Playing by new rules
CBP seeks to update customs broker regulations.
By Eric Kulisch
U.S. Customs and Border Protection Commissioner Alan Bersin challenged brokers at the National Customs Brokers and Forwarders Association of America conference in early April to accept new standards and responsibilities for their profession, but the reality is a comprehensive review of broker regulations has been underway for more than 18 months.
That review took on more urgency last summer when Bersin instructed staff to find ways to make the entire cargo process at the border more efficient.
NCBFAA has been closely involved in the review process, and supports several of the proposals being floated, so Bersin's comments were not a complete surprise. In fact, the agency is asking the industry to help define the future role of a broker.
The Customs Modernization Act of 1993 called for a system of certified record keepers that Customs officials said would become a new profit center for the brokerage community, but never got started.
CBP officials want to update the federal code in five areas of broker practice to reflect the rapid change in global commerce during the past quarter-century, said Cynthia Whittenberg, director of trade facilitation and administration.
In the area of broker duties, CBP wants brokers to have increased responsibility for vetting clients and strengthening requirements for proof of identity necessary to execute a power of attorney. It also is exploring clearer regulations guiding the relationship between brokers and freight forwarders, given the evolution of the forwarding industry.
Brokers also could play a new role as 'a force multiplier' for small and medium-size importers that lack the capacity to implement robust compliance programs, Whittenberg said.
By operating under the compliance umbrella of a knowledgeable broker, or possibly allowing the broker to audit its compliance practices, smaller companies could become eligible for the Importer Self-Assessment or other partnership programs, and receive benefits such as reduced oversight and documentation requests, she said.
CBP also contemplates modernizing its regulations and practices to better fit how brokers do business, particularly by enabling the agency to accept electronic data in the format used in daily transactions so that brokers don't have to create new systems to alter information for Customs or submit paper documents.
Whittenberg suggested doing away with the so-called 'triennial report' that functions as a poor man's census of the broker industry, identifying who is still an active broker. There are about 12,000 brokers on CBP's rolls. Customs brokers must submit the document every three years and pay a $100 administrative fee in their respective port districts stipulating that the company is still in business, and listing all employees, addresses and related information. Failure to file the report in a timely fashion can lead to one's license being revoked. CBP feels it can streamline that process, lessen the burden on itself and the trade and accomplish its requirements in an electronic environment, especially with the advent of the Automated Commercial Environment computer system.
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The new rules also would provide better clarity on which workers need to be reported to CBP and how to gather the data, she said.
Some question whether salespersons, warehousemen, janitors and others who don't touch customs work need to be included in the report, and different CBP offices have been known to interpret the requirement differently.
Broker industry representatives have asked CBP to address the issue of companies with offshore customs brokerage operations, but the agency first needs help understanding the problem and how the government might help, Whittenberg said.
A third area under review is how to increase the professional standards of the broker industry, including a more stringent broker exam and whether the exam should be available online whenever someone is ready to take it.
Exam content, which many criticize as focusing on arcane minutia instead of real-world shipping situations, also could be updated. CBP is interested in enhancing the licensing criteria. Whittenberg said she has received industry feedback that an individual should have some previous customs experience before receiving a license.
Professionalism would also be raised through continuing education requirements to maintain one's license, which NCBFAA supports.
'Brokers are probably one of the few industries where you obtain a license and you have no obligation to keep up with continuing education and current issues in your field,' Whittenberg said.
NCBFAA Vice President Darrell J. Sekin explained to delegates why the organization feels it is important to tighten the licensing standards.
'If we want to be recognized as professionals, not only by government, but by our customers, then we have to do something to maintain that and just getting that license' is not enough to stay current on all the rapid changes in the transportation and regulatory arenas, he said.
The brokerage industry will 'never be taken seriously' unless it brings in more experienced, quality people and requires continuing education, said Sekin, who is president of DJS International Services in Colleyville, Texas.
Top freight forwarders and customs brokers encourage continuous training, and NCBFAA offers online classes to become a Certified Customs Specialist or Certified Export Specialist. The coursework covers subjects not generally tested on the Customs licensing exam.
On the disciplinary front, CBP is looking to update the penalty provisions to make sure it has the needed authority to take action against non-compliant firms and is using the regulations effectively, she said.
CBP also wants to clarify what constitutes misuse of the code used to file entries through the Automated Broker Interface, and to have some due process provisions for suspending a license in that situation.
Finally, the agency is considering how to elevate the broker's position within the Customs-Trade Partnership Against Terrorism, which primarily benefits importers who have proven systems for securing their international cargo.
Bersin suggested that brokers could provide services to small and medium-size enterprises that enable them to become eligible for the voluntary program, thereby increasing the ranks of trusted shippers and narrowing the universe of shippers that CBP focuses on for possible violations or threats.
