting business as a broker, he or she must
update his or her address information within ten (10) calendar days
through a CBP-authorized electronic data interchange (EDI) system. If a
CBP-authorized EDI system is not available, then address updates must
be provided in writing within ten (10) calendar days to the processing
Center.
(b) Change in organization. A partnership, association, or
corporation broker must update within ten (10) calendar days in writing
to the processing Center any of the following:
(1) The date on which a licensed member or officer ceases to be the
qualifying member or officer for purposes of Sec. 111.11(b) or (c)(2),
and the name of the licensed member or officer who will succeed as the
license qualifier;
(2) The date on which a licensed employee ceases to be the national
permit qualifier for purposes of Sec. 111.19(a), and the name of the
licensed employee who will succeed as the national permit qualifier;
and
(3) Any change in the Articles of Agreement, Charter, Articles of
Association, or Articles of Incorporation relating to the transaction
of customs business, or any other change in the legal nature of the
organization (for example, conversion of a general partnership to a
limited partnership, merger with another organization, divestiture of a
part of the organization, or entry into bankruptcy protection).
(c) * * * A broker who changes his or her name, or who proposes to
operate under a trade or fictitious name in one or more States and is
authorized by State law to do so, must submit to the appropriate
Executive Director, Office of Trade, at the Headquarters of U.S.
Customs and Border Protection, evidence of his or her authority to use
that name. * * *
(d) Triennial status report--(1) General. Each broker must file a
triennial status report with CBP on February 1 of each third year after
1985. The report must be filed through a CBP-authorized EDI system and
will not be considered received by CBP until payment of the triennial
status report fee prescribed in Sec. 111.96(d) is received. If a CBP-
authorized EDI system is not available, the triennial status report
must be filed with the processing Center. A report received during the
month of February will be considered filed timely. No form or
particular format is required.
(2) Individual--(i) Each individual broker must state in the report
required under paragraph (d)(1) of this section whether he or she is
actively engaged in transacting business as a broker. If he or she is
so actively engaged, the broker must also:
[[Page 63318]]
(A) State the name under which, and the address at which, the
broker's business is conducted if he or she is a sole proprietor, and
an email address;
(B) State the name and address of his or her employer if he or she
is employed by another broker, unless his or her employer is a
partnership, association or corporation broker for which he or she is a
qualifying member or officer for purposes of Sec. 111.11(b) or (c)(2);
and
(C) State whether or not he or she still meets the applicable
requirements of Sec. 111.11 and Sec. 111.19 and has not engaged in
any conduct that could constitute grounds for suspension or revocation
under Sec. 111.53.
(ii) An individual broker not actively engaged in transacting
business as a broker must provide CBP with the broker's current mailing
address and email address, and state whether or not he or she still
meets the applicable requirements of Sec. Sec. 111.11 and 111.19 and
has not engaged in any conduct that could constitute grounds for
suspension or revocation under Sec. 111.53.
(3) Partnership, association, or corporation--(i) Each partnership,
association, or corporation broker must state in the report required
under paragraph (d)(1) of this section the name under which its
business as a broker is being transacted, the broker's office of record
(see Sec. 111.1), the name, address and email address of each licensed
member of the partnership or licensed officer of the association or
corporation, including the license qualifier under Sec. 111.11(b) or
(c)(2) and the name of the licensed employee who is the national permit
qualifier under Sec. 111.19(a), and whether the partnership,
association, or corporation is actively engaged in transacting business
as a broker. The report must be signed by a licensed member or officer.
(ii) A partnership, association, or corporation broker must state
whether or not the partnership, association, or corporation broker
still meets the applicable requirements of Sec. Sec. 111.11 and 111.19
and has not engaged in any conduct that could constitute grounds for
suspension or revocation under Sec. 111.53.
(4) Failure to file timely. If a broker fails to file the report
required under paragraph (d)(1) of this section by March 1 of the
reporting year, the broker's license is suspended by operation of law
on that date. By March 31 of the reporting year, CBP will transmit
written notice of the suspension to the broker by certified mail,
return receipt requested, at the address reflected in CBP records. If
the broker files the required report and pays the required fee within
60 calendar days of the date of the notice of suspension, the license
will be reinstated. If the broker does not file the required report and
pay the required fee within that 60-day period, the broker's license is
revoked by operation of law without prejudice to the filing of an
application for a new license. Notice of the revocation will be
published in the Federal Register.
(e) * * * Upon permanent termination of brokerage business, written
notification of the name, address, email address and telephone number
of the party having legal custody of the brokerage business records
must be provided to the processing Center. * * *
* * * * *
0
22. Section 111.32 is revised to read as follows:
Sec. 111.32 False information.
