Updated 'Supervision and Control' Factors Among Planned Regulatory Recommendations for Brokers

CBP Commissioner Gil Kerlikowske highlighted the broker regulations within his prepared remarks for the conference (here). "The group did excellent work, and though I realize COAC is in the process of approving these recommendations, I want to highlight a few themes that will ultimately benefit the broker community," he said. "A renewed focus on responsible supervision and control that takes into account what brokers will need to manage a virtual work force; strengthening the relationship between brokers and importers by recommending that brokers obtain powers of attorney directly from importers; and flexibility regarding the disclosure of confidential customs information to third parties, as dictated by the agreement that importers make with brokers." CBP will review the COAC recommendations prior to publishing a proposed rulemaking to update the regulations, he said.

There's some widespread recognition that "it's really time to modernize the broker regulations," said Jerry Malmo, director of CBP's Commercial Fraud Division. Brokers "really need the freedom to operate within this environment and we need to improve accountability and compliance." The full regulatory process would likely take somewhere between 18 months to two years, he said. CBP plans to update the broker handbook "to provide clarity to CBP's Broker Management Officers as we transition to broker oversight from the Centers of Excellence and Expertise." Some modernizing of the broker exam is already in the works, said Malmo. A proposal solely focused on changes to the regulations on the exam "has gone forward," that will change testing dates to the fourth Monday of April and October and increase the cost from $200 to $390, he said.

As planned, many of the recommendations follow the lead of recommendations made in 2014 (see 14052209). The committee will again recommend that CBP enable brokers to operate through a single national permit, said Allen. The group will also recommend that CBP work with brokers that don't currently have a national permit to transition such a single permit, she said. Also, the agency should ensure that customs business is only conducted in the U.S. and eliminate the need for brokers to get regional permit waivers. Notably, the working group this time didn't address importer bona fides, which were a controversial issue within previous reviews of broker regulations (see 1502110066).

CBP's national permits should require brokers to provide information to CBP through ACE on how plans for "responsible supervision and control," the group will recommend. Some of the ten factors of responsible supervision also deserve updating, said the group. Among those changes would be a clarification as to the meaning of "reject rate" and allowing for virtual supervisory visits of other offices without a licensed broker, said Allen. CBP should also provide policy guidance "preferably in the broker handbook" on best practices, including on the maintenance of "an adequate ratio of employees to a licensed broker based on factors such as the volume, type, diversity of business and commodities a broker handles," the group will recommend. The possibility of a "broker ratio" has also proven to be a difficult issue and CBP is resistant to including a ratio within the regulations (see 1510230074).

The group will also recommend that the customs broker exam move to an electronic format and CBP consider making the test "on demand," rather than only twice per year, said Allen. Recordkeeping will also be addressed, she said. The recommendation calls for a requirement that "electronic customs records be stored in an electronic format" within the U.S. customs territory, while duplicates can be stored outside the territory. The reason for the domestic storage requirement is that "CBP does need the power to subpoena," she said.

The group will also recommend CBP allow for brokers to disclose "confidential business information" to "third parties to facilitate the movement of merchandise, perform security screenings or reviews, for collection purposes, to address any claim or potential claim against him/herself from the importer, or otherwise to conduct business within the broker's scope of services consistent with its power of attorney." Also recommended are enhancements to ACE to allow for broker employee information reporting and a review of the triennial reporting process, she said. CBP should also update the regulations to clarify the relationship between brokers and importers to say "the broker shall follow the importer's documented instructions regarding customs business," including the billing of third parties, according to the recommendations.

CBP should also remove mentions of specific fee dollar amounts charged by the agency in the regulations, she said. That would make it easier for CBP to make changes when necessary, Allen said. Also recommended is that CBP create a broker management office that reports to CBP headquarters with "full-time, dedicated personnel on a national level, with each broker assigned to one team for management purposes." Continuing education requirements of 40 hours every three years will again be recommended, she said.