MAP-21 Customs Broker Exemption Hinges on Definition of 'Transaction,' Says Avalon

The Federal Motor Carrier Safety Administration interpretation of the word "transaction" will largely determine to what extent customs brokers would be exempt from financial and licensing requirements of the Moving Ahead for Progress in the 21st Century Act (MAP-21), said Avalon Risk Management in a video outlining the exemptions to the law. The National Customs Brokers and Forwarders Association of America previously interpreted the bill's language to mean most work done by customs brokers is exempt from the new bonding requirements of MAP-21 (see 12070325), though the regulatory treatment of customs brokers seems to be an open question.

Among three exemptions spelled out within MAP-21 are licensed customs brokers "only to the extent that the customs broker is engaging in a movement under a customs bond or in a transaction involving customs business," as defined by CFR 19 Part 111.1. According to Avalon Executive Vice President Michael Brown, CBP has previously ruled that arranging for the transport of cargo by truck "does not constitute customs business." That means the question will focus on the definition of "transaction" within the statute," he said. "If the 'transaction were defined broadly enough to encompass the customs entry, then the exemption would likely apply," he said. "If not, then a transportation broker or surface freight forwarder registration and bond would be required."

FMCSA remains uncertain as to exactly how the regulations will treat customs brokers, said John Drake, the agency's director of Government Affairs, during a conference last month (see 13092623). Even "if and when" the FMCSA takes a firm position on the matter, the agency can only control its own enforcement actions, it will likely be "difficult, if not impossible, to prevent private party actions against unlicensed entities where the ambiguity of the law's language will come into question," he said. Outside of the uncertain areas of the law, most companies get involved cargo movements beyond the international transportation and/or customs transaction, such as "post-entry warehousing and subsequent transportation and returns," he said. In such cases, registration is required and given "the lack of clarity, we believe that most companies that arrange for transportation by truck should immediately register for authority with the FMCSA," in order to prevent regulatory penalties or private party claims, he said.