Most cargo imported into the United States is cleared by a customs broker through U.S. Customs and Border Protection, and not by the importer directly. Customs brokers are professionals who are licensed by U.S. Customs and Border Protection (hereinafter “CBP”) after passing both a very difficult written examination and an exhaustive background investigation. Part 111 of the CBP Regulations (19 CFR Part 111) detail numerous “duties and responsibilities of customs brokers” and establish the grounds for imposition of monetary penalties against customs brokers, as well as procedure for cancellation, suspension, or even revocation of a customs broker license, for various and numerous violations. In recent years, CBP has been more aggressive in assessing penalties against customs brokers for allegedly “failing to exercise responsible supervision and control”, taking away licenses from brokers who violated the CBP regulations, and even pursuing criminal prosecutions against customs brokers for aiding or abetting persons or companies which commit import violations.
The maximum monetary penalty that may be assessed by CBP against customs brokers is $30,000 per violation. CBP may stack penalties for repeat violations against a licensed customs broker, so if the same violation was committed each time on four separate shipments, the total penalty assessed by CBP’s Fines, Penalties, and Forfeitures Offices may be $120,000. Fortunately, there is an opportunity for the broker to respond in writing to any pre-penalty and the penalty assessed by CBP, in an attempt to mitigate or cancel the penalty through the administrative petition process found at Part 171 of the CBP Regulations. Customs brokers convicted of most crimes will have their licenses revoked automatically, but again, brokers may choose to challenge that process administratively before CBP and the U.S. Department of Homeland Security in a complex process that involves CBP’s Office of Chief Counsel, CBP’s Broker Management Branch, and the local CBP Port Director where the violation(s) took place.
Separate for criminal prosecution and monetary penalties, it is now very common for CBP, through its Broker Management Branch and Import Specialist Division offices at the port level, to counsel customs brokers who appear to fail to exercise responsible supervision and control. Examples of failing to exercise responsible supervision and control may be repetitively and incorrectly classifying imported merchandise according to the Harmonized Tariff Schedule of the United States (HTSUS), failing to keep its employee list current, failing to maintain the proper entry records for each shipment for the required five year period, failing to timely make an entry or pay the required customs duties, failing to declare imported merchandise with the proper country of origin, or failing to properly declare that the imported merchandise is subject to antidumping or countervailing duties.
All too often, when CBP pursues a penalty pursuant to 19 USC 1592 against an importer for some wrongdoing, the importer blames its appointed customs broker. The actions by CBP may be pursued against a customs broker who violated the CBP regulations, and, interestingly, CBP may simultaneously pursue an investigation resulting in monetary penalties against the importer whom the customs broker represented. Even admitted failures by the customs broker do not absolve the importer of any wrongdoing. For example, if customs duties are not timely paid to CBP by a customs broker which had received payment for those duties from the importer it represents, CBP will always demand the payment from the importer as it always remains the importer’s responsibility to pay any applicable customs duties, and comply with all relevant CBP regulations. Separate from monetary penalties, liquidated damages claims are often pursued by CBP against an importer for committing CBP violations because all importers must have an import bond as security for customs duties.
On top of all this, the new CBP Commissioner has recently announced that there will be significant changes to Part 111 of the CBP Regulations to add more responsibilities to customs brokers, including required annual, continuing education. Customs brokers remain critical to a successful international supply chain for U.S. importers in arranging for the international transportation of cargo to the United States, and clearance by CBP and other Federal agencies.