[Federal Register Volume 64, Number 80 (Tuesday, April 27, 1999)]
[Proposed Rules]
[Pages 22726-22747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10127]
[[Page 22725]]
_______________________________________________________________________
Part IV
Department of the Treasury
_______________________________________________________________________
Customs Service
_______________________________________________________________________
19 CFR Part 111
Customs Brokers; Proposed Rule
Federal Register / Vol. 64, No. 80 / Tuesday, April 27, 1999 /
Proposed Rules
[[Page 22726]]
DEPARTMENT OF THE TREASURY
Customs Service
19 CFR PART 111
RIN 1515-AC34
Customs Brokers
AGENCY: U.S. Customs Service, Department of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes to revise Part 111 of the Customs
Regulations, which governs the licensing and conduct of customs brokers
in the performance of customs business on behalf of others. The
proposed revision includes changes to the regulatory texts to reflect
amendments to the underlying statutory authority enacted as part of the
Customs Modernization provisions of the North American Free Trade
Agreement Implementation Act. The proposed revision also includes
changes to reflect the recent reorganization of Customs as well as
changes to improve the content, layout and clarity of the regulatory
texts.
DATES: Comments must be received on or before June 28, 1999.
ADDRESSES: Written comments (preferably in triplicate) may be addressed
to the Regulations Branch, Office of Regulations and Rulings, U.S.
Customs Service, 1300 Pennsylvania Avenue N.W., Washington, D.C. 20229.
Comments submitted may be inspected at the Regulations Branch, Office
of Regulations and Rulings, U.S. Customs Service, 1300 Pennsylvania
Avenue N.W., 3rd Floor, Washington, D.C.
FOR FURTHER INFORMATION CONTACT:
Operational Aspects: Bruce Ingalls, Office of Field Operations
(202-927-1082).
Legal Aspects: Jerry Laderberg, Office of Regulations and Rulings
(202-927-2320).
SUPPLEMENTARY INFORMATION:
Background
Section 641 of the Tariff Act of 1930, as amended (19 U.S.C. 1641),
provides that a person must hold a valid customs broker's license and
permit in order to transact customs business on behalf of others, sets
forth standards for the issuance of broker's licenses and permits,
provides for disciplinary action against brokers in the form of
suspension or revocation of such licenses and permits or assessment of
monetary penalties, and provides for the assessment of monetary
penalties against other persons for conducting customs business without
the required broker's license. Section 641 also authorizes the
Secretary of the Treasury to prescribe rules and regulations relating
to the customs business of brokers as may be necessary to protect
importers and the revenue of the United States and to carry out the
provisions of section 641.
The regulations issued under the authority of section 641 are set
forth in Part 111 of the Customs Regulations (19 CFR Part 111). Part
111 includes detailed rules regarding the licensing of, and granting of
permits to, persons desiring to transact customs business as customs
brokers, including the qualifications required of applicants and the
procedures for applying for licenses and permits. Part 111 also
prescribes recordkeeping and other duties and responsibilities of
brokers, sets forth in detail the grounds and procedures for the
revocation or suspension of broker licenses and permits and for the
assessment of monetary penalties, and sets forth fee payment
requirements applicable to brokers under section 641 and 19 U.S.C.
58c(a)(7).
On December 8, 1993, amendments to certain Customs and navigation
laws became effective as the result of enactment of the North American
Free Trade Agreement Implementation Act (``the Act''), Public Law 103-
182, 107 Stat. 2057. Title VI of the Act set forth Customs
Modernization provisions that included, in section 648, certain
amendments to section 641 of the Tariff Act of 1930. The substantive
amendments to section 641 are as follows:
1. In the definition of ``customs business'' in section 641(a)(2),
a second sentence was added that provides that customs business ``also
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 the Customs Service in furtherance
of [the customs business activities listed in the first sentence],
whether or not signed or filed by the preparer, or activities relating
to such preparation, but does not include the mere electronic
transmission of data received for transmission to Customs.''
2. Section 641(c)(1) was amended by adding a provision for the
issuance of a national permit for the conduct of such customs business
as the Secretary of the Treasury prescribes by regulation.
3. A new subsection (c)(4) was added to provide that when
electronic filing (including remote location filing) of entry
information with Customs at any location is implemented by the
Secretary of the Treasury pursuant to the provisions of the National
Customs Automation Program (``the NCAP,'' which was established by
section 631 of the Act and is codified at 19 U.S.C. 1411-1414), a
licensed broker may appoint another licensed broker who holds a permit
in a Customs district to act on its behalf as its subagent in that
district if such activity relates to the filing of information that is
permitted to be filed electronically. New subsection (c)(4) also
provides that the broker who appoints a subagent remains liable for all
obligations arising under bond and for all duties, taxes and fees, and
for any other liabilities imposed by law, and cannot delegate such
liability to the subagent.
4. Section 641(d)(2)(B), which sets forth the procedures for the
suspension or revocation of a broker's license or permit, was amended
to increase to 30 days the period within which a hearing is to be held
after written notice of a hearing is provided to the broker.
5. Finally, section 641(f) was amended to provide: that the
Secretary of the Treasury may not prohibit customs brokers from
limiting their liability to other persons in the conduct of customs
business; that for purposes of any provision of the Tariff Act of 1930
pertaining to recordkeeping, all data required to be retained by a
customs broker may be kept on microfilm, optical disc, magnetic tapes,
disks or drums, video files or any other electrically generated medium;
and that, pursuant to such regulations as the Secretary of the Treasury
shall prescribe, the conversion of data to such storage medium may be
accomplished at any time subsequent to the relevant customs transaction
and the data may be retained in a centralized basis according to such
broker's business system.
