CBP Looking at Revision to 'Supervision and Control' Factors, Broker Guidelines

CBP is seeking input on how to revise its regulations for broker penalties because the current set of factors considered by the agency provide an imperfect look at adherence to supervision and control requirements, said CBP officials Sept. 20. They spoke during a CBP Webinar on "Broker penalties," one of several Webinars on changes to 19 CFR 111 broker regulations. Email documents@brokerpower.com for a copy of the presentation used during the Webinar.

The hope is to simplify regulations and create more meaningful relationships between CBP, brokers and importers, said Elena Ryan, CBP's acting director-Trade Facilitation and Administration. It's still early in the overall process of a rulemaking, she said. Work on a notice of proposed rulemaking will begin after the agency finishes the Webinars and roundtables on the issue, she said. Then they will start looking at certain policy decisions and seeking input from the agency's regulatory lawyers. An NPRM would be published in 2013 at the earliest, as it would also face review from the Department of Homeland Security, Office of Management of Budget, and possibly the Department of Treasury, said Ryan. "We are talking six months to a year before an NPRM is even published." After that, there will be probably 90 days for comment and CBP would hope to hold public meetings, after which CBP would begin work on a final rule, she said.

10 Factors Update

Responsible supervision and control is required of brokers performing customs business through 19 CFR 111.1. In reviewing potential supervision and control violations, the agency focuses on ten factors:

• the training required of employees of the broker;
• the issuance of written instructions and guidelines to employees of the broker;
• the volume and type of business of the broker;
• the reject rate for various customs transactions;
• the maintenance of current editions of CBP Regulations, the HTSUS, and CBP issuances;
• the availability of an individually licensed broker for necessary consultation with employees of the broker;
• the frequency of supervisory visits of an individually licensed broker to another office of the broker that does not have a resident individually licensed broker;
• the frequency of audits and reviews by an individually licensed broker of the customs transactions handled by the employees of the broker;
• the extent to which the individually licensed broker who qualifies the district permit is involved in the operation of the brokerage;
• any other circumstance which indicates that an individually licensed broker has a real interest in the operations of a broker.

But those factors can provide an incomplete view of how well a broker has performed in terms of supervision and control, said Brian Barulich, senior attorney in CBP's penalties branch. Sometimes the factors are not relevant to a violation or CBP does not usually have access to information on the ten factors, meaning an interview with the broker is needed. Also, violations may be discovered later, during which factors for that broker may have changed, he said. Further, violations may still occur even if a broker rates well on the factors, and a broker may rate poorly on the ten factors but didn't commit violations, he said.

New Definitions Sought

CBP would like to update the definitions within Part 111 "with a mechanism to fairly penalize brokers that do not consistently provide a high quality of service in handling customs transactions," said Barulich. The definition should incorporate current commercial practices and realities and shouldn't require consideration of factors which are not relevant or to which CBP does not usually have access.

While there's some value to the factors, "does it make sense for them to be regulatory provisions" and might it make more sense for them to be part of mitigation guidelines?" said Ryan.

"Personally, I think it would be better to move towards a more performance based definition," said Barulich. That might mean CBP looking specifically at what the broker has done, he said. Meaning CBP "wouldn't have to concentrate on the environment of the brokerage," he said. That would allow CBP to remove a lot of the factors CBP is currently "guessing about" and move to violations that can be established based on what's filed or an inability to produce records, he said. There's no definitive move toward such a performance based definition, Barulich noted. Barulich said not every entry error is deserving of a broker penalty and headquarters reviews of penalties take that into consideration, he said.

Broker Guidelines Clarity

It may be time to update broker guidelines to provide clarity on what CBP considers to be serious broker violations, generally tied in with Priority Trade Issues, said Jeremy Baskin, senior advisor to the executive director-Regulation and Rulings. "We're looking now for some type of interaction with the trade on how to go forward," he said. "We're willing to enter into a serious discussion about what hasn't worked at this point and what the government considers serious." CBP has developed over time a concept of egregious versus non-egregious violations and CBP would like to know from the industry if that is something that works, he said. The current regulatory scheme was developed in a time that was a far different time, he said.