Customhouse Brokers in International Shipping

A Customhouse Broker in international shipping is a person who is licensed under Part 111 CR to transact Customs business on behalf of others.

General Requirements to become a Customs Broker in international shipping:
For more detailed information http://www.customs.gov/xp/cgov/import/broker_management/brokers.xml

1. Must pass the exam with 75% or garter passing score and apply for the Customs Broker's license within 3 years after passing the exam.
   
   The exam is normally given at CBP service ports ( ports ) the first Monday in April and the first Monday in October. If that Monday is a religious holiday, the examination will be given the following Tuesday. The appropriate CBP port director must receive the examination application and $200 fee at least 30 days in advance of the examination.
2. Must be at least 21 years old.
3. Must be U.S. Citizen.
4. Must have a good moral character.
   CBP and FBI will check out your background for: Felony convictions (1); Credit scores (2); You cannot be a Government employee, even a member of National Guard etc (3); involving in drug use (4) etc. It may take from 8 to 12 month.
   
   If they will find that they do not feel comfortable issuing the license, the may may refuse issue the license to you. An applicant may file with the Commissioner a request for review of the facts in writing or by personal appearance, within 60 days from the date of denial. If the Commissioner affirms the decision, the applicant may appeal to the Secretary of the Treasury within 60 days of the affirmation of denial by the commissioner.
5. You must submit fingertips.

Application for a broker's license involved in international shipping must be submitted on CF 3124 and shall be made under oath. In the case of an individual, the application must be in the hands of the Port Director at least 30 days before the scheduled examination. The application must be accompanied by a check made out to the United States Customs Service in the amount of $200. Upon passing the examination an additional $200 will be required for a total fee of $400.

The Customs Broker license in international shipping is valid NATIONWIDE and FOR LIFE without re-testing. A Permit to Operate is issued in each in each district that you operate in. You automatically get a District Permit in the district where you took the license exam. However some things have to be done to keep the license active.

Three types of organizations that Customs will permit: The term "person" as used
above may denote individuals, partnerships, associations, or corporations.

1. Sole Proprietorship.

You operate under your name (1); You have a Permit to Operate (2) and; You have a proof to use the name in your state (3) i.e. registered the business.

2. Partnership.

The same as above, but at least one partner must be licensed CB and a permit holder.

3. Corporation.

• In the corporation ONE officer must be licensed and permit holder, no matter how many licenses you have in the corporation.
• A corporate license will be suspended if there is NO LICENSED CORPORATE OFFICER after 120 days.
  After 180 days the Permit to Operate will be suspends.
• Article of the corporation MUST state that the corporation in the Customs Brokerage business. I.e. if a FF got the CB license, then it must be changed in the article of the corporation.

If a corporation has multiply offices within one district (Let's say in District of New York it has office in the port of New York and in JFK Airport) then:

• It uses the original Permit to Operate and DOES NOT require a license in each office.
• HOWEVER, the licensed CB must provide RESPONSIBLE SUPERVISION, i.e. Frequently visits (1); Have HTS on file in each office (2) and; Availability for each office to answer questions related to CB business (3).
• Records keeping must be done separately in each office.

RECORDS and ACCOUNTING KEEPING.
U.S. Customs will visit CB locations in order to look at the Recodes (1) and Accounting (2) keeping. Customs must be assured that if they want to check out something for an importer or shipper they can trace it back to the source.

CB MUST KEEP IN RECORDS:

Customs form 3079 (Record of Transaction of Licensed Customhouse Broker) must be kept in accordance with instructions on the form, unless an exemption has been granted by the Port Director. This authority is granted when the information required on CF 3079 is disclosed in other Customhouse Brokers.

1. Entries and all supplied documents must be kept for 5 (five) years: from the DATE OF ENTRY for CONSUMPTION entries (1) and; from the LAST WITHDRAWAL for WAREHOUSE entries.

2. Powers of Attorney must be kept ORIGINALS ONLY: at ALL TIME for active PA (1) or; for 5 (five) years from the date of revocation if it had been revoked by CB's client.

3. Confidentiality. NO ONE. No entity can look at the client records except the CLIENT HIMSELF (1); CUSTOMS (2) or UNDER A COURT ORDER (3). I.e. ANY government agencies MUST HAVE A COURT ORDER in order to look at your client records.

FINANCIAL MANAGEMENT: 19 CFR 111.29

1. If it is the money FROM CUSTOMS that CB must return to his client must be returned WITHIN 60 DAYS.
Example: An entry had been liquidated and Customs found that duty had been overpaid and issued a check with a refund.

2. If it is the money FROM THE CLIENT TO CUSTOMS, then CB must pay it ON or BEFORE THE DUE DATE.
Example: CB got a check from the client, which contains CB fee and Customs Duty all in one. Then it must be paid ON or BEFORE THE DUE DATE.

