What Every Member of the Trade Community Should Know About: Customs …

What Every Member of the Trade Community Should Know About:

Customs Brokers

AN INFORMED COMPLIANCE PUBLICATION JANUARY 2005

Customs Brokers January 2005

NOTICE: This publication is intended to provide guidance and information to the trade community. It reflects the position on or interpretation of the applicable laws or regulations by U.S. Customs and Border Protection (CBP) as of the date of publication, which is shown on the front cover. It does not in any way replace or supersede those laws or regulations. Only the latest official version of the laws or regulations is authoritative.

Publication History Revised: January 2005 First Published: March 2000

PRINTING NOTE: This publication was designed for electronic distribution via the CBP website () and is being distributed in a variety of formats. It was originally set

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up in Microsoft Word97 . Pagination and margins in downloaded versions may vary depending upon which word processor or printer you use. If you wish to maintain the original settings, you may wish to download the .pdf version, which can then be printed

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using the freely available Adobe Acrobat Reader .

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Customs Brokers January 2005

PREFACE

On December 8, 1993, Title VI of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), also known as the Customs Modernization or "Mod" Act, became effective. These provisions amended many sections of the Tariff Act of 1930 and related laws.

Two new concepts that emerge from the Mod Act are "informed compliance" and "shared responsibility," which are premised on the idea that in order to maximize voluntary compliance with laws and regulations of U.S. Customs and Border Protection, the trade community needs to be clearly and completely informed of its legal obligations. Accordingly, the Mod Act imposes a greater obligation on CBP to provide the public with improved information concerning the trade community's rights and responsibilities under customs regulations and related laws. In addition, both the trade and U.S. Customs and Border Protection share responsibility for carrying out these requirements. For example, under Section 484 of the Tariff Act, as amended (19 U.S.C. 1484), the importer of record is responsible for using reasonable care to enter, classify and determine the value of imported merchandise and to provide any other information necessary to enable U.S. Customs and Border Protection to properly assess duties, collect accurate statistics, and determine whether other applicable legal requirements, if any, have been met. CBP is then responsible for fixing the final classification and value of the merchandise. An importer of record's failure to exercise reasonable care could delay release of the merchandise and, in some cases, could result in the imposition of penalties.

The Office of Regulations and Rulings (ORR) has been given a major role in meeting the informed compliance responsibilities of U.S. Customs and Border Protection. In order to provide information to the public, CBP has issued a series of informed compliance publications, and videos, on new or revised requirements, regulations or procedures, and a variety of classification and valuation issues.

This publication, prepared by the International Trade Compliance Division, ORR, is part of a series of informed compliance publications advising the public of new or revised regulations or procedures. We sincerely hope that this material, together with seminars and increased access to rulings of U.S. Customs and Border Protection, will help the trade community to improve voluntary compliance with customs laws and to understand the relevant administrative processes.

The material in this publication is provided for general information purposes only. Because many complicated factors can be involved in customs issues, an importer may wish to obtain a ruling under Regulations of U.S. Customs and Border Protection, 19 C.F.R. Part 177, or to obtain advice from an expert who specializes in customs matters, for example, a licensed customs broker, attorney or consultant.

Comments and suggestions are welcomed and should be addressed to the Assistant Commissioner at the Office of Regulations and Rulings, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue, NW, (Mint Annex), Washington, D.C. 20229.

Michael T. Schmitz, Assistant Commissioner Office of Regulations and Rulings

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Customs Brokers January 2005

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NOTE ON SPELLING, HYPHENATION AND CAPITALIZATION

Over the years, the spelling and hyphenation of "customhouse" has varied. Government and trade publications and even statutes refer to "custom-house," "customhouse," or "Custom House." The hyphenated form "custom-house" was preferred in the nineteenth century, while the non-hyphenated form "customhouse" became popular in the twentieth century. The twoword form was often found on signs and buildings. The variations "Customs House," and "customshouse" were never officially sanctioned, but nonetheless, appear in some publications. In this publication, we generally use "customhouse", except in quoted material where the format appears as in the original material quoted. In recent U. S. Customs and Border Protection (CBP) publications, "Customs" is capitalized when referring to a CBP officer, the CBP organization, or a specific building such as the New York Customhouse, but is usually not capitalized when referring to customs duties, customs bonds or customhouses in general. The practice has varied since 1789, and consistency is often missing. In this publication, the current practice is followed except in quoted material where the format appears as in the original material.

