On August 14, 2019, the U.S. Customs and Border Protection ("CBP") issued a notice of proposed rulemaking requiring customs brokers to verify the identity of their importer clients, in particular non-resident importers.1
CBP stated that the purpose of the rule is to strengthen the agency's ability to prevent fraudulent transactions, improve revenue protection, and help prevent the use of shell or shelf companies attempting to evade customs laws, in particular as relates to intellectual property rights, anti-dumping / countervailing duties, and health and safety requirements. CBP also asserted that creating more rigorous standards for importer verification will improve the competitiveness of brokers that comply with customs regulations.
Current rules and regulations only require customs brokers to obtain very minimal details regarding importers to which they provide services. The proposed rule seeks to require brokers to obtain more detailed information from their clients, including:
"(1) the client's name; (2) for a client who is an individual, the client's date of birth; (3) for a client that is a partnership, corporation, or association, the grantor's date of birth; (4) for a client that is a partnership, corporation, or association, the client's trade or fictitious names; (5) 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; (6) the client's email address and business website; (7) a copy of the grantor's unexpired government-issued photo identification; (8) the client's Internal Revenue Service (IRS) number, employer identification number (EIN), or importer of record (IOR) number; (9) the client's publicly available business identification number (e.g., Data Universal Numbering System (DUNS) number, etc.); (10) a recent credit report; (11) a copy of the client's business registration and license with state authorities; and (12) the grantor's authorization to execute power of attorney on behalf of the client."2
The proposed rule also creates procedural and record-keeping requirements for customs brokers to verify information collected from clients, including conducting checks to determine if the client has been sanctioned by the U.S. government or suspended or debarred from doing business with the U.S. government.
In addition, the proposed rule describes when and with what frequency such verifications must occur, stating that verification is required prior to conducting any business with a new client. In the case of existing clients for which the broker already holds a power of attorney, clients that are partnerships would have to be verified within two years of the effective date of the rule, and all other clients within three years of the effective date of the rule.3
The proposed rule would also implement penalties for non-compliance. If a customs broker does not collect, verify, secure, retain, update, or make available upon CBP's request the necessary information required under the new rule, the broker could be subject to a fine, sanctions, or a suspension of the broker's license.
Footnotes
[1] Customs Broker Verification of an Importer's Identity, U.S. Customs and Border Protection, 84 Fed. Reg. 40302 (August 14, 2019), https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17179.pdf.
[2] Id. at 40304.
[3] Id. at 40307.
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