Whittenberg said CBP might explore revamping the minimum-security criteria for brokers in C-TPAT to include a tiered membership structure that provides some benefit to those that play a greater role in supply chain security.
Since brokers don't physically handle most cargo, their current value to C-TPAT mostly lies in the fact that they transmit important trade data and act as a liaison between CBP and others in the supply chain. As such, CBP looks to them as an educational resource that can encourage clients to follow the C-TPAT tenants.
CBP needs to solicit the views of licensed brokers at small and large firms, as well as those of independently licensed people who work in other corporate roles, and importers as it rewrites broker regulations, said Robert DeCamp, director of regulatory affairs and consulting for A.N. Deringer, after being briefed on the effort at the April 12 meeting of the Commercial Operations Advisory Committee (COAC).
He also cautioned officials to make sure they preserve due process for small brokers 'because the slightest hindrance of their operating structures is tantamount to putting them out of business.'
Fellow COAC member Jeff Coppersmith, who is also chairman of the NCBFAA, suggested that any new rules take into account that brokers deal with many federal agencies besides CBP.
Agency officials stress the broker revision project is still in the conceptual stage and will be fleshed out with industry input.
Brokers as 4PLs. Michael Ford, vice president of regulatory compliance and quality for BDP International who sits on COAC, concurred that brokers need to create strategic alliances with customers to attain a higher level of professionalism.
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BDP is a large international logistics company in Philadelphia that provides a host of trade and security compliance services, including customs brokerage.
Web-based data management, greater legal understanding and awareness of complex manufacturing practices that depend on components from multiple countries are the types of new skills brokers will need to exhibit in the next decade, Ford said.
Intermediaries have the knowledge and tools to help companies, especially smaller ones, achieve the benefits of ISA, C-TPAT and other programs that are elusive to many who consider building a compliance structure cost prohibitive, he said.
The arrangement, Ford stressed, must go much deeper than a consulting project, with the broker integrated into the importer's business so that both sides share the risk and rewards.
At A.N. Deringer, a large privately held logistics company that specializes in northern border trade and also has offices at several sea and air ports, brokers act as advance scouts on the compliance front using sophisticated systems to look for potential trouble spots, District Manager Amy Magnus said.
Most of her time, she said, is spent trying to spot potential compliance problems that clients missed and could seriously impact their business. It is easy for an importer, for example, to be unaware that products they enter into the country are subject to payment of antidumping or counterveiling duties, that certain products require an export license or that duty preferences under free trade agreements aren't automatic.
Brokers have traditionally played that watchdog role and tried to catch problems before Customs or other government agencies do. But Magnus said the difference now is dealing with enormous amounts of data that can swamp the uninitiated.
'Sure, we have to manage that data. But we can also use that data to your advantage if you're an importer. We can start to analyze the data, not just move it back and forth, and look for those anomalies that we know CBP is looking for and try and catch them in advance so we can bring our customers into compliance,' she said.
Even for importers that self-file their entries 'there is nothing like having somebody who doesn't have a real financial stake in the outcome to look at what is going on,' she added.
A.N. Deringer, for example, might notice a trend of CBP issuing CF 28 forms requesting information on a narrow commodity issue, search its database for clients with similar products and alert them there might be an enforcement dragnet underway so they can get their documentation in order.
Charter Brokerage's value-added services include helping customers create their own internal compliance programs and draft a compliance manual, said Mary Hatch, international trade counsel in the company's New York office, during an interview.
The company can also use its system to run random compliance checks on entries for customers that prefer to do some oversight on their own or that want to check entries filed by other brokers they hire.
It has a proprietary online document storage and reporting system that helps shippers analyze their import and export data at a detailed level and pull up records as needed. The automated system has a compliance module so customers can do compliance reviews, testing and reporting on their own.
Charter Brokerage also operates as a freight forwarder and provides duty drawback services and support services for the operation of foreign trade zones and bonded warehouses.
Some importers, according to Magnus, are now looking to top brokers to oversee their other brokers similar to how a fourth-party logistics provider (4PL) manages a shipper's third-party providers of discrete logistics tasks.
Call it the 4PB, or fourth-party broker.
'We're being asked to assist importers, not to file entries, but to become their broker to manage other brokers and their compliance,' Magnus said.
'I want you to be my lead broker,' she said a representative for a major client told her.
That new role means a broker has to switch from a mindset of how much to charge for completing every entry to 'how can I add value to my customer and give them something that they desperately need and in many cases did not know that they had a need.
'They did not realize the level of non-compliance until they got a letter from Customs which said they were going to be involved in a focused assessment' and were faced with significant fines, Magnus said.
Brokers, she added, need to work with CBP on developing some kind of system that enables them to validate trade regulations are being followed, especially at companies that don't have internal compliance departments, because the agency doesn't have the staff or time to audit all importers.