On September 27, 1995, Customs published the following documents in
the Federal Register as a result of changes in the Customs Headquarters
and field organizational structure:
1. T.D. 95-77 (60 FR 50008) amended the Customs Regulations on an
interim basis. The amendments included extensive changes to
Secs. 101.1, 101.3 and 101.4 (19 CFR 101.1, 101.3 and 101.4) to reflect
the changes to the basic Customs field organization, involving the
elimination of regions and districts for most purposes so that ports of
entry would constitute the foundation of the Customs field structure
and would be empowered with most of the functions and authority that
had been held in the district and regional offices and also involving
the designation of some ports as service ports having a full range of
cargo processing functions, including inspection, entry, collection,
and
[[Page 22727]]
verification. T.D. 95-77 also included amendments to Parts 4, 19, 24,
103, 111, 112, 113, 118, 122, 127, 141, 142, 146 and 174 of the Customs
Regulations (19 CFR Parts 4, 19, 24, 103, 111, 112, 113, 118, 122, 127,
141, 142, 146 and 174) to reflect these organizational changes. The
background portion of T.D. 95-77 pointed out that districts and regions
would still exist as geographical descriptions for limited purposes
such as for broker permits and certain cartage and lighterage purposes,
and T.D. 95-77 therefore set forth certain additional regulatory
changes in order to reflect this fact; these changes included the
addition of definitions for ``district,'' ``district director'' and
``region'' in Sec. 111.1 (19 CFR 111.1) to enable the current statutory
broker licensing and permitting schemes to operate. (The background
portion of T.D. 95-77 also noted that the Customs reorganization
included the creation of twenty Customs Management Centers and five
Strategic Trade Centers for which no regulatory changes were being made
because these new organizational entities will not have direct contact
with the public.)
2. T.D. 95-78 (60 FR 50020) also amended the Customs Regulations on
an interim basis and involved nomenclature changes. The T.D. 95-78
changes were set forth in a table format in numerical order by section
affected and in most cases involved the replacement of outdated
references with new references to reflect the new Customs Headquarters
and field organizational structure. The majority of these changes
involved replacing ``district'' with ``port'' and replacing ``district
director'' with ``port director,'' or some variation thereof. The T.D.
95-78 changes involved almost every part within Chapter I of the
Customs Regulations (19 CFR Chapter I) and included a large number of
changes to Part 111.
3. A general notice (60 FR 49971) informed the public of the
geographic areas covered for purposes of Customs broker permits and for
certain cartage and lighterage purposes where the word ``district''
appears in the Customs Regulations. This notice was a consequence of
the publication of T.D. 95-77 and T.D. 95-78 and, in particular, of the
T.D. 95-77 regulatory changes made in order to retain the concept of a
``district'' for certain Customs broker and cartage and lighterage
purposes. This general notice consisted of a table, arranged by State
or other geographic location, setting forth in the left column a list
of service ports (each of which represents a ``district'') and in the
right column the ports of entry within each such ``district.''
With regard to the changes to section 641 made by section 648 of
the Act, Customs has determined that a number of those changes should
be reflected in Part 111. Specifically, the regulations should be
amended as follows: (1) to reflect the change to the section 641(a)(2)
definition of ``customs business;'' (2) to provide for the issuance of
national permits as authorized under amended section 641(c)(1); (3) to
reflect the 30-day period within which a suspension or revocation
hearing is to be held under amended section 641(d)(2)(B); (4) to
implement the amended section 641(f) proscription against prohibiting a
broker from limiting its liability to other persons; and (5) to reflect
the amended section 641(f) recordkeeping provisions. With regard to the
appointment of subagents as authorized under amended section 641(c)(4),
Customs believes that it would be premature to amend Part 111 at this
time; rather, it would be preferable to address this issue at such time
as related NCAP test procedures have been concluded, appropriate
programming enhancements have become operational, and appropriate
regulatory proposals have been formulated.
Customs has also performed a general review of Part 111 to
determine whether other regulatory changes should be made. Based on
that review, Customs has identified a number of other areas where
significant improvement could be made to the existing regulatory texts.
These improvements include: (1) the elimination of obsolete or
otherwise unnecessary provisions; (2) the addition of new provisions
where the regulations appear to be incomplete or are otherwise in need
of clarification; (3) further textual changes arising out of the
reorganization of Customs that were not fully addressed in the
district/port terminology changes made by T.D. 95-77 and T.D. 95-78,
including some changes to those previously-published changes and
particularly in order to clarify certain procedural aspects of the
regulations (for example, where to file permit applications and broker
status reports and where to pay permit user fees); and (4) a large
number of nonsubstantive, editorial changes to improve the precision
and clarity of the regulations, ranging from the reorganization or
complete redrafting of existing texts to minor word changes within a
particular regulatory provision.
In the light of the number and breadth of the changes outlined
above, Customs believes that the proposed changes should be presented
in the context of a complete revision of Part 111. With the exception
of minor wording or other editorial-type changes that do not appear to
warrant specific mention, the changes reflected in the proposed
revision of Part 111 set forth in this document are discussed in more
detail below.
Discussion of Proposed Amendments
Section 111.1
The following proposed changes have been made to this definitions
section:
1. References to ``Commissioner'' have been replaced by references
to ``Assistant Commissioner'' throughout Part 111, and a definition of
``Assistant Commissioner'' has been added to clarify that each such use
of this term refers to the Assistant Commissioner, Office of Field
Operations.
