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Proposal Would Require Customs Brokers to Collect Certain Information to Verify Importer Identity

Wednesday, August 14, 2019
Sandler, Travis & Rosenberg Trade Report

CBP is seeking input by Oct. 14 on a proposal to require customs brokers to collect certain information from importers to enable the customs brokers to verify the identity of importers, including nonresident importers. CBP is proposing these amendments pursuant to section 116 of the Trade Facilitation and Trade Enforcement Act of 2015, which directs the agency to promulgate regulations to require brokers to verify the identity of the importers who are their clients.

Before a customs broker may transact customs business on behalf of a client, the broker must obtain a valid power of attorney. CBP notes that while only a limited amount of information is required for a valid POA, the majority of customs brokers currently require additional information when a POA is obtained from an importer, which is used by the broker to verify the importer’s existence and identity. Brokers require this additional information and have initiated processes and procedures to validate an importer’s identity in order to protect the broker’s business interests, reduce identity theft, and help to prevent the use of shell or shelf companies to further a business fraud scheme.

Additional information that a broker might request includes the registration of the importer’s business with a state government and the articles of incorporation under which that business is formed. CBP also provides non-binding guidance on how brokers can validate importers when they obtain a POA.

Since the collection and verification of any additional information from the importer is voluntary, CBP claims that an atmosphere of “broker shopping” has been created where an importer that does not wish to provide this additional information might refuse to provide it to one broker in the hopes that another broker will not ask for it. CBP adds that if the second broker does not request the additional information, that broker will transact customs business on the importer’s behalf with minimal information about the importer, leading to the possible use of shell or shelf companies, revenue loss, increased security risks with the goods being imported into the U.S., and an uneven playing field for brokers.

CBP is therefore proposing to amend its regulations to standardize the process by which customs brokers verify the identity of their importer and nonresident importer clients. Specifically, at the time the POA is obtained the broker would be required to collect, at a minimum, the following information from the client, if applicable:

- the client’s name;

- for a client who is an individual, the client’s date of birth;

- for a client that is a partnership, corporation, or association, the grantor’s date of birth and the client’s trade or fictitious names;

- 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;

- the client’s email address and business website;

- a copy of the grantor’s unexpired government-issued photo identification;

- the client’s Internal Revenue Service number, employer identification number, or importer of record number;

- the client’s publicly available business identification number (e.g., Data Universal Numbering System number, etc.);

- a recent credit report;

- a copy of the client’s business registration and license with state authorities; and

-  the grantor’s authorization to execute POA on behalf of client.

CBP states that the broker would have to collect all the information that is applicable to that particular client. Some information might not be applicable to a client depending on whether the client is an individual, partnership, corporation, or association. For example, a small business might not have a business website, or a client who is an individual would not have a business registration and license with state authorities or a publicly available business identification number. Additionally, if certain foreign jurisdictions do not provide credit reports the broker would not be required to collect a recent credit report from that client.

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