In February, we often celebrate Valentine’s day with candy and flowers for the people who have a special place in our heart. This month’s compliance circular is going to focus on some of the people at the heart of the international freight forwarding industry, the Customs Brokers. As early as 1799, Customs Brokers were called “known agents or factors” and could make entry on behalf of cargo owners who were unable to do so, for a variety of reasons.
By the mid-1850s, the “customhouse broker” or “express agent” was recognized in many ports. These brokers were unregulated at the time, allowing many problems to arise, including fraud of revenue, which led to a ban on “customhouse brokers” for a period of years. By 1894, the chief officer of the customs office at each port could issue a license to “any reputable and competent person desiring to transact business as a customs-house broker.”
On June 10, 1910, the passage of the 1910 Act changed the wording from “reputable and competent” to “person of good moral character.” This gave the chief officer of the customs port the ability to review applications of those citizens of the United States with such good moral character to transact business and grant a license to be a customhouse broker. The Act of 1910 also protected the revenue of the Treasury by requiring brokers to supervise their employees as they handled customs business, requiring the broker to be held “strictly responsible for their acts.”
Many more changes developed the role of the custom broker over the last 100 years, including the following requirements of the 1935 Act:
- Protecting of importers and the revenue of the United States;
- Establishing of recordkeeping and accounting requirements;
- Requiring inspection of brokers, their papers, documents and correspondence; and
- Requiring the furnishing by brokers of “information relating to their business” to any duly accredited agent of the United States.
Major changes were made to the role of the Customs Broker in the Trade and Tariff Act of 1984, the Customs Modernization Act of 1993 (The Mod Act) and Chapter 111 in the 19CFR. These changes outline Customs expectations of how a Customs Broker will be licensed, how a Customs Broker will conduct business and how a Customs Broker will remain in good standing.
Today there are approximately 13,000 active licensed customs brokers in the United States. These brokers have met the qualifications to become a licensed broker, including passing a customs broker license exam that is administered twice annually with a normal passage rate of approximately 7 - 10 percent.
The Informed Compliance Publication Customs Brokers
The CBP provides detailed information on the role of a broker and what it takes to be one. Being a Customs Broker is not for the faint of heart, as it does demand qualification, knowledge and acceptance of responsibility for brokerage activities and information.
Often the Customs Broker acts as an adviser, a mediator, a coordinator, an encyclopedia, as well as a voice for the importer with Customs, other government agencies, air and ocean carriers and domestic truckers. The specialization of the Customs Broker is vital as they directly affect the speed and accuracy with which entries are processed.
The Broker-Client relationship requires trust and transparency and open dialogue to ensure correct details are provided in all areas, limiting exposure and penalty situations. So, give your broker a “shout out” today. Most of them are at the heart of your international business and want the best for you and your business!