Customs and International Trade Law Blog : International Trade Lawyer & Attorney : Becker & Poliakoff Law Firm : Customs Law, Border Protection

Hundreds of people apply every year to become a customs broker. Customs brokers are licensed by U.S. Customs and Border Protection (CBP). The process requires passing a rigorous multiple choice examination, and then passing a background investigation.  For many applicants who successfully pass the examination, they are denied a license because the background investigation revealed a poor credit history and rating. 

Although the application to be a customs broker is submitted to the local port, the decision letter granting or denying a broker license is issued by Allen Gina, Assistant Commissioner, Office of International Trade, CBP Headquarters in Washington, D.C.  A typical denial letter would state:

After careful evaluation of the information obtained from the background investigation, we must deny your application due to your financial history.

The denial letter always cites the CBP regulation at 19 CFR 111.16 - a failure to establish the business integrity and good character of the applicant.  Fortunately, the letter also cites 19 CFR 111.17 which provides the right of appeal of the denial of the customs broker license.

The appeal must be filed, in writing, and submitted to Mr. Gina no later than 60 days from the date of the denial letter. The appeal must persuasively argue why the applicant has business integrity and good character.  For example, if the applicant went through a divorce, and the former spouse failed to pay certain bills which negatively affected the applicant's credit history and rating, that is an important fact that must be argued, and documented, in the appeal.  

There are numerous reasons why CBP may legitimately deny a customs broker license to an applicant who has a spotty financial history. Similarly, there are numerous reasons to explain to CBP that despite what appears to be a questionable financial history, the applicant has business integrity and good character, and should still receive the customs broker license.

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Comments or questions, click below, or contact me directly.

Peter Quinter, Partner in Charge

Customs and International Trade Law Department

(954) 270-1864 or pquinter@becker-poliakoff.com

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The annual conference of the National Customs Brokers and Forwarders Association of America (NCBFAA) just concluded in San Antonio, Texas. Several prominent speakers from U.S. Customs, the Federal Maritime Commission, the U.S. Census Bureau, the Bureau of Industry and Security, the Office of Foreign Assets Control, Transportation Security Administration, and the Department of Homeland Security discussed new policies and procedures that every customs broker and international freight forwarder should use to serve their import and export clients.

Deputy Commissioner for U.S. Customs, David Aguilar, used a new talking point in his repeated use of the phrase "protect the American way of life" which apparently has replaced "protect the border" in his description of the mission of the U.S. Customs and Border Protection.  U.S. Customs Senior Attorney Susan Terranova stated that in 2009, Customs had issued over 500 penalties against exporters and freight forwarders for failing to file timely or accurately complete Automated Export System (AES) filings. Each penalty was issued in the amount of $10,000.

Marc Rossi, Branch Chief, Certified Cargo Screening Program, Air Cargo Division, TSA, stated that there are 98 foreign flagged airlines that fly into the United States, over 4,000 indirect air carriers (IACs), 52 independent cargo screening facilities, and only 403 IACs certified by the TSA as Certified Cargo Screening Facilities (CCSF), in preparation for the August 1, 2010 100% screening of air cargo aboard passenger aircraft in the United States.  More information about the implementation of the 100% screening rule is available at www.tsa.gov/ccsp. 

Along with Brandon Fried, Director, Air Forwarders Association, I lectured at the NCBFAA Conference about Export Compliance for Freight Forwarders.  The focus of my presentation was on exactly how to mitigate penalties once a Proposed Charging Letter, Pre-Penalty Notice, or Notice of Proposed Penalty has been issued by BIS, OFAC, or TSA.  The Power Point presentation is available only upon request.

See you at next year's NCBFAA Conference at the Sheraton Wild Horse Pass Resort and Spa near Phoenix, Arizona.

Please contact me at pquinter@becker-poliakoff.com or (954) 270-1864.

Peter Quinter, Partner, Customs and International Trade Department, Miami, Florida

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With all of the complexities involved in the import process, even customs brokers can make mistakes such as by providing the wrong tariff classification of the imported item to U.S. Customs and Border Protection .  A customs broker who makes such a mistake may become the subject of an investigation by U.S. Customs which ultimately results in a $30,000 penalty against the broker.

Customs brokers are often the best choice for importers to take care of all the formalities in clearing imported cargo through U.S. Customs, however, a customs broker who makes a mistake when declaring certain information to U.S. Customs may put  the importer at risk of being accused  of  fraud by U.S. Customs in violation of 19 U.S.C. 1592.  Increasingly often, the customs broker may itself be investigated  by U.S. Customs for failing to exercise responsible supervision and control in violation of 19 U.S.C. 1641. 

It is standard practice for U.S. Customs to demand that the broker appear before the Broker Compliance Unit of U.S. Customs at the local port of entry to answer questions about the mistakes discovered by Customs regarding a particular importer or set of entries.  The broker is usually directed to bring with him/her certain documents for review by U.S. Customs at the meeting.  The broker may be accompanied by an attorney during this informal stage of the investigation. The customer of the customs broker, the importer, is generally not made aware by U.S. Customs that its customs broker has been summoned to a meeting with Customs for a counseling session.

If the U.S. Customs personnel are not satisfied with the answers by the broker at the meeting, U.S. Customs will issue a Notice of Pre-Penalty against the broker. The penalty may be up to $30,000. The broker will have 30 days to file a written petition, and request an oral presentation.  A lawyer who is an expert in customs law and procedure should be involved to advise and represent the broker to attempt to get the penalty canceled or mitigated.  The guidelines of what to say in such a Petition are set forth in an Appendix  C to Part 171 of the Customs Regulations.  U.S. Customs personnel must consider a certain set of factors before determining that the customs broker failed to exercise reasonable care and "responsible supervision and control".  Every customs broker should read, the U.S. Court of International Trade decision issued on January 28, 2010 in the case of United States v. UPS Customhouse Brokerage, Inc.. for a better understanding of both a customs brokers' and U.S. Customs' rights and responsibilities.

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The U.S. Court of Appeals for the Federal Circuit just issued an important decision that will help all customs brokers who are facing a broker penalty action pursuant to 19 U.S.C. 1641 and 19 CFR Part 111.  The Court held that U.S. Customs and Border Protection (CBP) must consider all ten factors specifically identified at 19 CFR 111.1 when determining whether or not to mitigate a penalty issued by CBP against a customs broker for failing to excercise "responsible supervision and control."  CBP had argued to the Court that it only needed to consider those factors it thought were relevant.  The Court disagreed with CBP, and reversed the decision of the U.S. Court of International Trade. The Court stated:

"Because Customs did not consider all ten factors listed in 19 CFR 111.1, its determination that UPS violated 19 U.S.C. 1641 was improper. Accordingly, we vacate that portion of he Court of International Trade's judgment and remand for further proceedings."

So, even though the Court determined that UPS was wrong in its tariff classification of imported merchandise, and even though UPS paid CBP $15,000 in penalties for failing to exercise responsible supervision and control, it remains to be seen whether CBP will assess another $75,000 in penalties against UPS.   My guess is that CBP will pursue the remaining penalties against UPS which were also for alleged misclassification of the same merchandise on different entries.  The Court required CBP to at least consider all ten factors, but also explicitly stated that CBP has the discretion to weigh each of the factors as it deems appropriate in determining whether to mitigate a penalty against a customs broker.

If CBP does pursue the penalties, no doubt UPS will challenge them, especially because another remaining legal question will be whether the CBP regulation at 19 CFR 111.91 which limits penalties to a maximum of $30,000 will apply.  That is another issue of importance to all licensed customs brokers. If interested, please read the complete Federal Circuit decision.

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