NCBFAA Lobbying on Bankruptcy Law, Drawback Proposed Rule During Fly-in

Customs brokers this week will be lobbying congressional leaders to press the Department of the Treasury and CBP to change the proposed rule that excludes excise taxes from drawback, and will be asking members to co-sponsor the Customs Business Fairness Act (see 1712180053). The act, H.R. 4657, would change bankruptcy law so that customs brokers are not subject to clawback on duties advanced to CBP after a client declares bankruptcy.

Currently, businesses that declare bankruptcy frequently have an unwinding of payments that occurred in the last 90 days before the company entered bankruptcy protection. The payments can be restored if the creditor -- in this case, brokers -- argues that the payments were made in the ordinary course of business, but obviously going to court is costly in terms of time and money. Clawback can be requested by either a bankruptcy trustee or the debtor. If it happens, the customs broker has to line up with other creditors to receive whatever payments may be available from the insolvent company.

One of the attendees at the National Customs Brokers & Forwarders Association of America Government Affairs Conference Sept. 24 in Washington noted that with broad Section 301 duties, brokers are advancing more money in duties, and therefore have more exposure.

H.R. 4657 does not cover customs brokers' fees, and NCBFAA legislative representative Jon Kent said the association did not ask for fees to be included in this rewrite of the bankruptcy code because the members thought that including fees would add ammunition for congressional skeptics who might ask why customs brokers should go to the front of the line of creditors.

Because CBP would have priority if the importer had paid CBP directly, customs brokers argue the use of their businesses as a conduit for duties should be considered as the same category, a legal concept called subrogation.

"From the government's perspective, it is far easier to collect the initial duties from a finite number of licensed customs brokers than a hundred thousand individual importers," the brokers' talking points say. Customs tried to promulgate a regulation that would have allowed customs brokers the shield of CBP's priority status, but courts said the agency exceeded its authority, and Congress would have to rewrite the law. Hence, this lobbying effort. This is the second year the interest group has focused on the act during its fly-in (see 1709110033).