2. Two sentences have been added at the end of the definition of
``customs business'' to reflect the change to the section 641(a)(2)
definition effected by section 648 of the Act as discussed above.
3. In the first sentence of the definition of ``district'' (added
by T.D. 95-77 as discussed above), the words ``other than a national
permit'' have been added after ``permit'' in order to avoid an
inconsistency with the national permit concept reflected in new
Sec. 111.19(f) (which is discussed below), and the words ``issued under
this part'' have been removed because they are no longer necessary in
view of the proposed new definition of ``permit'' discussed below. In
addition, the second sentence has been modified to refer to publication
of the listing of districts and ports ``periodically'' (rather than
``on or before October 1, 1995, and whenever updated'') since the date
mentioned in the present text no longer serves a useful purpose.
4. The definition of ``district director'' (added by T.D. 95-77 as
discussed above) has been removed because this term is not used in
revised Part 111.
5. A definition of ``employee'' has been added to ensure that this
term will have the same meaning wherever used in Part 111 (for example,
for determining whether a license is required under Sec. 111.3(b) and
for purposes of providing required employee information under
Sec. 111.28(b)).
6. A definition of ``permit'' has been added. This new definition
refers to any permit issued to a broker under Sec. 111.19 and applies
to both district permits and national permits (the latter are addressed
in new Sec. 111.19(f) discussed below).
7. The definition of ``records'' conforms to the final rule
published in the Federal Register (63 FR 32916) on
[[Page 22728]]
June 16, 1998, involving a revision of the Customs Regulations
pertaining to recordkeeping requirements principally in order to
implement statutory changes made by sections 614 and 615 of the Act as
well as the change made by section 648 of the Act to section 641(f) as
discussed above. Changes for the same reason are also reflected in the
texts of Secs. 111.21 and 111.23, and in the treatment of Sec. 111.22,
as set forth below.
8. A definition of ``responsible supervision and control'' has been
added. Customs believes that this definition is needed because the
expression is used in multiple sections in Part 111 (that is, in
Secs. 111.11, 111.13, 111.19 and 111.28). The proposed definition is
based on paragraph (d) of present Sec. 111.11, which would be
eliminated.
Section 111.2
Section 111.2, which sets forth the basic circumstances in which a
license and district permit are required, has been considerably
expanded and divided into two paragraphs: paragraph (a) pertains to
licenses and paragraph (b) pertains to permits. The specific
organizational and substantive changes reflected in the revised text of
this section are as follows:
1. Paragraph (a)(1) repeats the basic license requirement statement
contained in the first sentence of present Sec. 111.2 but with the
addition of a cross-reference to paragraph (a)(2), which sets forth
exceptions to the general rule.
2. Present Sec. 111.3, regarding specific types of transactions not
requiring a broker's license, has been moved to Sec. 111.2 as new
paragraph (a)(2) because, for purposes of organizational clarity,
Customs believes it is preferable in this case to have those exception
provisions immediately following the general statement to which they
relate. In addition, the following textual changes are reflected in
this new Sec. 111.2(a)(2) text:
a. The second sentence of present Sec. 111.3(b)(2), which refers to
filing the required statement ``at each port within the district,'' has
not been included in the corresponding new Sec. 111.2(a)(2)(ii)(A)(2)
because it adds nothing not already covered by the first sentence. In
addition, the present text has been modified to not require the filing
of the statement if the broker is operating within a district under a
paragraph (b)(2) exception to the district permit rule because
compliance with such a requirement would be problematic, particularly
in the case of transactions initiated from a remote location.
b. Present Sec. 111.3(e) (new Sec. 111.2(a)(2)(v)) has been revised
to refer to ``noncommercial'' shipments or merchandise (rather than
``informal'' entry) and by replacing the language regarding Sec. 143.26
and 19 U.S.C. 1498 with a simple proviso regarding meeting the
requirements of Sec. 141.33. Customs believes that the revised text
more accurately reflects the circumstances intended to be covered by
this provision.
c. A subparagraph (vi) has been added to the new Sec. 111.2(a)(2)
text to cover foreign trade zone activities not involving the transfer
of merchandise to the customs territory of the United States.
3. The permit provisions of new paragraph (b) reflect the same
structure as that described above for the license provisions of new
paragraph (a). Thus, paragraph (b)(1) repeats the basic district permit
requirement statement contained in the second sentence of present
Sec. 111.2 but with the addition of a cross-reference to new paragraph
(b)(2) which sets forth exceptions to the general rule. The new
Sec. 111.2(b)(2) exceptions to the district permit rule involve the
following:
a. Paragraph (b)(2)(i) would allow a broker who files entries for a
client at other locations covered by a district permit to place the
broker's employee at the client's premises for the purpose of
performing customs business (other than filing entries or other
documents with Customs) solely on behalf of that client even though the
broker does not have a permit for the district in which the client's
premises are located.
b. Paragraph (b)(2)(ii) would allow a broker to file a manual
drawback claim, and represent a client regarding such a claim, at the
drawback office that has been designated by Customs for the purpose of
filing drawback claims even though the broker does not have a permit
for the district where that drawback office is located. The electronic
filing of drawback claims in a district for which a broker does not
have a permit may be done only pursuant to a national permit issued to
that broker.
c. Paragraph (b)(2)(iii) describes the basic circumstances under
which a national permit may be used in lieu of obtaining a district
permit, with a cross-reference to new Sec. 111.19(f) that sets forth
the procedures for obtaining such a national permit. These new national
permit provisions, which are intended to implement section 641(c)(1) as
amended by section 648 of the Act as discussed above, are explained in
more detail below in the discussion of new Sec. 111.19(f).
