Part 111 Regs Anticipated, Dreaded by NCBFAA

The Part 111 broker regulations in the works for five years are about to be released (see 2209140051) and National Customs Brokers & Forwarders Association of America Customs Committee Chair Mary Jo Muoio that said there are aspects of the rules that the group welcomes, and others that it dreads.

Muoio said NCBFAA expects the rule to be released before the end of September, so it can be during the current federal fiscal year. She was speaking at NCBFAA's Government Affairs Conference Sept. 19.

John Leonard, deputy executive assistant commissioner in CBP's Office of Trade, also said at the conference that the Part 111 rewrite is about to be released.

"So Part 111 is 'this' close. I know I've been saying that for months and months, but it is supposedly going to get reviewed by the secretary tomorrow," he said Sept. 19. "The secretary of homeland security. There's also the secretary of treasury that needs to review it as well. So a couple of very high-level people got to have eyes on it, but I think we're in the stretch run on getting this thing signed. And it's so exciting, right? To finally do away with district permits after like 50 years."

Muoio said the group wanted CBP to revisit Part 111, to clean up issues like how long brokerages had to notify CBP when someone was hired, when someone left the company, or when there is a change in ownership. Each currently has a different timeline, which is an HR administrative nightmare, she said.

She said she expects that to change.

There will no longer be district permits and national permits for brokers, which worries NCBFAA a little, in that some brokers' jobs could be at risk if their employers are no longer required to have a licensed broker in a certain location.

One of the pending regulations will require brokers to verify their customers' identities, and it will require brokers to do so for all their existing clients. This is a change that was first laid out in the Trade Facilitation and Trade Enforcement Act (TFTEA) signed into law six years ago, but has still not been promulgated.

Muoio said the group doesn't bring up the issue when it meets with CBP because they're not eager for the reg to come out.

She said they have made comments on verifying importers' identities that are more practical than CBP's proposal of verifying every year, and the No. 1 suggestion NCBFAA has is that companies that are certified through the Customs-Trade Partnership Against Terrorism (CTPAT) should not be included, since CBP already has vetted them.

"We do expect that some of our comments were taken into consideration," she said, and she said the group expects CBP will give the trade a longer period to revalidate customers than the initially proposed yearly schedule.

Muoio said NCBFAA fought back hard on one section of Part 111, which covers which criteria CBP uses to evaluate whether licensed brokers have "responsible supervision and control" of employees who are assisting with filing entries. Currently, there are 10 criteria, and CBP is suggesting adding five more, including timely communication.

"I was terribly troubled by these additional criteria," she said, including how brokers could document effective communication when it could be in person, over instant messaging, by voice mail, e-mail, etc.

Stuart Schmidt, manager of trade compliance at UPS, said another drawback to that change is that CBP can choose any one of those 15 elements as a reason to bring enforcement action against a broker. Muoio added that currently, CBP only has to judge compliance after evaluating the broker's overall performance across 10 elements.

"I think that’s a big loss for us as brokers," Schmidt said.

NCBFAA also said it fought hard against a section that requires brokers to report to CBP when they cut business ties to an importer if they did so because they suspect that the customer is attempting to commit a fraud against the United States.

That's not because brokers want to do business with shady customers, but because they wonder what liability reporting a suspicion exposes them to.

One broker complained that the government leaves brokers in the dark after the government discovers wrongdoing. He said that half of one of his customer's shipments were seized, and that the broker didn't know why. Twenty entries later, CBP told the broker that the importer had been smuggling contraband in the shipments.

Muoio said brokers have told CBP many times that they need to know when they are working with a criminal actor. "We always get a lot of legalese … about why they can’t," she said.