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Customs Brokers January 2005

INTRODUCTION........................................................................................ 10

HISTORICAL BACKGROUND..................................................................10

SUMMARY OF THE CURRENT STATUTORY REQUIREMENTS ...........14

EFFECT OF CUSTOMS SERVICE REORGANIZATION ON BROKERS 16

GENERAL PROVISIONS ..........................................................................18

Definitions .................................................................................................................. 18

LICENSE AND DISTRICT PERMIT REQUIRED.......................................20

License....................................................................................................................... 20 Permit......................................................................................................................... 21 Transacting customs business without a license........................................................ 22 Representation before Government agencies............................................................ 22

PROCEDURE TO OBTAIN LICENSE OR PERMIT ..................................22

Licenses ..................................................................................................................... 22 Individual broker's license .......................................................................................... 22 Partnership................................................................................................................. 22 Association or Corporation ......................................................................................... 23 Application for license ................................................................................................ 23 Written examination for individual license .................................................................. 24 Appeal of failing grade on examination ...................................................................... 25 Investigation of the license applicant.......................................................................... 25 Issuance of license..................................................................................................... 26 Denial of license ......................................................................................................... 26 Review of the denial of a license................................................................................ 26 Reapplication for license ............................................................................................ 27 Permits ....................................................................................................................... 27 Responsible supervision and control.......................................................................... 28 Decision on permit...................................................................................................... 28 National permit ........................................................................................................... 28 Review of permit denial .............................................................................................. 29

DUTIES AND RESPONSIBILITIES OF CUSTOMS BROKERS ...............29

Record of transactions ............................................................................................... 29 Retention of records ................................................................................................... 29 Consolidated records ................................................................................................. 30 Records confidential................................................................................................... 30 Records must be available ......................................................................................... 30 Responsible supervision ............................................................................................ 31 Employee information................................................................................................. 31

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Customs Brokers January 2005

Termination of qualifying member or officer ............................................................... 32 Change in ownership.................................................................................................. 32 Diligence in correspondence and paying monies ....................................................... 32 Notification of change of business address, organization, name, or location of business records; status report; termination of brokerage business .......................... 33 Conflict of interest....................................................................................................... 35 False information........................................................................................................ 35 Government records................................................................................................... 35 Undue influence upon Department of Homeland Security employees ....................... 36 Acceptance of fees from attorneys ............................................................................. 36 Relations with unlicensed persons ............................................................................. 36 Misuse of license or permit......................................................................................... 37 False representation to procure employment ............................................................. 37 Advice to client ........................................................................................................... 37 Protests ...................................................................................................................... 37 Endorsement of checks.............................................................................................. 37 Relations with person who is notoriously disreputable or whose license is under suspension, canceled "with prejudice," or revoked..................................................... 38 Revocation by operation of law .................................................................................. 38 License....................................................................................................................... 38 Permit......................................................................................................................... 38

CANCELLATION, SUSPENSION, OR REVOCATION OF LICENSE OR PERMIT, AND MONETARY PENALTY IN LIEU OF SUSPENSION OR REVOCATION ...........................................................................................39

General ...................................................................................................................... 39 Cancellation of license or permit ................................................................................ 39 Without prejudice ....................................................................................................... 39 With prejudice ............................................................................................................ 39 Voluntary suspension of license or permit.................................................................. 40 Grounds for suspension or revocation of license or permit ........................................ 40 Investigation of complaints ......................................................................................... 40 Review of report on investigation ............................................................................... 41 Determination by Assistant Commissioner................................................................. 41

DISCIPLINARY PROCEEDINGS ..............................................................41

Content of statement of charges ................................................................................ 41 Preliminary proceedings............................................................................................. 41 Request for additional information.............................................................................. 42 Decision on preliminary proceedings.......................................................................... 42 Contents of notice of charges..................................................................................... 42 Service of notice and statement of charges ............................................................... 43 Service of notice of hearing and other papers............................................................ 43 Extension of time for hearing...................................................................................... 44 Failure to appear ........................................................................................................ 44 Hearing....................................................................................................................... 44

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Customs Brokers January 2005

Proposed findings and conclusions ............................................................................ 44 Recommended decision by hearing officer ................................................................ 45 Additional submissions............................................................................................... 45 Immaterial mistakes ................................................................................................... 45 Dismissal subject to new proceedings........................................................................ 45 Decision and notice of suspension or revocation or monetary penalty....................... 45 Appeal from the Secretary's decision ......................................................................... 46 Reopening the case ................................................................................................... 46 Notice of vacated or modified order............................................................................ 47 Reprimands................................................................................................................ 47 Employment of broker who has lost license ............................................................... 47 Settlement and compromise....................................................................................... 47

MONETARY PENALTY AND PAYMENT OF FEES .................................48

Penalties .................................................................................................................... 48 Grounds for imposition of a monetary penalty; maximum penalty.............................. 48 Notice of monetary penalty......................................................................................... 48 Petition for relief from monetary penalty..................................................................... 48 Decision on monetary penalty .................................................................................... 48 Supplemental petition for relief from monetary penalty .............................................. 49 Fees ........................................................................................................................... 49 License fee; examination fee; fingerprint fee.............................................................. 49 Permit fee................................................................................................................... 49 User fee...................................................................................................................... 49 Status report fee......................................................................................................... 50 Method of payment..................................................................................................... 50 Fee Summary Chart ................................................................................................... 50

ADDITIONAL INFORMATION...................................................................51

The Internet................................................................................................................ 51 Customs Regulations ................................................................................................. 51 Customs Bulletin ........................................................................................................ 51 Importing Into the United States ................................................................................. 52 Informed Compliance Publications ............................................................................. 52 Value Publications...................................................................................................... 53 "Your Comments are Important"................................................................................. 54

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