A broker must not file or procure or assist in the filing of any
claim, or of any document, affidavit, or other papers, known by such
broker to be false. In addition, a broker must not give, or solicit or
procure the giving of, any information or testimony that the broker
knew or should have known was false or misleading in any matter pending
before the Department of Homeland Security or to any representative of
the Department of Homeland Security. A broker also must document and
report to CBP when the broker separates from or cancels representation
of a client as a result of determining the client is intentionally
attempting to use the broker to defraud the U.S. Government or commit
any criminal act against the U.S. Government. The report to CBP must
include the client name, date of separation or cancellation, and reason
for the separation or cancellation.
0
23. In Sec. 111.36, revise paragraph (c)(3) to read as follows:
Sec. 111.36 Relations with unlicensed persons.
* * * * *
(c) * * *
(3) The broker must execute a customs power of attorney directly
with the importer of record or drawback claimant, and not via a freight
forwarder or other third party, to transact customs business for that
importer of record or drawback claimant. No part of the agreement of
compensation between the broker and the forwarder, nor any action taken
pursuant to the agreement, can forbid or prevent direct communication
between the importer of record, drawback claimant, or other party in
interest and the broker; and
* * * * *
0
24. In Sec. 111.39:
0
a. Paragraph (a) is revised;
0
b. Paragraphs (b) and (c) are redesignated as paragraphs (c) and (d);
0
c. A new paragraph (b) is added; and
0
d. Newly redesignated paragraph (c) is amended by:
0
i. Removing the word ``paper'' and adding in its place the word
``record''; and
0
ii. Adding a sentence to the end of the paragraph.
The additions and revisions read as follows:
Sec. 111.39 Advice to client.
(a) Withheld or false information. A broker must not withhold
information from a client relative to any customs business it conducts
on behalf of a client who is entitled to the information. The broker
must not knowingly impart to a client false information relative to any
customs business.
(b) Due diligence. A broker must exercise due diligence to
ascertain the correctness of any information which the broker imparts
to a client, including advice to the client on the proper payment of
any duty, tax, or other debt or obligation owing to the U.S.
Government.
(c) * * * The broker must advise the client on the proper
corrective actions required and retain a record of the broker's
communication with the client in accordance with Sec. Sec. 111.21 and
111.23.
* * * * *
Sec. 111.42 [Amended]
0
25. In Sec. 111.42:
0
a. Paragraph (a)(1) is amended by removing the word ``Customs'' and
adding in its place the word ``customs''; and
0
b. Paragraph (a)(3) is amended by adding the word ``Executive'' before
the word ``Assistant'' and adding the phrase ``, or his or her
designee,'' after the words ``Assistant Commissioner''.
0
26. In Sec. 111.45:
0
a. Paragraphs (a), (b), and (c) are revised; and
0
b. In paragraph (d), remove the cross-reference ``or (b)'' in the
second sentence.
The revisions read as follows:
Sec. 111.45 Revocation by operation of law.
(a) License and permit. If a broker that is a partnership,
association, or corporation fails to have, during any continuous period
of 120 days, at least one member of the partnership or at
[[Page 63319]]
least one officer of the association or corporation who holds a valid
individual broker's license, that failure will, in addition to any
other sanction that may be imposed under this part, result in the
revocation by operation of law of the license and the national permit
issued to the partnership, association, or corporation. If a broker
that is a partnership, association, or corporation fails to employ,
during any continuous period of 180 days, a licensed customs broker who
is the national permit qualifier for the broker, that failure will, in
addition to any other sanction that may be imposed under this part,
result in the revocation by operation of law of the national permit
issued to the partnership, association, or corporation. CBP will notify
the broker in writing of an impending revocation by operation of law
under this section thirty (30) calendar days before the revocation is
due to occur, if the broker has provided advance notice to CBP of the
underlying events that could cause a revocation by operation of law
under this section. If the license or permit of a partnership,
association, or corporation is revoked by operation of law, CBP will
notify the organization of the revocation.
(b) Annual broker permit fee. If a broker fails to pay the annual
permit user fee pursuant to Sec. 111.96(c), the permit is revoked by
operation of law. The processing Center will notify the broker in
writing of the failure to pay and the revocation of the permit.
(c) Publication. Notice of any revocation under this section will
be published in the Federal Register.
* * * * *
0
27. In Sec. 111.51:
0
a. Paragraph (a) is revised;
0
b. Paragraph (b) is amended by:
0
i. Removing the words ``Assistant Commissioner'' and adding in their
place the words ``appropriate Executive Director, Office of Trade,'';
and
0
ii. Removing the word ``Secretary'' and adding in its place the words
``Executive Assistant Commissioner''.
