CTPAT Validation Will Benefit Brokers In New Enforcement Environment, CBP Says

U.S. Customs and Border Protection is encouraging customs brokers to become validated in the Customs Trade Partnership Against Terrorism in light of an executive order that directs a broad tightening of U.S. customs enforcement efforts.

Under this EO, foreign importers of record will be required to be validated in CTPAT themselves, or use a CTPAT-validated customs broker, to file formal entries. CBP states that the EO will thus fundamentally change the responsibilities of CVCBs by mandating a higher standard of due diligence when they represent foreign IORs.

To comply with these heightened expectations, CBP states, in the near future CVCBs will need to perform comprehensive vetting of their foreign clients before they conduct any customs business. CBP foresees that during vetting CVCBs will verify critical information such as the IOR’s legal identity, ownership structure, business affiliations, U.S. assets, and history of compliance and import activity. Furthermore, brokers will need to assess the IOR’s ability to pay duties, taxes, and fees and verify details regarding supply chain, product classification, valuation, and country of origin. CVCBs will be expected to maintain thorough records of this vetting process, and all relevant communications, to demonstrate that they have exercised appropriate due diligence.

Further, CBP states, the EO directs the imposition of significant penalties on brokers who fail to conduct required due diligence, repeatedly represent noncompliant or unverifiable clients, or fail to cooperate with CBP requests for information. These consequences will include financial penalties, increased audit frequency, and the potential suspension or removal of the CVCB from the CTPAT program. In addition, the EO establishes a minimum penalty floor of 50 percent of the assessed penalty for violations and eliminates mitigation options for repeat offenders.

CBP asserts that the new requirements under the EO will create a distinct competitive advantage for CVCBs, who will become the primary (and perhaps only) viable option for an increased market share of U.S. imports and will be able to market their services as a necessary solution for certain clients. CBP concludes that CTPAT validation will thus “serve as a powerful badge of trust and reliability for brokers in an increasingly more secure trade environment.”