As the first comprehensive authorization of U.S. Customs and Border Protection (CBP) since 2003, the Trade Facilitation and Trade Enforcement Act of 2015 (“TFTEA”) introduced a range of new trade enforcement initiatives that affect the trade community. One of these initiatives—section 116 of the TFTEA—redefines the role of customs brokers. In accordance with the TFTEA’s focus on stronger enforcement of trade regulations, section 116 expands upon customs brokers’ existing obligations to create additional compliance responsibilities. Beyond expanding a brokers role in ensuring that their customers’ transactions conform to U.S. trade law, the TFTEA also attaches greater liability for any violations of these new oversight requirements.
Specifically, section 116 of the TFTEA places more demanding screening obligations on customs brokers by requiring brokers to collect, verify, and maintain, information on the identity of the importers they represent. The motivation behind placing enhanced vetting requirements on customs brokers is grounded in the efficiency gained through the brokers closeness to the transaction. The TFTEA rebalances compliance responsibilities away from the importers and onto the brokers because brokers already enjoy established channels of communication through receipt of Powers of Attorney (POA) from importers. In acquiring POAs, brokers are well positioned to substantiate the information they already have on an importer’s identity with further inquiry, and to subsequently store that information for future reference.
However, if the TFTEA’s shift toward more reliance on brokers creates greater efficiency in regulating importers, it also generates potential conflicts of interest. Notice that the implementation of section 116’s screening requirements now place customs brokers on both sides of the regulatory divide. On the one hand, in facilitating transactions on importer’s behalf, brokers will continue to act as the private sector representatives of their importer clients. On the other hand, in assuming the role of collector, verifier, and custodian of importer information, section 116 also thrusts brokers into the difficult position of being an unofficial regulator over their own customers.
Moreover, brokers must reconcile these competing obligations quickly and effectively because their failure to uphold their new oversight responsibility will now carry enhanced penalties under the TFTEA. Specifically, section 116 provides that brokers face the potential of a $10,000 fine per violation of their regulatory responsibilities. In addition, brokers could be subject to the possible loss of their license if they fail to meet these new requirements. While CBP plans to publish formal procedures to guide brokers in meeting section 116’s oversight requirements, these procedures are still under development by CBP.
In the interim, CBP has released informal recommendations designed to help brokers validate an importer’s POA in accordance with the expectations of section 116. These recommendations include:
- To the greatest extent possible, have POAs completed in person so the grantor’s personal identification (driver’s license, passport, etc.) can be reviewed.
- Check applicable Web sites to verify the POA grantor’s business and registration with State authorities.
- If the principal uses a trade or fictitious name in doing business, confirm that the name appears on the POA.
- Verify that the importer’s name, importer number and Employer Identification Number (also known as the Federal Tax Identification Number) on the POA match what is in ACS.
- Check whether the POA grantor is named as a sanctioned or restricted person or entity by the U.S. Government.
As CBP releases more formal guidelines on complying with the TFTEA’s new section 116 requirements, brokers will have greater direction on their oversight responsibilities with importers. However, even with these parameters, brokers may find that their dual roles as a private sector representative alongside public regulator creates a tension.