An executive order signed by President Trump on Wednesday, June 3 will have a significant impact on the customs brokerage industry, and appears likely to separate the cream from the crop in important ways.
The executive order is described as tightening customs enforcement, with a strong emphasis on importer accountability and vetting, foreign importer restrictions and disclosure obligations. Penalties for noncompliance are higher than they used to be.
Importers of record will face more challenging requirements in the areas of enforcement, bonding, data submissions and compliance rules. For foreign IORs, the standards are even greater – with mandates to either be CTPAT-validated or to use a CTPAT-validated customs broker for entries. Without meeting these requirements, foreign IORs will also be prohibited from filing informal entries.
Here are some of the details of the enhanced and recurring vetting:
- Increased audits
- Restricted in-bond use
- Maximum penalties on brokers that fail due diligence or represent noncompliant parties
Penalty mitigation will also offer less relief than in the past, with minimum final penalties of 50 percent of the original assessed penalty, and no mitigation permitted for repeat offenders.
Importers of record will have to carry much higher bond coverage than in the past, and will have to disclose much more information about their businesses during the bond process.
For those concerned about the impact of this executive order, there is some good news: The changes are not immediate, and the White House says it will work with the industry to give the affected parties time to adjust.
Here is a timeline of expected events that will arise from the executive order, as outlined in an analysis by Sandler, Travis & Rosenberg, P.A.:
45 days
- Submit recommendations for legislation to strengthen customs enforcement.
90 days
- Require submission of documentation or information that the foreign exporter provided to foreign customs authorities before export to the United States.
- Revise mitigation standards to establish a minimum penalty floor of at least 50 percent, a minimum liquidated damages floor, and no mitigation for repeat offenders.
- Take actions to expedite and enhance seizure and disposal of non-compliant imports, including easing voluntary abandonment, increasing bond requirements for high-risk shipments, and authorizing third-party disposal.
- Enhance transparency through periodic review and expiration of confidentiality requests, as appropriate, and publication of annual enforcement transparency reports.
180 days
- Revise importer eligibility regulations, guidance, and policies to require minimum domestic assets, bonding, or both; increased bond coverage; IOR designation for formal and informal entries; and additional IOR data disclosures.
- Require all IORs to maintain good standing with CBP.
- Update the IOR registry by removing inactive IORs, confirming compliance and disclosures for active IORs, and creating risk-based tiers.
- Establish enhanced and recurrent vetting procedures for IORs, affiliates, customs brokers, custodians of bonded merchandise, and freight forwarders.
1 year
- Submit a report to the President on the effectiveness of the matters set forth in the order.
While these new requirements are not terribly burdensome for companies that already place a strong emphasis on customs compliance, they will definitely serve as a test to see who in the industry has the wherewithal to qualify.
A potential downside to the industry will be the increased administrative costs of complying with these new requirements – not to mention the bonding amounts themselves – and the likely spillover impact on broader costs to stakeholders across the board.
Bestway is diligently studying the executive order and consulting with our contacts and resources to be sure we have a complete understanding of what is required and what our clients will need to do to avoid any resulting complications.
Stay in contact with us so we can guide you through these developments.
