Customs Brokers Need Training on Identifying Fraud, Former CBP Official Says

Customs brokers need more training before they get put in the difficult situation of having to determine whether their client may have committed fraud for the purposes of broker separation provisions of CBP's recent Part 111 rewrite, trade consultant Cindy DeLeon said during a panel discussion June 20.

The provisions, which require brokers to separate from their clients and report them to CBP if fraud is detected, require customs brokers to become "enforcement officers," said customs broker Robert Morris of Daniel B. Hastings, also speaking during the panel at the American Association of Exporters and Importers annual conference. Brokers in Laredo, where Morris is based, "want customs to define better what fraud is and maybe we need to get some better training on what that is," Morris said. "Our stance is that there are too many things that are questionable and we won't be" police officers "until they really define what is going to be."

DeLeon, a former CBP auditor, explained that identifying fraud can be difficult, using the case of discovering two different invoices as an example. While it can be fraud, "in a lot of cases there is an explanation," DeLeon said. While not every explanation is valid, "there is an explanation that doesn't necessarily mean fraud," DeLeon said. "There's a lot that goes into developing a fraud case against an importer and so I think it is imperative for training to be given now that brokers are put in this situation."

While this could be difficult, much of this may come down to the customs broker, Sandler Travis lawyer and former DOJ official Jason Kenner said. It is going to be important for brokers to work with their clients and ask questions to try and understand why there may be a problem. Kenner added that the new provisions will most likely only affect "very few cases" where there's no explanation for the problems brought up and the importer "still wants you to keep pushing it" despite having been warned of the issue, Kenner said.

"I feel like maybe this isn't gonna be as impactful as some folks fear because I think, by and large, most brokers, most importers, are trying to do the right thing." Kenner said. "This is a very gray area of the law," and it is going to come down to "broker interfacing and having open lines of communication with an importer to flesh out" any potential problems, Kenner said.

And while brokers face penalties if they don't comply, punishing a broker for not reporting fraud would be a difficult case to build, said Cynthia Whittenburg, who leads the National Customs Brokers & Forwarders Association of America Educational Institute. If CBP were building a case against the broker, CBP would have to have evidence that the broker had "knowledge about a certain situation involving fraudulent documents," Whittenburg said. "The case would have to be built against the broker in order to take some sort of disciplinary action against the broker," and "it would have to be some really egregious behavior for that to occur," she said.

One key consideration is to know your customer before making any determinations about fraud, said Matthew Varner of Aritzia. "If you know your customer," and you are in communication with your customer, you "don't have to be a criminal analyst to figure out if there's" fraud, he said.