The latest on Russia sanctions from the International Trade and Supply Chain Team
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Washington D.C., USA - March 1, 2020: Sign of U.S. Customs and Border Protection on the building in Washington D.C., USA, the largest federal law enforcement agency.

A recent ruling analyzed whether certain functions performed in preparation for filing an entry with U.S. Customs and Border Protection (“CBP”) arise to the level of “Customs Business” that must be performed by a licensed broker. Ruling HQ H326926, issued to Heizwerthy Customs & Freight Solutions (“Heizwerthy”), states that allowing an unlicensed company to extract and key in entry-related data elements constitutes impermissible Customs Business.

As one of few rulings on the topic, this development provides important insight for brokers and importers on what activities are considered Customs Business and must be performed by a licensed broker. This distinction is crucial because Customs laws require that Customs Business be performed by a person with a valid customs license. As defined, Customs business includes:  

“the preparation of documents or forms in any format and the electronic transmission of documents, invoices, bills, or parts thereof, intended to be filed with U.S. Customs and Border Protection in furtherance of such activities, whether or not signed or filed by the preparer…”

As the definition of Customs Business is fairly broad, there have been several inquiries over the years as to which activities may be performed without a broker’s license either as compliance functions or as activities not arising to the level of Customs Business. See HQ 227186 (January 13, 1999); see also HQ H175280 (September 24, 2012).

The contemplated scenario at issue in this latest ruling was a foreign, unlicensed entity determining entry elements based on the shipping documentation and keying in those elements into CBP’s Automated Broker Interface (“ABI”) before final review and transmission by a licensed broker. In determining that these activities were impermissible, CBP relied upon a previous ruling where it determined that the use of scanning technology by an unlicensed contractor to generate an entry was impermissible Customs Business, despite the entry being transmitted by a licensed customs broker. In essence, CBP deemed these activities as those “in furtherance of” the preparation of documents intended to be filed with CBP, and ultimately classified the activities as Customs Business.

In addition to making this determination, CBP also addressed specific implications for activities undertaken by a foreign, unlicensed company. Specifically, it pointed out that 1) an unlicensed company should not have access to ABI as it is only for use by customs brokers, importers, and ABI service bureaus, 2) the company must be approved by CBP to gain access to ABI, and 3) to allow access by a third party without written authorization from clients is a breach of the broker’s obligations not to disclose client records to any persons other than those clients. 

Also of noteworthy importance, CBP reiterated that pursuant to Part 111 of Customs Regulations which went into effect December 19, 2022, all “customs business must be conducted within the U.S. customs territory.” 19 C.F.R. § 111.3(a); see also Modernization of the Customs Broker Regulations, 87 Fed. Reg. 63,274 (Oct. 18, 2022). Therefore, brokers are obligated to ensure that any Customs Business is performed within the United States, Puerto Rico, or the District of Columbia.

We will continue to monitor any developments regarding the distinction between  activities that are appropriately performed by an unlicensed individual, or company personnel, versus those which must be performed by a licensed customs broker. For questions, please reach out to Husch Blackwell’s International Trade and Supply Chain team