Reminder: Comments on CBP Proposed Rule on Importer Record Sharing due Dec 27

The proposed amendment would state that brokers, upon the client’s consent in a written authorization, could share client information with affiliated entities related to the broker so that these entities may offer non-customs business services to the broker’s clients.

The proposed amendment would also state that customs brokers could use a third-party to perform photocopying, scanning, and delivery of client records for the broker.

CBP Says Blanket Prohibition in Regs is Antiquated, Needs to be Updated

CBP previously stated that it recognizes that the development of more modern and efficient business practices, brought about by the changing structure and environment of the business community, has rendered the blanket prohibition of the current regulation somewhat antiquated.

The proposed changes are intended to update the regulations to reflect modern business practices, while protecting the confidentiality of client (importer) information.

The proposed changes would also align the regulations with CBP’s previously published rulings concerning brokers’ confidentiality of client information (for example, HQ 116025 of September 2003 and HQ 116190 of June 2004¹).

CBP added that its longstanding position on this matter is that absent written client consent, a broker may not share client information.

Details of the Proposed Exceptions to Current Confidentiality Regs

Currently, 19 CFR 111.24 provides that with the exception of certain accredited officers or agents of the U.S. and the surety involved in a particular transaction, brokers may not disclose client information to third persons except when ordered to by a court.

CBP proposes to revise 19 CFR 111.24 into a new paragraph (a) in order to provide for disclosure exceptions in new paragraphs (b) and (c), as follows:

(a)Client records are confidential, with exceptions. The business records of the clients serviced by the broker are considered confidential. Except as provided in paragraphs (b) and (c), the broker must not disclose the contents or any information connected with client records to any persons other than those clients, their surety on a particular entry, and the Field Director, Office of International Trade, Regulatory Audit, the CBP port director, the Immigration and Customs Enforcement agent, or other duly accredited officers or agents of the United States, except on subpoena by a court of competent jurisdiction.

(b)Disclosure to affiliated entity related to broker. Upon the client’s consent in a written authorization to share client information outside the brokerage, a broker may disclose only to an affiliated entity related to the broker, information specified in the written authorization pertaining to the customs business of that client so that the affiliated entity may offer non-customs business services to the broker’s client.

(c)Other third-party service providers. (1)Photocopying and scanning services. A broker may provide its clients’ records to a third-party service provider for photocopying and/or scanning without violating the prohibitions set forth in the provisions of this part pertaining to confidentiality, provided that:

(i) The broker exercises due diligence in accordance with 19 CFR 111.29(a)² in the selection of the third-party service provider for photocopying and/or scanning by ensuring that its association with the third-party does not violate the provisions in 19 CFR 111.36(b)³; and

(ii) The broker enters into a non-disclosure agreement with the third-party service provider for photocopying and/or scanning that requires the third-party to keep the information contained in any records pertaining to the broker’s client confidential.

(2)Messenger services. A broker may provide its clients’ records to a third-party messenger service provider for transport and delivery without violating the prohibitions set forth in the provisions of this part pertaining to confidentiality, provided that the clients’ records are sealed in such a manner so that the third-party messenger service provider may not view, alter, or amend the documents to be delivered.

(CBP notes that the written consent and the nondisclosure agreement would be subject to the recordkeeping requirements prescribed for brokers as set forth in 19 CFR 111.21(a), 111.23, and 111.25.)

¹In Headquarters rulings (HQ) 116025 of September 2003 and HQ 116190 of June 2004, CBP found that absent a written release from the client authorizing disclosure of client information, 19 CFR 111.24 precludes a broker from sharing client information with separately-incorporated affiliates of the same parent company.

²According to the first sentence of 19 CFR 111.29(a), each broker must exercise due diligence in making financial settlements, in answering correspondence, and in preparing or assisting in the preparation and filing of records relating to any customs business matter handled by him as a broker.

³19 CFR 111.36(b) states that with certain exceptions, a broker must not enter into any agreement with an unlicensed person to transact customs business for others in such manner that the fees or other benefits resulting from the services rendered for others inure to the benefit of the unlicensed person.

(See ITT’s Online Archives or 10/26/10 and 10/27/10 news, 10102608 and 10102714, for previous BP summaries of the proposed rule.)

(D/N USCBP-2010-0038, FR Pub 10/27/10)