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In October, U.S. Customs and Border Protection (CBP) rolled out a series of new regulatory changes that went into effect in December. The changes involve administrative processes between brokers and CBP, while others apply to the relationship that freight brokers have with their clients.
The new regulations state that brokers must execute a customs power of attorney directly with the importer of record or drawback claimant (client) and not via a freight forwarder or other (unlicensed) third party, to transact customs business for that client.
According to the new CBP rules, brokers must also advise their clients about the proper corrective actions required in the case of noncompliance, error, and/or omission on the client’s part. Those brokers also have to retain a record of the communication that they’ve had with their clients.
If a broker believes its client has made an error or omission in the information provided, that company is expected to work with its client to take the appropriate, corrective actions. Importers that intentionally attempt to use the broker to defraud the U.S. government must be reported to the CBP if the broker severs its relationship with the client as a result of the client’s attempt.
Measuring the Impacts
In effect since December, the new CBP regulations are impacting many shippers/importers on both sides of the U.S.-Canada border. Heather Burke, DB Schenker’s Director of Regulatory Compliance (in the U.S.) and Zsuzsanna Papai, Key Account Manager, Global Trade Customs (in Canada), have been fielding calls, educating customers, and helping them navigate the new requirements.
According to Burke, one of the primary changes involves power of attorney, which was previously extended to the broker by forwarders who secured that power of attorney. “The broker can’t be in the middle anymore,” said Burke. “The grantor of the power of attorney must directly transmit that power of attorney to the broker. This is one area where both brokers and shippers have really had to adjust.”
As a freight forwarder, DB Schenker has a wide network of international offices and partners, all of which must now be treated as “external forwarders.” In Canada, DB Schenker had to work closely with customers to properly establish the requisite communication.
The U.S.-Canada Connection
Due to the close physical proximity of Canada and the U.S., DB Schenker works with a number of Canadian entities that serve as non-resident importers into the U.S. When the new rules went into effect, Papai said the team was “very busy for a couple of weeks, making sure everyone was in compliance in order to avoid any type of shipment delays or trade interruptions.”
“The new rules have definitely impacted us in Canada, since we are a sister company to our U.S. organization,” said Papai. “Even though Canada and the U.S. have always had a ‘friendly’ relationship from a customs perspective and for the sharing of statistical information, the new rules have created some new challenges for us.” Burke said DB Schenker continues to work with “infrequent importers” that may not have encountered the new rules yet, helping them navigate and comply with the requirements.
Setting the Record Straight
In most cases, the new regulations “codify” actions that importers / non-resident importers of record, forwarders and brokers should be taking anyway, said Burke. Only now, those entities are expected to be more accountable for their actions.
Brokers need to ensure they document their efforts to educate and counsel clients regarding entry requirements and if errors are discovered, provide guidance for corrective actions. A key change in regulations is the requirement for the broker to report a client to CBP when the broker severs the relationship because the client attempts to use the broker to defraud the U.S. government. Brokers will need to carefully evaluate each scenario to determine the actions it should take. Certain actions could complicate an importer’s decision to file a prior disclosure. “The new regulation adds complexity to the importer-broker relationship, but the key is to have regular dialogue regarding an importer’s entry activity,” Burke states.