d. Finally, paragraph (b)(2)(iv) would allow a broker to orally or
in writing or electronically represent an importer of record before
Customs after an entry of merchandise filed by another broker (as agent
and not as importer of record) has been completed and accepted by
Customs even though that broker does not have a permit for the district
where the representations are to be made, provided that the broker has
a national permit and provided that the broker, if requested by
Customs, submits evidence of the broker's right to represent the
client. This provision is intended to provide brokers with more
flexibility in responding to their clients' needs on a national basis
once an entry has come under the jurisdiction of Customs. The text
reflects the view of Customs that a broker should be able to follow up
with Customs on any matter arising out of an entry filing or regarding
the merchandise covered by an entry without being constrained by the
need to have a district permit covering the location where the
representations on behalf of the client are made.
Section 111.3
As a consequence of the transfer of the text of this section to
Sec. 111.2, this section has been designated as ``reserved.''
Section 111.5
In paragraph (a), which concerns the general right of a broker who
represents a client in the importation or exportation of merchandise to
represent the client before Treasury Department agencies, the exception
language at the end regarding representation in a district where the
broker does not have a permit has been removed because exceptions to
the district permit rule are covered by new Sec. 111.2(b)(2).
Section 111.11
The basic requirements for an individual broker's license under
paragraph (a) have been modified as follows: in subparagraph (a)(1), to
require that the individual be a citizen of the United States ``on the
date of submission of the application;'' in subparagraph (a)(2), to
require that the individual attain the age of 21 ``prior to the date of
submission of the application;'' and in subparagraph (a)(4), to provide
that the individual must have attained a passing grade on a written
examination ``taken within the 3-year period before submission of the
application.'' The changes in subparagraphs (a)(1) and (a)(2) are
intended to add necessary precision by more clearly defining the time
at which these basic requirements must be met.
[[Page 22729]]
Revised subparagraph (a)(4) is intended to achieve several objectives.
First, as in the case of the other paragraph (a) criteria, it makes the
taking and passing of the examination a condition precedent to the
submission of a license application to Customs (a failure to pass the
examination would no longer result in the denial of a license
application because no application would exist at that point in time).
Second, prescribing a 3-year period in which to submit a license
application after passing the examination gives an individual more
flexibility concerning where and when the application is submitted
(thus, the examination could be taken and passed in one district and
the application could be submitted later to a port director within
another district at any time within the 3-year period). Third, drawing
a distinction between the examination process and the application
submission process makes it possible to provide for a separate fee
payment for each process in the simplified Sec. 111.96(a) fee structure
discussed below. Fourth, the revision will enhance administrative
efficiency by eliminating the need for Customs to process license
applications that may never result in the issuance of a license because
the applicant has not passed the required examination.
In addition, for the reasons stated above in connection with the
proposed addition of the definition of ``responsible supervision and
control'' in Sec. 111.1, paragraph (d) has been removed.
Section 111.12
The following changes have been made to this section which sets
forth license application procedures:
1. Paragraph (a) reflects the following changes: the third sentence
has been modified to refer to a ``$200 application'' fee in order to
reflect changes to the fee provisions of Sec. 111.96(a) that are
discussed below; in the fourth sentence, after the reference to ``one
or more States,'' the words ``at a port'' have been removed because
they are unnecessary and potentially confusing; the fifth sentence,
which concerns the time for submitting an application for an
individual's license, has been modified to reflect the 3-year period
specified in Sec. 111.11(a)(4); the sixth sentence has been modified
(also as a consequence of the Sec. 111.11(a)(4) changes) to provide
that the port director may also require a copy of the notification that
the individual passed the examination (see the discussion of
Sec. 111.13(e) below) and by removing at the end the words ``or after
the applicant obtains a passing score on the written examination;'' and
a new sentence has been added at the end to permit the port director to
refuse to accept the filing of an application that, on its face,
demonstrates noncompliance with one or more of the basic requirements
of Sec. 111.11 (for example, the application is filed more than 3 years
after the individual passed the written examination), in which case the
application and fee would be returned to the filer without further
action.
2. Also as a consequence of the Sec. 111.11(a)(4) changes,
paragraph (c), which concerns application withdrawals, has been
modified by removing the reference to providing notice before the date
of the written examination and by revising the remaining text. Revised
paragraph (c) provides that any license application may be withdrawn by
written notice at any time prior to issuance of the license but also
specifically precludes a refund of the $200 application fee because a
refund no longer would be necessary or appropriate in the new
regulatory context.
Section 111.13
The following changes have been made to this section which concerns
written examinations for individual licenses:
1. Throughout the section all references to an ``applicant'' have
been removed or have been modified (for example, to read ``individual''
or ``examinee'' or ``prospective applicant'') to reflect that under the
Sec. 111.11(a)(4) and related changes a written examination will always
precede the filing of a license application.
2. In paragraph (b), which concerns the date and place of the
examination, a new sentence has been added after the first sentence to
require written notice of an individual's intent to take the
examination, and payment of the $200 examination fee, at least 30
calendar days prior to the scheduled examination date. The advance
notice is necessary in order for Customs to ensure that an adequate
facility will be available to accommodate all prospective examinees,
and payment of the fee at that time is necessary because the
examination fee would no longer be part of the application fee under
the Sec. 111.11(a)(4) and related textual changes discussed above (see
also the new paragraph (d) examination fee refund provision discussed
below). In addition, in order to afford procedural flexibility to
Customs when appropriate, the first sentence no longer refers to
examinations ``at each district office'' and the last sentence provides
for giving notice of the exact time and place but without implying that
notice will be given individually to each prospective examinee.