The revision reads as follows:
Sec. 111.51 Cancellation of license or permit.
(a) Without prejudice. The appropriate Executive Director, Office
of Trade, may cancel a broker's license or permit ``without prejudice''
upon written application by the broker if the appropriate Executive
Director, Office of Trade, determines that the application for
cancellation was not made in order to avoid proceedings for the
suspension or revocation of the license or permit. If the appropriate
Executive Director, Office of Trade, determines that the application
for cancellation was made in order to avoid those proceedings, he or
she may cancel the license or permit ``without prejudice'' only with
authorization from the Executive Assistant Commissioner.
* * * * *
Sec. 111.52 [Amended]
0
28. Amend Sec. 111.52 by removing the words ``Assistant Commissioner''
and adding in their place the words ``appropriate Executive Director,
Office of Trade,''.
0
29. In Sec. 111.53:
0
a. Remove the word ``Customs'' wherever it appears and add in its place
the term ``CBP'';
0
b. Amend paragraph (e) by removing the words ``Assistant Commissioner''
and adding in their place the words ``appropriate Executive Director,
Office of Trade,'';
0
c. Amend paragraph (f) by removing the word ``or'' following the
semicolon;
0
d. Redesignate paragraph (g) as paragraph (h); and
0
e. Add a new paragraph (g).
The addition reads as follows:
Sec. 111.53 Grounds for suspension or revocation of license or
permit.
* * * * *
(g) The broker has been convicted of committing or conspiring to
commit an act of terrorism as described in section 2332b of title 18,
United States Code; or
* * * * *
0
30. Revise Sec. 111.55 to read as follows:
Sec. 111.55 Investigation of complaints.
Every complaint or charge against a broker which may be the basis
for disciplinary action may be forwarded for investigation to the
appropriate investigative authority within the Department of Homeland
Security. The investigative authority will submit a final report on the
investigation of complaints to the processing Center and send a copy of
the report to the appropriate Executive Director, Office of Trade.
0
31. Revise Sec. 111.56 to read as follows:
Sec. 111.56 Review of report on the investigation of complaints.
The processing Center will review the report on the investigation
of complaints, or if there is no report on the investigation of
complaints, other documentary evidence, to determine if there is
sufficient basis to recommend that charges be preferred against the
broker. The processing Center will then submit the recommendation with
supporting reasons to the appropriate Executive Director, Office of
Trade, for final determination together with a proposed statement of
charges when recommending that charges be preferred.
0
32. Revise Sec. 111.57 to read as follows:
Sec. 111.57 Determination by appropriate Executive Director, Office
of Trade.
The appropriate Executive Director, Office of Trade, will make a
determination on whether or not charges should be preferred, and will
notify the processing Center of the decision.
Sec. 111.59 [Amended]
0
33. In Sec. 111.59, paragraph (a) and paragrapb (b) introductory text
are amended by removing the words ``port director'' and adding in their
place the words ``processing Center''.
Sec. 111.60 [Amended]
0
34. In Sec. 111.60, remove the words ``port director'' in the last
sentence and add in their place the words ``processing Center''.
0
35. Revise Sec. 111.61 to read as follows:
Sec. 111.61 Decision on preliminary proceedings.
The processing Center will prepare a summary of any oral
presentations made by the broker or the broker's attorney and forward
it to the appropriate Executive Director, Office of Trade, together
with a copy of each paper filed by the broker. The processing Center
will also give to the appropriate Executive Director, Office of Trade,
a recommendation on action to be taken as a result of the preliminary
proceedings. If the appropriate Executive Director, Office of Trade,
determines that the broker has satisfactorily responded to the proposed
charges and that further proceedings are not warranted, he or she will
so inform the processing Center, who will notify the broker. If no
response is filed by the broker or if the appropriate Executive
Director, Office of Trade, determines that the broker has not
satisfactorily responded to all of the proposed charges, he or she will
advise the processing Center of that fact and instruct the processing
Center to prepare, sign, and serve a notice of charges and the
statement of charges. If one or more of the charges in the proposed
statement of charges was satisfactorily answered by the broker in the
preliminary proceedings, the appropriate Executive Director, Office of
Trade, will instruct the processing Center to omit those charges from
the statement of charges.
0
36. In Sec. 111.62:
0
a. Revise paragraph (d); and
[[Page 63320]]
0
b. Amend paragraph (e) by:
0
i. Removing the phrase ``, in duplicate''; and
0
ii. Removing the words ``port director'' and adding in their place the
words ``processing Center''.
