On August 13, 2019, CBP released a proposed rule that would mandate customs brokers collect certain information from their importer-clients so as to verify the importer’s identity. The proposed rule sets out minimum standards for customs brokers in terms of what information they would be required to obtain from their clients, as well as what records must be maintained throughout the broker-importer partnership. These standards have been proposed as part of implementing the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA).
Under the proposed regulations, a broker would be required to collect the identity-verifying information at the time the broker obtains a power of attorney (POA) from the importer. A valid POA is necessary for brokers to transact any customs business on the clients’ behalf, and once obtained, the POA establishes an agency relationship between the broker (agent) and their importer-client (principal). The current regulations that govern POA relationships demand very little of the broker in terms of collecting identity-verifying information from the importer. However, in collecting as much information as possible on a potential client, brokers can better protect their own business interests, reduce the possibility of identity theft, and avoid fraudulent business schemes.
For this reason, many customs brokers already are in the practice of requiring that an importer-client provide additional information to the broker above and beyond what POA regulations demand. However, under the current voluntary information-sharing regime, there are also many brokers that do not require an importer-client provide additional information. The resulting bifurcation in customs broker practice allows for bad-faith actors to engage in what is known as “broker shopping,” and also subjects the entire trade industry to a high risk of illegitimate and fraudulent trade transactions.
Therefore, to eliminate such risk and protect the integrity and veracity of the international trade community at large, the proposed rule would standardize customs broker practice, imposing a mandatory identity-information sharing regime on broker-importer partnerships. The proposed rule then would have little effect on the brokers already engaged in the practice of requiring additional information from their importer-clients. The minimum standards would require the broker to collect the following information from their client, if applicable:
(1) The client’s name; (2) For a client who is an individual, the client’s date of birth; (3) For a client that is a partnership, corporation, or association, the grantor’s date of birth; (4) For a client that is a partnership, corporation, or association, the client’s trade or fictitious names; (5) The address of the client’s physical location (for a client that is a partnership, corporation, or association, the physical location would be the client’s headquarters) and telephone number; (6) The client’s email address and business website; (7) A copy of the grantor’s unexpired government-issued photo identification; (8) The client’s Internal Revenue Service (IRS) number, employer identification number (EIN), or importer of record (IOR) number; (9) The client’s publicly available business identification number (e.g., Data Universal Numbering System (DUNS) number, etc.); (10) A recent credit report; (11) A copy of the client’s business registration and license with state authorities; and (12) The grantor’s authorization to execute power of attorney on behalf of client.
Public comments, written data, views, arguments, or any other pertinent information relating to the proposed rule can be submitted to CBP either by mail or online at the Federal eRulemaking Portal (Docket No. USCBP-2019-0024) on or before October 13, 2019.