3. Paragraph (c), which concerns special examinations, has been
modified to provide for a separate written request for a special
examination (rather than in connection with the filing of a license
application) in order to reflect the separation of the examination and
application processes as discussed above. In addition, a sentence has
been added at the end to provide that the license applicant shall be
responsible for all additional costs incurred by Customs in connection
with the special examination that exceed the $200 examination fee and
to require reimbursement to Customs of such additional costs before the
examination is given.
4. Paragraph (d), which addresses a prospective examinee's failure
to appear for the examination, has been modified to reflect the
separation of the examination and application processes. Thus, the
modified text no longer provides for denial of an application for
failure to appear but rather simply provides for a refund of the $200
examination fee if the prospective examinee notifies the port director
at least 2 working days prior to a regularly scheduled examination that
he will not appear. However, the modified text precludes any refund in
the case of a paragraph (c) special examination, because Customs
believes that the person who specifically requested the special
treatment should remain responsible for the costs to Customs resulting
from the request.
5. The heading and text of paragraph (e) have been revised to refer
to notice of the examination result (rather than license application
denial) as a consequence of the separation of the examination and
application processes. The revised text provides for written notice to
each examinee and is intended in particular to ensure that an examinee
who attained a passing grade would be able to present appropriate
written proof of meeting the Sec. 111.11(a)(4) criterion when filing a
license application in another district within the prescribed 3-year
period. Revised paragraph (e) also clarifies that failure to pass the
examination precludes the filing of a license application but does not
preclude the examinee from taking an examination at a later date.
6. A new paragraph (f) has been added to set forth an
administrative appeal procedure for an individual who failed to pass
the written examination and wishes to challenge that result.
[[Page 22730]]
Section 111.14
The texts of paragraphs (a) and (b) have been merged into one new
paragraph (a) entitled ``referral of application for investigation'' in
order to eliminate unnecessarily repetitive text, with paragraphs (c)
through (e) redesignated as paragraphs (b) through (d). In addition, in
paragraph (d) (redesignated as paragraph (c)), the first sentence
regarding the ``return'' of the application with the investigative
report and recommendation has been removed since it is archaic and
unnecessary and the wording of the paragraph heading has been revised
accordingly.
Section 111.15
The following changes have been made to this section, which
concerns the procedures for issuing licenses:
1. In the first sentence, the words ``and has paid all applicable
fees prescribed in Sec. 111.96(a)'' have been added at the end of the
opening clause to clarify that other license application fees must be
paid by individual applicants in addition to the $200 fee that must
accompany the application under Sec. 111.12(a).
2. The last sentence regarding maintenance and availability of an
alphabetical list of brokers licensed at each port has been removed
since it is inconsistent with the current national license concept (see
also the below discussion of the proposed changes to Sec. 111.19(e)).
Section 111.19
The following changes have been made to this section, which
concerns the issuance of permits:
1. Paragraph (a) has been modified to provide that, in the case of
a permit issued concurrently with a license, the permit is issued with
reference to the district ``in which the port'' through which the
license application was submitted ``is located''. This change reflects
the operational reality arising out of the Customs reorganization as
discussed above, under which the ports now operate as the basic
organizational units for public access and other purposes, including
the submission of applications for broker licenses and permits. Similar
clarifying wording changes are reflected elsewhere in Part 111.
2. The first sentence of paragraph (b) has been modified to provide
for submission of a district permit application in the form of a letter
to the director of the port at which the applicant intends to conduct
customs business. The regulations would no longer provide for
submission of a permit application on Customs Form 3124 (which was
designed for license application purposes and thus is not suitable in a
permit context). The remaining paragraph (b) text has been replaced by
a new final sentence that specifies seven classes of documents or other
information that must be submitted with the application.
3. Existing paragraph (c) has been modified to more clearly
identify the fees that must accompany the permit application (that is,
the Sec. 111.96(b) district and national permit application fee and the
Sec. 111.96(c) annual user fee). In addition, a new second sentence has
been added to clarify that the annual user fee must be paid when an
initial permit is issued concurrently with a license under paragraph
(a).
4. Paragraph (d) has been divided into two subparagraphs. New
subparagraph (d)(1) sets forth general principles regarding the
exercise of responsible supervision and control over the customs
business conducted in a district for which a permit is granted; the
text reflects the substance of the first two sentences of present
paragraph (d) but does not retain the ``[o]n or after October 31,
1987'' reference in the second sentence since this reference is no
longer necessary. New subparagraph (d)(2) sets forth rules permitting
an exception to the at-least-one-individual-broker-per-district rule
and reflects the substance of the remainder of present paragraph (d)
except for the following: the word ``region'' has been replaced by the
words ``larger geographical area'' to avoid a circular effect when the
Sec. 111.1 definition of ``region'' is applied; and a sentence has been
added at the end to provide that a written decision on a waiver under
this subparagraph will be issued by the Office of Field Operations and
must specify the region covered by a waiver.
5. The following changes have been made to paragraph (e): the first
two sentences have been removed because the present procedure of
notifying other port directors of a permit application and obtaining
their comments is unnecessarily cumbersome and time-consuming; the last
two sentences have been replaced by two new sentences that provide for
issuance of a written decision on the permit application, set forth a
specific legal standard for issuance of a permit, and require that the
port director refer the matter to Customs Headquarters for instructions
if the port director believes that the permit should not be issued; and
a new sentence has been added at the end to require that each port
director maintain and make available to the public an alphabetical list
of all brokers permitted through his port.