The revision reads as follows:
Sec. 111.62 Contents of notice of charges.
* * * * *
(d) The broker will be notified of the time and place of a hearing
on the charges; and
* * * * *
0
37. In Sec. 111.63:
0
a. Remove the words ``port director'' wherever they appear and add in
their place the words ``processing Center''; and
0
b. Revise paragraphs (a)(2) and (c).
The revisions read as follows:
Sec. 111.63 Service of notice and statement of charges.
* * * * *
(a) * * *
(2) By certified mail, return receipt requested, addressed to the
broker's office of record (or other address as provided pursuant to
Sec. 111.30).
* * * * *
(c) Certified mail; evidence of service. When service under this
section is by certified mail to the broker's office of record (or other
address as provided pursuant to Sec. 111.30), the receipt of the
return card signed or marked will be satisfactory evidence of service.
Sec. 111.64 [Amended]
0
38. In Sec. 111.64, paragraph (a) is amended by removing the words
``port director'' and adding in their place the words ``processing
Center''.
Sec. 111.66 [Amended]
0
39. Section 111.66 is amended by removing the words ``Secretary of
Homeland Security, or his designee,'' and adding in their place the
words ``Executive Assistant Commissioner''.
Sec. 111.67 [Amended]
0
40. In Sec. 111.67:
0
a. Paragraph (d) is amended by removing the words ``port director''
wherever they appear and adding in their place the words ``processing
Center''; and
0
b. Paragraph (e) is removed.
Sec. 111.69 [Amended]
0
41. Section 111.69 is amended by removing the words ``Secretary of
Homeland Security, or his designee'' and adding in their place the
words ``Executive Assistant Commissioner''.
Sec. 111.70 [Amended]
0
42. Section 111.70 is amended by removing the words ``Secretary of
Homeland Security, or his designee'' and adding in their place the
words ``Executive Assistant Commissioner''.
Sec. 111.71 [Amended]
0
43. Section 111.71 is amended by removing the words ``Secretary of
Homeland Security, or his designee'' and adding in their place the
words ``Executive Assistant Commissioner''.
0
44. Revise Sec. 111.72 to read as follows:
Sec. 111.72 Dismissal subject to new proceedings.
If the Executive Assistant Commissioner finds that the evidence
produced at the hearing indicates that a proper disposition of the case
cannot be made on the basis of the charges preferred, he or she may
instruct the processing Center to serve appropriate charges as a basis
for new proceedings to be conducted in accordance with the procedures
set forth in this subpart.
0
45. Revise Sec. 111.74 to read as follows:
Sec. 111.74 Decision and notice of suspension or revocation or
monetary penalty.
If the Executive Assistant Commissioner finds that one or more of
the charges in the statement of charges is not sufficiently proved, the
suspension, revocation, or monetary penalty action may be based on any
remaining charges if the facts alleged in the charges are established
by the evidence. If the Executive Assistant Commissioner in the
exercise of discretion and based solely on the record, issues an order
suspending a broker's license or permit for a specified period of time
or revoking a broker's license or permit or, except in a case described
in Sec. 111.53(b)(3), assessing a monetary penalty in lieu of
suspension or revocation, the appropriate Executive Director, Office of
Trade, will promptly provide written notification of the order to the
broker and, unless an appeal from the order of the Executive Assistant
Commissioner is filed by the broker (see Sec. 111.75), the appropriate
Executive Director, Office of Trade, will publish a notice of the
suspension or revocation, or the assessment of a monetary penalty, in
the Federal Register. If no appeal from the order of the Executive
Assistant Commissioner is filed, an order of suspension or revocation
or assessment of a monetary penalty will become effective sixty (60)
calendar days after issuance of written notification of the order
unless the Executive Assistant Commissioner finds that a more immediate
effective date is in the national or public interest. If a monetary
penalty is assessed and no appeal from the order of the Executive
Assistant Commissioner is filed, payment of the penalty must be
tendered within sixty (60) calendar days after the effective date of
the order, and, if payment is not tendered within that sixty (60)-day
period, the license or permit of the broker will immediately be
suspended until payment is made.
Sec. 111.75 [Amended]
0
46. In Sec. 111.75:
0
a. In the section heading, remove the word ``Secretary's'' and add in
its place the words ``Executive Assistant Commissioner's'';
0
b. Remove the words ``Secretary of Homeland Security, or his designee''
and add in their place the words ``Executive Assistant Commissioner'';
and
0
c. Remove the word ``Secretary's'' and add in its place the words
``Executive Assistant Commissioner's''.
