Role of the Broker~ Regulatory Revision Commercial Operations Advisory Committee Subcommittee on Trade Facilitation August 18, 2011

 The Trade Integrated Planning and Coordination Cell (TIPCC) was established by Commissioner Bersin on June 29, 2010, to review the activities which support CBP’s trade mission and contribute to the nation’s economic security. As part of creating a 21st century vision, the TIPCC generated ideas to transform the role of the broker to modernize and facilitate legitimate trade.  The Role of the Broker-Broker Regulatory Revision Workgroup was established January 2011 by CBP in partnership with the National Customs Brokers and Fowarders Association of America (NCBFAA) to work collaboratively to develop solutions to meet the challenges of 21 st Century commerce as it relates to their vital role, exploring the following major topics: Role of the Broker~ Regulatory Revision 2  Expanded broker role  Regulatory modernization  Broker responsibilities  Penalty regime/  Professionalism disciplinary actions

The Workgroup will propose concepts that will:  Expand the role of the broker to meet the challenges of 21 st Century global trade  Ensure licenses brokers exercise due diligence in conducting customs business  Increase the value of a customs broker license  Leverage broker relationships to extend the opportunity for small and medium enterprises to be recognized as trusted partners Goals 3

 Continuing education requirement to maintain active license 4. Modernization  Discontinue Triennial reporting – replace with automated annual status reporting  Allow upload of employee data into ACE  Provide for reporting of continuing education reporting 5. Penalty Regime  Revise statute language to allow for immediate suspension of license (threats to national security), pending review of case, with due process  Focus on bad actor’s license rather than filer code remediation 4 Highlights of Proposed Options 1. Expanded Role  “Pre-certification” of C-TPAT applicants”  Pre-application support for ISA applicants 2. Broker Responsibilities  Establish requirement for importers to present bona fides  Require broker to obtain evidence  Broker must receive POA directly from importer  Customs business is to be conducted within the U.S. Customs Territory 3. Professionalism  Apprentice prerequisite for broker license

5 Expanded Broker Role Key ConsiderationsKey Challenges Pre-certification of applicants for C-TPAT Fast-track of importer’s application Allows CBP resources to be redeployed Additional touch points (expanding pool of applicants) Expands business potential Complements other business services Expands career paths and competencies for brokerage Reduces costs to CBP Lack of tangible benefits for applicant Push back from existing service providers Technology adjustments and enhancements Cost resistance Longer sales cycle SAFE Ports Act Pre-application support for ISA applicants Leverages existing relationship with clients Potential for ongoing assistance with importers in meeting program requirements Facilitates reducing the “haystack” Lack of tangible benefits for applicant Cost resistance Visibility into importers’ compliance may result in possible conflict – client v. government Direct competition with CBP services provided

6 Broker Responsibilities Key ConsiderationsKey Challenges More robust importer validation Establish requirement for importers to present bona fides Requires broker to obtain evidence of bona fides Shared responsibility for validating importers’ identify Strengthens the standard to fix accountability to true party of interest Should reduce incidents of identify theft Increased requirements upon importers Statutory and regulatory changes needed Resistance to shared responsibility Customs business and power of attorney (POA) Broker must receive POA directly from importer to perform customs business on behalf of importer Increased broker visibility to client Reduces surety risk Customs business is to be conducted within the U.S. Customs Territory Freight forwarders will not be able to serve as a POA conduit for customs business May impact off-shore operations

7 Professionalism Key ConsiderationsKey Challenges Enhance customhouse broker licensing criteria Introduction of “apprenticeship” prerequisite Continuing education requirement to maintain active license Increased value of license Higher quality of work products Better educated practitioner Overall increased professionalism from which the trade community and CBP should benefit Bandwidth to implement apprenticeship Resistance from non-practicing customshouse broker Regulatory change required Automated means to report requirements have been met Creation of an oversight body for continuing education administration

8 Modernization Key ConsiderationsKey Challenges Discontinue Triennial reporting Replaced with automated annual status reporting Allow at will upload of employee data into ACE – minimizes brokers’ administrative burden Clarify which employees must be reported Collect only minimal employee data that CBP actively uses Link continuing education reporting with annual reporting Leverage ACE portal functionality Efficient/accurate collection of broker information Establish new definitions of “active” and “inactive “status Establishing new fee structure Statutory and regulatory change required Change requirement for existing ACE Portal ($$$) Annual requirement to report

9 Modernization (continued) Key ConsiderationsKey Challenges Permitting Scheme Modernize permit framework to allow for alternative qualification acquisition Rational approach for providing responsible supervision and control Reduce reliance on waiver process Equal access via transparency of alternate qualification criteria Allow for greater flexibility in broker planning Eliminate unnecessary costs Administrative fee structure Regulatory change needed Industry resistance CBP resistance Length of time to receive approval for alternative qualification

10 Penalty Regime/Disciplinary Actions Key ConsiderationsKey Challenges Revise 19 U.S.C language Provide for immediate suspension of license (threats to national security), pending review of case Provide due process provision Focus on bad actor’s license revocation rather than filer code remediation Establishing expedited process for suspension with due process Resistance from brokers

 Brief the Commercial Operations Advisory Committee (COAC) on proposed concepts developed, to-date, in mid-August 2011  Continue consultations with CBP stakeholders  Finalize proposal to present to Commissioner Bersin in October Next Steps

Contact Information: Cynthia F. Whittenburg Director, Trade Facilitation and Administration Office of International Trade