Concern Mounts Over Job Prospects for Licensed Brokers as Full RLF Filling Approaches

With major changes ahead for CBP’s national permitting scheme, licensed customs brokers are increasingly concerned with the prospects for the profession, said several brokers in interviews. The expansion of remote location filing on national permits to all entry types and government agencies, set to occur by the end of 2016 alongside full implementation of the Automated Commercial Environment, could allow brokerages to employ a single licensed individual to qualify all of their customs business. Brokers have been active in voicing concerns that such an outcome could undermine compliance and make customs brokering a less attractive profession, but have yet to find a solution acceptable to CBP.

The National Customs Brokers & Forwarders Association of America in 2014 asked CBP to set a requirement in its regulations for brokerages to employ one licensed broker for every 12 employees conducting business on a national permit (see 14072222), mirroring an earlier recommendation from the CBP Advisory Comm­­ittee on Commercial Operations (see 14052209). Though initially receptive (see 1504220017), CBP has since cooled to the idea (see 1510050015). As the agency moves toward issuing a proposed rewrite of its Part 111 broker regulations, it does “not anticipate” the effort will include a licensed broker ratio, said a CBP spokeswoman.

The ratio proposal was modeled from CBP’s own management system, which limits the number of employees that can report to one supervisor, said Donna Mullins of Mullins International Solutions. The NCBFAA had spent “years” coming up with the ratio proposal and molding a consensus from the varying interests of brokerages, from the smallest to the largest, said Ken Bargteil, a recently retired customs broker still active in the association. “That was the best we could do,” he said.

Now the broker association goes back to the drawing board, with discussions with CBP focused on a number of policies the agency could adopt to support the continued presence of brokers in customs business, including consideration of the number of licensed brokers when mitigating penalties for lack of adequate supervision and control (see 1510090021). A customs lawyer speaking at a recent conference said CBP may consider whether a broker employs an "adequate number of licensees," and whether there's "timely accessibility" to licensed brokers and to the qualifying broker (see 1510210017).

When the ACE rollout is completed in mid-2016, all entry types and commodities will be available for RLF filing on a national permit. Able to save on fees for district permits and salaries for the licensed brokers that qualify them, some brokerages will no doubt start making cuts, with areas with fewer entries but a large number of brokerage firms, such as Portland, Oregon, likely the first to feel the crunch, said Gary Ryan, who also recently retired after over 40 years in the industry. Since local licensed brokers won’t be needed in these areas, prospective licensees won’t have any reason to take the exam. “While there might be a glut of individual licensed customs brokers now, if the number of individuals taking the customs brokers examination declines, there may be a shortage of licensed customs brokers in some geographical areas in the future,” said Ryan.

With brokers in less demand, salaries could stagnate or even decrease, and customs brokering becomes less appealing, said Bargteil. “The only case that can really be made is, the economics of being a licensed broker will change, and that likely will have a negative impact on the profession.”

Potentially even more troubling is the negative impact on compliance from fewer licensed brokers overseeing transactions. For example, logistics and transportation companies will be able to add nationwide customs brokerage to their portfolios only the basis of having a single licensed broker. All they would have to do is hire a broker and buy an ABI suite, he said. “I don’t think you can expect such a company to be able to offer the same level of service,” said Bargteil. “That’s a stretch of credulity.”

Despite the concerns of some that demand for licensed brokers could decline, those compliance concerns and the important role that brokers play mean there will always be a need for licensees, said Alan Klestadt a lawyer with Grunfeld Desiderio and the NCBFAA's customs counsel.. “Importers place value on the involvement of licensed individuals,” understanding that brokers have “important expertise being brought to bear,” said Klestadt. So does CBP, which “has stated in many occasions that they get a lot of value from the involvement of customs brokers,” he said. “There's a significant knowledge that brokers bring to the transaction, which facilitates the clearance of goods and helps the importer and CBP manage the transaction efficiently and effectively.”

Regulations that require importers to exercise reasonable care and customs brokers to exercise responsible supervision and control, ensure the role of the broker in the import process, said Lenny Feldman of Sandler Travis, who co-chairs the COAC’s Trade Modernization Subcommittee. “If companies now are not valuing the expertise of customs brokers, I would say they’re putting themselves at potentially a significant legal exposure.”

Those same regulations could pave the way for a potential solution to the national permit issue. CBP could employ a “holistic approach,” setting policies on how the number of licensees a brokerage employs relates to supervision and control requirements, including by adding to existing informed compliance documents, and fine tuning that with rulings tailored to companies’ specific situations. Feldman said the COAC is monitoring the issue, and could provide recommendations to CBP once it knows where the agency is headed with its Role of the Broker concept.

More drastic action may be necessary if CBP fails to act, said Mullins, whose “See a Broker, Save a Broker” campaign resulted in at least 400 letters to CBP Commissioner encouraging him to work toward regulations requiring a minimum number of brokers (see 14042918). “If Customs is not going to take a stand, maybe we the community need to reach out to our congressmen.”

Some longtime brokers see the changes as the industry coming full circle, once again facing similar challenges as before district permits were introduced in 1984. Under the first national license scheme created by the Tariff Act of 1930, only two licensed brokers were required to qualify an entire brokerage. “Some large firms, like the Railroad Express Agency that had offices in many major U.S. cities, only had the required two individual licensed brokers giving ‘adequate supervision and control’ to all of their offices and employees,” said Ryan. Given the lack of demand for licensed brokers, and the amount of studying required for the exam, few chose to obtain a license, he said. “There were years, in Seattle, when no one took the customs broker’s examination.”

Perceiving a lack of adequate broker supervision and professionalism, William von Raab contemplated deregulating the customs brokerage industry upon becoming Commissioner of Customs in 1981, said Ryan. After discussions with the NCBFAA, which wanted to promote the industry, von Raab instead decided on a different solution. Put forward as part of the Trade and Tariff Act of 1984, a new scheme was created where brokerages would be required to hold a permit in each district where they did business, each qualified by a licensed broker.

Brokerages walked a tightrope finding enough licensed brokers to qualify their district permits. “All of the sudden, because of this rule, brokers had to scramble to get licensees within each of the districts in which they operated,” he said. “I had a devil of a time,” said Bargteil, who was with Kuehne+Nagel. “We came right down to the wire, the last day before that rule came into effect, finding a broker for our Philadelphia district.”

Less than a decade later, CBP planted the seeds of what would become an about-face. A step in CBP’s continuing efforts to automate, the Customs Modernization Act of 1993 created a framework where brokerages could obtain a single national permit for filing customs entries remotely through RLF, qualified by a single licensed broker.

Though intensely controversial at first, particularly for smaller brokerages, the initial effects of RLF were relatively slight, felt mainly by brokers specializing in out port business, the filing of entries for other brokers in districts where the other broker had no permit, said Bargteil. Development was slow. A final rule making RLF a permanent regulatory program wasn’t published until the end of 2009, and the program was only available for entry types 01 and 11 until 2012. Brokerages still have to maintain district permits, and a system of local licensed brokers, to file entries not supported by RLF. However, with the accelerating development of ACE over the past several years full implementation of RLF is now in sight. As entry types and PGAs are deployed in ACE, so they become available for RLF filing, on a national permit, qualified by a single licensed broker.