0
47. In Sec. 111.76:
0
a. In paragraph (a), remove the word ``written'' and the words ``in
duplicate'' in the first sentence and remove the words ``Assistant
Commissioner'' and add in their place the words ``appropriate Executive
Director, Office of Trade,''; and
0
b. Revise paragraph (b).
The revision reads as follows:
Sec. 111.76 Reopening the case.
* * * * *
(b) Procedure. The appropriate Executive Director, Office of Trade,
will forward the application, together with a recommendation for action
thereon, to the Executive Assistant Commissioner. The Executive
Assistant Commissioner may grant or deny the application to reopen the
case and may order the taking of additional testimony before the
appropriate Executive Director, Office of Trade. The appropriate
Executive Director, Office of Trade, will notify the applicant of the
decision by the Executive Assistant Commissioner. If the Executive
Assistant Commissioner grants the application and orders a hearing, the
appropriate Executive Director, Office of Trade, will set a time and
place for the hearing and give due written notice of the hearing to the
applicant. The procedures governing the new hearing and recommended
decision of the hearing officer will be the same as those governing the
original proceeding. The original order of the Executive Assistant
Commissioner will remain in effect pending conclusion of the new
proceedings and issuance of a new order under Sec. 111.77.
0
48. Revise Sec. 111.77 to read as follows:
[[Page 63321]]
Sec. 111.77 Notice of vacated or modified order.
If, pursuant to Sec. 111.76 or for any other reason, the Executive
Assistant Commissioner issues an order vacating or modifying an earlier
order under Sec. 111.74 suspending or revoking a broker's license or
permit, or assessing a monetary penalty, the appropriate Executive
Director, Office of Trade, will notify the broker in writing and will
publish a notice of the new order in the Federal Register.
Sec. 111.78 [Amended]
0
49. Section 111.78 is amended by removing the words ``port director''
and adding in their place the words ``processing Center''.
Sec. 111.79 [Amended]
0
50. Section 111.79 is amended by removing the words ``Assistant
Commissioner'' and adding in their place the words ``appropriate
Executive Director, Office of Trade,'' wherever they appear.
0
51. Revise Sec. 111.81 to read as follows:
Sec. 111.81 Settlement and compromise.
The Executive Assistant Commissioner may settle and compromise any
disciplinary proceeding which has been instituted under this subpart
according to the terms and conditions agreed to by the parties
including, but not limited to, the assessment of a monetary penalty in
lieu of any proposed suspension or revocation of a broker's license or
permit.
Sec. 111.91 [Amended]
0
52. In Sec. 111.91:
0
a. The introductory text is amended by removing the word ``Customs''
and adding in its place the term ``CBP''; and
0
b. Paragraph (a) is amended by removing the phrase ``Sec. Sec.
111.53(a) through (f)'' and adding in its place the phrase ``Sec.
111.53(a) through (g)''.
Sec. 111.92 [Amended]
0
53. In Sec. 111.92, amend paragraph (a) by removing the word
``Customs'' and adding in its place the term ``CBP''.
Sec. 111.94 [Amended]
0
54. Section 111.94 is amended by removing the word ``Customs'' wherever
it appears and adding in its place the term ``CBP''.
0
55. In Sec. 111.96, revise paragraphs (a), (b), and (d) to read as
follows:
Sec. 111.96 Fees.
(a) License fee; examination fee; fingerprint fee. Each applicant
for a broker's license pursuant to Sec. 111.12 must pay a fee of $300
for an individual license application and $500 for a partnership,
association, or corporation license application to defray the costs to
CBP in processing the application. Each individual who intends to take
the examination provided for in Sec. 111.13 must pay a $390
examination fee before taking the examination. An individual who
submits an application for a license must also pay a fingerprint
processing fee; the processing Center will inform the applicant of the
current Federal Bureau of Investigation fee for conducting fingerprint
checks, which must be paid to CBP before further processing of the
application will occur.
(b) Permit application fee. An application fee of $100 must be paid
in connection with a national permit issued under Sec. 111.19 to
defray the processing costs, including costs associated with an
application for reinstatement of a permit that was revoked by operation
of law or otherwise.
* * * * *
(d) Triennial status report fee. A fee of $100 is required to
defray the costs of administering the triennial status reporting
requirement prescribed in Sec. 111.30(d)(1).
* * * * *
Helen Mary B. McGovern,
Assistant Secretary for Trade and Economic Security, Department of
Homeland Security.
Thomas C. West, Jr.,
Deputy Assistant Secretary of the Treasury for Tax Policy.
[FR Doc. 2022-22445 Filed 10-17-22; 8:45 am]
BILLING CODE 9111-14-P