In June of 2020, Customs published proposed changes to the regulations that apply specifically to Customs brokers. In the two years since the proposed rules were published, there were significant discussions between the brokerage community and Customs regarding the proposals. It appears that the proposed regulations may now be moving toward implementation.
While Part 111 of the regulations applies only to brokers, several of the proposed provisions will change (for some) how importers interact with the brokers. Some key provisions and their potential ramifications are:
Document Corrective Action Recommendations
The proposed regulations require brokers to advise their clients on the proper corrective actions that need to be taken if an error is discovered. They also require the broker to retain a record of the communication. This is important because companies evaluating whether a prior disclosure or other action is necessary will also need to consider the fact that their broker has put them on notice of a potential error. It is also significant that Customs will be able to ask brokers for any records pertaining to communicating recommended corrective actions. An importer that has received such a communication would be well advised to seek out competent counsel to either address the corrective action or prepare to defend the legality of the alleged error. The one thing an importer will not be able to safely do is ignore that communication.
Report Terminations of Representation
Another significant requirement in the proposed regulations is that brokers report to Customs any time the broker terminates a client relationship because the importer is attempting to defraud or otherwise commit any criminal act against the United States. This will make it more important than ever for importers to stay in contact and alignment with their brokers. In many cases, there is disagreement or concern about classification or some other aspect of import transactions. Brokers facing a regulatory requirement like this may be more inclined to report instructions received from the importer to Customs than they would have without this requirement. Ensuring that disagreements and concerns are fully and appropriately addressed will not only ensure more accurate Customs entries, but also ensure that brokers do not feel like they are obligated to report activity to Customs.
Direct Nationwide Relationships
Another significant set of changes has to do with the relationship between importers and their brokers. Rather than allowing the power of attorney between the importer and broker to be executed via a freight forwarder, Customs is proposing that the power of attorney must be done between the importer and the broker. This means that many importers who only interact with their brokers indirectly will have direct contact with the broker. Second, Customs is eliminating geographically-limited district permits, so that all brokers will have National Permits and be allowed to operate nationwide. For some importers this will mean it is no longer necessary to maintain multiple brokers depending on the district in which goods are being imported. It also means that some local brokers who have maintained satellite offices in certain districts will be able, if they choose, to close those offices and still work in those districts. For importers this should make it easier to find a broker or brokers based on service, cost, or other factors, but not on physical location.
Taken together, these changes to the Customs broker regulations will behoove importers to ensure they are in regular contact with the brokers. It will also behoove importers to ensure that the person having that regular contact is able to interact meaningfully with the broker and get internal issues addressed as they arise. If you have any questions about the process of importing, who the respective parties are in an import transaction, or the correct data to report to Customs do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.