Customs Brokers' Customer Bankruptcy Provision Addressed in New Bill

Pro-trade Democrat Gregory Meeks, who represents Queens, New York, has introduced a bill with four other Democrats and fellow New Yorker Rep. Peter King (R) that would change the treatment of customs brokers when their customers go into bankruptcy. The Customs Business Fairness Act, H.R. 2261, was introduced April 10.

When King explained the bill to other members, as he sought co-sponsors, he said it would "eliminate an unfair financial burden borne by customs brokers." Brokers collect duties from their clients and pay CBP on the importers' behalf. After a client declares bankruptcy, the customs broker must pay a bankruptcy trustee all the funds it received from the client during the 90 days before bankruptcy. Typically, this provision is designed to prevent favoritism by companies that know they're going to declare bankruptcy.

But in this case, the broker has to give money to the trustee that it sent on to CBP, not just its own fees. "This can amount to a substantial financial liability for the customs broker -- often well into the six-figure range," King wrote. He said the bill would make a technical change to the bankruptcy code that would "recognize that the customs broker has simply provided those funds to CBP on behalf of the importer."

This bill is a major lobbying priority of the National Customs Brokers & Forwarders Association of America (see 1809240035), and was introduced in 2017 and 2009. The December 2017 bill had the same lead co-sponsors.