Proposed Importer ID Regs Would Require Brokers to Reverify All Clients Within Three Years

The regulations are required by Section 116 the Trade Facilitation and Trade Enforcement Act of 2015. CBP says that they will stem the problem of broker shopping, where unscrupulous importers seek out a customs broker that does not adequately check an importer’s bona fides, which can lead to the “use of shell or shelf companies, revenue loss, increased security risks with the goods being imported into the United States, and an uneven playing field for brokers,” CBP said.

By setting minimum standards for all brokers, CBP hopes to level that playing field and eliminate opportunities for duty avoidance, intellectual property rights violations and importation of unsafe merchandise, the agency said. According to CBP, the majority of brokers already meet or exceed the minimum requirements included in the proposed rule. Only for about 5 percent of all POAs do brokers not require adequate additional information on their clients’ activities, the agency said.

While customs brokers would have to comply with the new requirements for any new clients upon the regulations’ effective date, the proposed rule also requires that brokers update information to comply with the new requirements and perform related verification activities on their existing clients within two to three years after the final rule, depending on the client’s business type.

Information Collected From Importers at Time POA Is Obtained

Under the proposed rule, CBP would create new 19 CFR 111.43 requiring brokers to collect and verify, at the time the POA is obtained, the following information from their importer clients:

• the client’s name
• for a client who is an individual, the client’s date of birth
• for a client that is a partnership, corporation, or association, the grantor’s date of birth
• for a client that is a partnership, corporation, or association, the client’s trade or fictitious names
• the address of the client’s physical location (for a client that is a partnership, corporation, or association, the physical location would be the client’s headquarters) and telephone number
• the client’s email address and business website
• a copy of the grantor’s unexpired government-issued photo identification
• the client’s Internal Revenue Service (IRS) number, employer identification number (EIN), or importer of record (IOR) number
• the client’s publicly available business identification number (e.g., Data Universal Numbering System (DUNS) number, etc.)
• a recent credit report
• a copy of the client’s business registration and license with state authorities
• the grantor’s authorization to execute power of attorney on behalf of the client.

“Under current practice, most brokers already collect all of the above applicable information from the client in the ordinary course of business,” CBP said. “Most brokers currently require this information to ensure that the client is not concealing his or her identity, misusing another business owner’s identity, or using a shell or shelf corporation to further a business fraud scheme.” Requiring all of the information from all of a broker’s clients “would also eliminate the ability of prospective clients to ‘broker shop,'” CBP said.

Verification Activities Include Client Visits, Photo ID Checks, Database Searches

New 19 CFR 111.43 would also require brokers to verify the authenticity of each of the data points collected from each of their clients. For new clients after the new regulations take effect, the verification would have to be done before conducting business on the client’s behalf, CBP said. Means of verification set forth in the proposed regulation include:

• a check of the appropriate websites to determine whether the client is named as a sanctioned or restricted person or entity by the U.S. Government, or if the client is suspended or debarred from doing business with the U.S. Government
• an in-person review of the grantor’s government-issued photo identification
• an in-person client meeting
• an in-person visit of the client’s place of business
• a review of the client’s Articles of Incorporation
• a query of publicly available information, business information and credit reporting entities, federal, state, and local databases or websites and any other relevant trade or business sources.

“The broker must use as many of the recommended verification means as necessary to be reasonably certain of the client’s identity,” CBP said. The preamble to the proposed rule includes recommended verification activities for each type of information collected by the broker.

For example, a broker could use the Automated Broker Interface to verify an existing client’s name, address, phone number and website, or the broker could check the client’s unexpired photo ID. To verify a client’s date of birth, a check of the client’s ID or a search of state databases would be sufficient. The broker should require that the client representative provide evidence of his or her authorization to sign a POA, and that evidence should be notarized whenever possible, CBP said.

Annual Updates, Reverifications Required

The proposed rule would require that customs brokers update their information annually about any client and its business to ensure that the information they have is timely, accurate, complete and relevant. Brokers would also have to reverify the client's activity annually using the same procedures as for first-time verification. “Depending on the client, maintaining the information could include setting up news alerts about the client, confirming with a client the accuracy of information, or setting up automatic searches in specific databases. This ensures the quality and integrity of the information in the POA, and in the identification and verification records,” CBP said.

Recordkeeping Required for Importer Information, Verification Activities

All brokers would have to maintain records of the information they are required to obtain from their importer clients, as well as records of the means and documents used to verify the client’s information. Each record must indicate which information was verified, descriptions of any documents relied upon, any non-documentary methods, any results of measures undertaken, and any resolution of discrepancies, as well as who performed the verification and the date the verification was performed, CBP said.

Brokers must indicate in the verification records which required information was not collected from the client because it was inapplicable, the agency said.

Records of importer information and verification activities would have to be maintained for the same period as POAs. That means they must be kept for as long as the POA is in effect, as well as for five years after the date of revocation of any POA or five years after the date the client ceases to be an “active client,” CBP said.

Brokers Must Implement Policies, Procedures and Internal Controls

New 19 CFR 111.43 would require customs brokers to “implement policies, procedures, and internal controls to verify a client’s identity before transacting customs business on behalf of that client,” CBP said.

Updates, Verification of Existing Clients Required in 2-3 Years

The proposed rule would not only affect any clients signed on after the regulations’ effective date, but would also require brokers to update their information on existing clients within two to three years after the final rule becomes effective. “For existing clients with a POA issued by a partnership, customs brokers would have two years from the effective date of the final rule to verify the client’s identity, and to update the necessary identification and verification records,” CBP said. That’s because POAs issued by partnerships are limited by the customs regulations to a period of not more than two years.

For all other existing clients, “customs brokers would have three years from the effective date of the final rule to verify the client’s identity, and to update the necessary identification and verification records,” CBP said. “The three-year period is to allow brokers adequate time to verify existing client’s identities pursuant to the new regulatory requirements taking into account the number of existing POAs and the number of hours per existing POA that the verification process will take.”

For all existing clients, brokers “would have to reverify the client’s identity on an annual basis after the initial verification,” CBP said.

(Federal Register 08/14/19)