3. If it is the money FROM THE CLIENT TO CUSTOMS paid to CB AFTER THE DUE DATE, then it must be paid WITHIN 5 (FIVE) WORKING DAYS to the Customs.
Example: CB filed an entry WITHOUT DUTY ATTACHED within 10 working days, but client forgotten to pay duty. (Probably a penalty will be involved as well).

4. CB must informed his clients AT LEAST ONCE A YEAR, that THEY CAN PAY TO CUSTOMS DIRECTLY (usually it is stated in CB invoices). To avoid bounced checks it is a good practice to have your clients to pay to Customs directly. In this case if a check bounces, then Customs goes to the client, but not to you.

EMPLOYMENT IN A CUSTOMS BROKER COMPANY:

CB must always file with Customs LIST OF EMPLOYEES (19 CFR 111.28) with name (1); address (2); SSN (3) and; 3 (three) years work history.

• CB must do that for all new employees WITHIN 10 DAYS AFTER 30TY DAYS OF EMPLOYMENT. (The first 30 days Customs does count such as trail period of employees and does not require the filing.)
• When employment is tormented, then CB must provide the info to Customs within 30 DAYS AFTER THE TERMINATION. (If it terminated within the 30 days of the trail period it does not apply).

Requirements to CB employees:

1. They DO NOT have to be U.S. Citizens, but must be U.S. Residents and have work authorization in the USA.
2. IMPORTANT: If an employee signs documents for CUSTOMS BROKER in international shipping then HE MUST HAS A POWER OF ATTORNEY FROM THE CUSTOMS BROKER.

IF CB CHANGED THE NAME or ADDRESS OF ORGANIZATION THEN CUSTOMS (PORT DIRECTOR) or headquarters MUST BE NOTIFIED.

CUSTOMS BROKERS ETHICS:

Ethics is the business common sense. You must deal with DILIGENCE.

CB has both obligations:

1. To the client that work (i.e HTS, forms etc) had done properly and;
2. To U.S. Customs. Insure that revenue of U.S. Government is protected.

SOME TOPICS OF THE ETHICS:

• CB has ETHICAL obligation in determination facts given to Customs.
  Example: A shipper declares that value of obviously very expensive machine is $1.
• CB has ETHICAL obligation to report errors and omissions from clients. Otherwise Customs will consider that you involved in these errors and omissions.
• CB cannot import the same commodity that your client imports. Otherwise you become a competitor to your client.
• CB cannot collect money from clients such as % from bills unless it is the actual research. I.e. CB can be paid for his time and efforts in research of items.
• CB must display his license in the office at all time.

PENALTY:

Maximum penalty to CB is $30,000. After that Customs takes CB license and put CB out of the business.

If the license had been revoked, the NO ONE CAN HIRE YOU FOR THE JOB EVEN AS EMPLOYEE FOR 5 YEARS!
After the 5 years you may apply to Customs to get approval to work AS AN EMPLOYEE for somebody else. NOT FOR YOURSELF. CFR 111.79.

STATUS REPORT:

CB must file to Customs the Status Report EVERY 3 (THREE) YEARS (starting 1979. No matter when the license had been issued). It must be filed before February 1st of each 3 years period (If it filed during the month of February, then it is still counted filed timely).

Failure to file this report will result in cancellation of license by "operation of law".

CANCELLATION OF THE LICENSE:

1. Without prejudice. VOLUNTARILY. CB got a Government job, etc.
A broker's license may be canceled by the Commissioner without prejudice upon written application if it is determined that the request was not made to avoid suspension or revocation of the license. Upon request by the broker, the cancellation may be made with prejudice, which is in effect the same as if the license had been revoked for cause by the Secretary.

2. With PREJUDICE. Customs took CB license.

3. Operational low. I.e. partnerships loose its licensed CB; CB failed his Status Report etc.

CUSTOMS BROKER CAN APPEAL TO THE SECRETARY AND IF DENIED TO THE CIT WITHIN 180 DAYS OF DENIAL.

MISCELLANIES:

• CB CANNOT employ disreputable people, but he CAN REPRESENT disreputable people.
• CB CANNOT use his bond for them who lost theirs Immediate Delivery Privileges.
• IF YOU DO CUSTOMS BROKERAGE BUSINESS WITHOUT THE LICENSE, YOU WILL BE FINED $10,000 PER ENTRY.
• Customs considers as active client who does TWO ENTRIES with CB WITHIN ONE YEAR (last 12 months).
• CB CANNOT use clients DUTY CHECK to offset money that the client owes him. I.e. DUTY CHECK must do to Customs.
• A PERMIT TO OPERATE IS VALID FOR 180 DAYS even there is NO ACTIVITY under that permit.
• Permits to Operate users FEE:
  a. If CB had been licensed in the district, then he get FREE Permit and $125 user fee.
  b. In any additional districts CB must pay $100 one time permit fee; plus $100 user fee.