6. Present paragraph (f) (which allows the port director to require
an investigation if additional facts are deemed necessary) no longer
appears to be appropriate or necessary and has been replaced by a new
paragraph (f) covering the issuance of national permits to reflect the
change to section 641(c)(1) made by section 648 of the Act (see also
the references to the national permit exception to the district permit
rule in new Secs. 111.2(b)(2) (ii) and (iii) as discussed above and set
forth below). New paragraph (f) provides that a broker must have a
national permit in order to transact customs business under the NCAP
within a district for which the broker does not have a district permit.
The text requires that the broker be an NCAP participant and in this
regard refers specifically to the electronic filing of entries from a
remote location and to the electronic filing of drawback claims as well
as more generally to the transaction of other customs business pursuant
to an NCAP component that is in operation. In referring both to
specific NCAP components and to NCAP components in a more general
sense, the text is not intended to limit or otherwise define the scope
or operation of the NCAP but rather is intended only to prescribe,
consistent with the broad authority set forth in section 641(c)(1) as
mentioned above, the circumstances in which the conduct of customs
business by a broker would require a national permit. Finally, new
paragraph (f) provides for an application in the form of a letter
addressed to Customs Headquarters and sets forth five classes of
documents or other information that must accompany the application,
including evidence that the application fee and user fee required under
Secs. 111.96 (b) and (c) have been paid.
7. A new paragraph (g) has been added to set forth procedures
regarding the administrative and judicial review of a denial of a
permit. This new text is intended in part to reflect the right to
judicial review of a permit denial under section 641(e)(1) and is based
on the license denial review provisions of Sec. 111.17 (but without
provision for review by the Secretary of the Treasury, which does not
appear to be necessary or appropriate in a permit context).
Sections 111.21 Through 111.23
Sections 111.21 and 111.23 reflect, and Sec. 111.22 has been
reserved without accompanying text as a result of, the changes made to
these sections in the recordkeeping final rule document mentioned above
in connection with the Sec. 111.1 definition of ``records.'' In
[[Page 22731]]
addition, in Sec. 111.23, a number of additional editorial changes have
been included as a consequence of those recordkeeping final rule
document changes, and subparagraphs (b)(2)(i) and (ii) thereof have
been further revised to refer to ``each'' address or location for
consolidated records in order to not preclude the use of multiple
consolidated locations.
Section 111.24
The phrase ``, their surety on a particular entry,'' has been added
to the text after ``such clients.'' This change is intended to ensure
that disclosure to a surety will not automatically constitute a
violation of the confidentiality principle embodied in Sec. 111.24. The
change is not intended to mandate disclosure to a surety, and is not
intended to represent the view of Customs regarding the propriety of
disclosure to sureties in all cases, because Customs believes that the
issue of whether records or information are properly disclosable by one
party to another should be treated as a private matter to be resolved
by the parties. In addition, the phrase ``the port director,'' has been
added after the reference to the special agent in charge in order to
more completely reflect operational realities in the field. Finally,
the words ``officers or'' have been added before ``agents of the United
States.''
Section 111.25
Similar to the approach reflected in the recordkeeping changes to
Secs. 111.1, 111.21 and 111.23, this section, which concerns the
availability of broker records, has been revised (1) to clarify that
there is a distinction between records that are peculiar to Part 111
and other records that brokers are responsible for under Part 163, and
(2) to provide that the records peculiar to Part 111 shall be made
available to Customs ``upon reasonable notice.'' In addition, the words
``or other authorized Customs officers'' have been added in the second
sentence to reflect that authority within Customs to examine such
records is not restricted to regulatory auditors and special agents.
Section 111.26
The reference in this section to ``Secs. 162.1a through 162.1i''
has been replaced by a reference to ``part 163 of this chapter'' as a
consequence of the recordkeeping changes.
Section 111.27
The second and third sentences have been removed because (1) the
second sentence (which concerns inspection of records to protect
importers and the revenue of the United States) is adequately reflected
in other provisions and (2) the third sentence (which specifies where a
report of findings is to be submitted within Customs) relates solely to
internal agency management practices and procedures that are not
normally the subject of a regulation.
Section 111.28
The following changes have been made to this section:
1. Paragraph (b), which concerns employee information, has been
reorganized so that paragraph (b)(1) will cover all current employees,
including new employees. In addition, in paragraph (b)(1)(i) as set
forth below, which contains general rules for providing current
employee information to Customs and thus corresponds to present
paragraph (b)(1), a new sentence has been added after the first
sentence to specify more clearly when the initial list of employees is
to be submitted to the port director.
2. A new paragraph (d) has been added to provide that, in the case
of a broker for which ownership shares are not publicly traded, the
broker must give immediate written notice to the Assistant
Commissioner, and to each director of a port through which a permit has
been granted to the broker, if the ownership of the broker changes,
including a change in ownership that results in the addition of a new
principal to the organization (but not a mere shift in ownership
interest among principals already of record with Customs). The new
paragraph also contains provision for a background investigation of a
new principal and ultimately for the initiation of license suspension
or revocation proceedings if the investigation of the new principal
uncovers information upon which a denial of a license application could
have been based and the relationship is not terminated to the
satisfaction of the port director.
