Brokers Focus on Responsible Supervision and Control Changes From Part 111 Rewrite

TUCSON, Arizona -- Despite initial concerns around national permits that focused on the devaluation of the customs broker license and reduced hiring of licensed brokers, the industry should be more concerned with new responsible supervision and control criteria included in CBP’s June 2020 proposed rule amending Part 111 to eliminate district permits (see 2006040037), according to panelists speaking at the National Customs Brokers & Forwarders Association of America annual conference on May 3.

Concern over broker employment had existed for years in the run-up to CBP’s proposal, with a particular focus on how the national permit would interact with an expansion of remote location filing in mid-2016 (see 1510230074). After CBP proposed elimination of the national permit, brokers worried that companies would not have to hire licensees to qualify their district permits anymore.

According to Mary Jo Muoio of INLT, companies with vacancies that have CBP waivers of licensee requirements for their district permits already ask themselves, “Am I ever going to replace that license in that office?” Those companies -- and all companies once district permits are abolished -- will be able to use their national permit licensees to exercise responsible supervision and control. “We didn't really want the value of the license to be watered down,” Muoio said.

But most brokers already hire more licensed brokers than required, Muoio said. “We all hire more than we need because we see a value to that,” she said. “I'm not necessarily worried about the total number of brokers … but I just think that we might change where we put them, and that's really also been made easier because of remote working,” she said.

Proposed changes to responsible supervision and control requirements for customs brokers are of more concern, said Lenny Feldman of Sandler Travis, who spoke on the same panel. Feldman recalled one recent case in which a broker escaped a 19 USC 1641 penalty because CBP is required to consider all 10 factors for reasonable supervision and control when it assesses broker penalties. The proposed rule would eliminate the requirement that CBP consider all the factors, allowing the agency to consider only some of them.

“They can pick and choose what factors they look at for responsible supervision and control as opposed to all of them,” Feldman said. “Not favorable to us.” The proposed rule also would add factors related to the responsiveness of brokers to communications from CBP and the timeliness of their responses, among other things, Feldman said. “That’s very subjective,” he said. “You have to be careful about that.”

And with one single, national permit allowing brokers to conduct customs business, the price of a CBP finding that the broker has not exercised responsible supervision and control will be much higher, Feldman said. “Stakes are going to be higher with the national permits as opposed to the district permits,” he said. “If you have an issue with that national permit, that's it. It's over and done.”