Section 111.30
The following changes have been made to this section:
1. In paragraph (a), which concerns notice of a change of a
broker's address, the requirement for notice to the Commissioner has
been removed to eliminate a duplicate collection and reduce the
reporting burden (a similar change also has been made in the
introductory texts of paragraphs (b) and (e) of this section), and the
remaining requirement has been modified to require notice to each
director of an affected port. In addition, a new sentence has been
added at the end of paragraph (a) to provide that an individual broker
not actively engaged in transacting business as a broker must provide
notice of a change in his non-business mailing address in the paragraph
(d) triennial status report. Customs believes that such notice is
necessary for Customs to be able to contact the broker for purposes of
administering Part 111.
2. In paragraph (b), which concerns notice of a change in a
partnership, association, or corporate broker, the words ``or any other
change in the legal nature of the organization'' have been added at the
end of paragraph (b)(2).
3. Paragraph (d), which concerns the triennial status report, has
been divided into four subparagraphs. Paragraph (d)(1) sets forth
general provisions and corresponds to the first six sentences of
present paragraph (d); the only substantive change concerns provision
for submission of the report only to the port through which the
broker's license was issued (rather than to Customs Headquarters and
with a copy to each port where the broker has been granted a permit).
Paragraph (d)(2) sets forth provisions applicable to individual brokers
and paragraphs (d)(2) (i) and (ii) correspond to the seventh and eighth
sentences of present paragraph (d); paragraph (d)(2)(iii) is new and
requires statements of continued compliance with Secs. 111.11 and
111.19 (which Customs believes must be administered as ongoing
standards) and about conduct that could constitute grounds for
suspension or revocation under Sec. 111.53 (the standards for which are
continuously applicable to all brokers). Paragraph (d)(3) sets forth
provisions applicable to partnership, association and corporate
brokers, corresponds to the ninth sentence of present paragraph (d),
and contains the additional requirement that the report be signed by a
licensed member or officer of the organization. Paragraph (d)(4)
concerns the failure to file timely and corresponds to the remaining
text of present paragraph (d) but with the following changes of note:
provision is made for issuance of the notice of suspension by the port
director (rather than by the Commissioner) as a consequence of the
change incorporated in new subparagraph (d)(1); and, in the next to the
last sentence, reference is made to revocation of the broker's license
``by operation of law'' if the broker fails to file the report within
the prescribed 60-day period.
Section 111.36
The following changes have been made to this section, which
concerns relations with unlicensed persons:
[[Page 22732]]
1. Paragraph (a) has been divided into two paragraphs (a) and (b),
with a separate heading for each. New paragraph (a) incorporates the
substance of the second sentence of present paragraph (a) and new
paragraph (b) incorporates the substance of the first sentence of
present paragraph (a). In addition, under new paragraph (a), the broker
may choose to transmit a copy of the entry (in lieu of a copy of his
bill for services rendered), and the words ``or unless the importer has
in writing waived transmittal of the copy of the entry or bill for
services rendered'' have been added at the end.
2. Present paragraph (b) has been redesignated as paragraph (c)
with the following changes: in paragraphs (c)(1), (c)(2), and (c)(3),
the words ``or other party in interest'' have been added after
``importer'' to cover cases in which the broker is the importer of
record but not the true party in interest; and the words ``unless this
requirement is waived in writing by the importer or other party in
interest'' have been added at the end of paragraph (c)(2)(i).
Section 111.42
This section has been reorganized into two paragraphs. The text of
all the present paragraphs of the section are consolidated into
paragraph (a), except for the last sentence of paragraph (e). Paragraph
(a) provides restrictions on the actions of a broker with any person
who is notoriously disreputable or whose license has been suspended,
cancelled ``with prejudice,'' or revoked. The last sentence of present
paragraph (e) is set forth as a separate new paragraph (b) to reflect
that it operates as a general exception to the restrictions set forth
in proposed paragraph (a).
Section 111.43
This section, which concerns the display of broker licenses and
permits, no longer has significant practical utility and has been
removed.
Section 111.44
This section, which precludes a broker from limiting the broker's
liability to a client with regard to the conduct of his brokerage
business, has been removed to reflect the prohibition added to section
641(f) by section 648 of the Act as discussed above.
Section 111.45
The following changes have been made to this section which concerns
revocation of a license or permit by operation of law:
1. The words ``[o]n or after October 31, 1987'' at the beginning of
paragraph (b) have been removed as unnecessary.
2. A new paragraph (d) has been added to clarify a broker's ongoing
duty to exercise responsible supervision and control over the conduct
of its brokerage business and to otherwise comply with Part 111, and to
underscore a broker's potential exposure to disciplinary sanctions for
failure to do so, even during the 120-day period referred to in
paragraph (a) or during the 180-day period referred to in paragraph
(b).
Section 111.51
In paragraph (b), which concerns the cancellation of a license or
permit with prejudice, an exception regarding a right of appeal has
been added at the end of the second sentence because the exercise of
such a right would be entirely inconsistent with the context reflected
in the first sentence.
Section 111.53
The following changes have been made to this section, which
concerns grounds for disciplinary action against brokers:
1. The section heading has been modified by removing the words ``or
monetary penalty in lieu thereof,'' to align on the change to the
introductory text of this section as discussed below.
2. The introductory text has been modified to state that the
appropriate ``port director'' (rather than ``Customs official'') may
``initiate proceedings for the suspension* * *or revocation'' (rather
than ``suspend'' or ``revoke''). The first change conforms to the use
of ``port director'' elsewhere in Subpart D and the second change
reflects the fact that under the statute the actual suspension or
revocation action is taken by the Secretary of the Treasury. In
addition, the words ``or assess a monetary penalty in lieu of
suspension or revocation'' have been removed from the introductory
text, to reflect the fact that for Subpart D (and contrary to monetary
penalties under Subpart E) the statute allows the assessment of a
monetary penalty only as an alternatively imposed sanction arising out
of the initiation of suspension or revocation proceedings. The grounds
for disciplinary action set forth in paragraphs (a)-(f) of this section
technically relate to only suspension or revocation proceedings, and
the assessment of monetary penalties arises in a Subpart D context only
in connection with the final decision taken by the Secretary of the
Treasury under Sec. 111.74 after initiation of such proceedings.
3. In paragraph (b)(3), the words ``(infractions set forth in this
subparagraph may form the basis for an action to suspend or revoke
only)'' have been removed as unnecessary in the light of the removal of
all references to monetary penalties.
4. A new paragraph (g) has been added to refer to a broker who no
longer meets the applicable requirements of Sec. 111.11 and
Sec. 111.19. Customs believes that this standard is necessary and
appropriate because, as already suggested above in connection with the
changes to Sec. 111.30(d), Secs. 111.11 and 111.19 include standards
that constitute ongoing requirements (rather than merely one-time
application criteria).
Section 111.54
This section, which was intended to clarify the meaning of
``appropriate officer of the Customs'' as used in 19 U.S.C. 1641(d)(2),
has been removed because (1) the expression defined in the regulation
appears in the statute neither in exactly the same words nor in the
context of suspension or revocation actions (19 U.S.C. 1641(d)(2)(A)
uses the expression ``appropriate customs officer'' but only in the
context of monetary penalties which are covered under Subpart E of Part
111) and (2) the section does not otherwise serve any useful purpose.
Section 111.57
This section has been revised to simply provide in one paragraph
for a determination by the Assistant Commissioner whether or not
charges should be preferred and for notice to the port director of this
decision, without the present paragraph (b) requirement of submission
of a proposed statement of charges because it already is adequately
covered by Sec. 111.56.
Section 111.64
The following changes have been made to paragraph (a) of this
section, which concerns service of the notice of hearing:
1. At the beginning of the first sentence, the words ``[w]ithin 10
days'' have been removed because this time frame for service is overly
restrictive and is not required by statute.
2. In the second sentence, the figure ``15'' has been replaced by
``30'' to reflect the change to section 641(d)(2)(B) made by section
648 of the Act regarding the number of days within which a hearing must
be held.
Section 111.73
This text of this section, which permits a decision based on a
partial proof of charges, has been incorporated into the text of
Sec. 111.74 to which it is more appropriate since it also concerns the
decision on disciplinary action taken by the Secretary of the Treasury.
[[Page 22733]]
Section 111.74
In addition to the insertion of a new first sentence to reflect
present Sec. 111.73, the following changes have been made to this
section:
1. In the second sentence, the words ``or permit'' have been added
after ``license'' in two places in order to correct an omission in
scope in the present text. In addition, the words ``except in a case
described in Sec. 111.53(b)(3)'' have been added to the second sentence
to reflect the exception contained in the introductory text of section
641(d)(1).
2. In the third sentence, the words ``[i]f no appeal from the
Secretary's order is filed'' have been added at the beginning. In
addition, the third sentence has been changed to provide that the
Secretary's order shall become effective 60 calendar days after the
Assistant Commissioner issues written ``notification of'' the order
(rather than after issuance of the order by the Secretary).
3. The fourth sentence has been changed to provide that payment of
an assessed monetary penalty must be tendered within ``60'' calendar
days ``after the effective date'' of the order (rather than within 120
days of the issuance of the order) in order to align with the 60-day
period specified in the case of suspension or revocation actions.
Section 111.76
The following changes have been made to this section, which
concerns reopening a disciplinary case:
1. In paragraph (a), the words ``[p]rovided that no appeal is filed
in accordance with Sec. 111.75'' have been added at the beginning in
order to preclude concurrent administrative and judicial proceedings.
2. In paragraph (b), a new sentence has been added at the end to
clarify the status of an existing order of the Secretary during the
pendency of proceedings under this section.
Section 111.80
This section, which clarifies the applicability of Part 111 in
broker disciplinary cases that were instituted prior to the broker
statute amendments of 1984, is longer necessary and has been removed.
Section 111.91
In paragraph (a), a proviso has been added at the end to clarify
that under section 641 imposition of monetary penalties under this
section and institution of suspension or revocation proceedings under
Subpart D are mutually exclusive actions when applied to the same
violation of a broker.
Section 111.92
The last sentence, which requires that a monetary penalty notice
involving more than $10,000 be referred to Customs Headquarters, has
been removed since it is neither necessary nor reflective of current
Customs procedures.
Section 111.95
This section has been revised to simply refer to the filing of
supplemental petitions for relief in accordance with Part 171 and
without making a distinction between determinations over $1,000 and
determinations involving lesser amounts.
Section 111.96
The following changes have been made to this section:
1. In paragraph (a), which concerns fees pertaining to the license
issuance process, the first sentence has been modified to refer only to
the processing of a license application and to prescribe a $200 fee
that would apply to all individual or organization applicants. The
remainder of the paragraph has been modified to cover fees that are
only required to be paid by individuals: a $200 fee before taking a
written examination under Sec. 111.13, and a fingerprint check and
processing fee after an individual's license application is submitted
to Customs. These changes in the paragraph (a) fee structure are
intended (1) to reflect the distinction between the examination process
and the application process as discussed above in connection with the
modification of Sec. 111.11(a)(4), (2) to indicate more clearly which
conditions apply only to individuals, and (3) to eliminate the need to
refund $100 if an examinee receives a failing grade on the examination
(because Customs believes that a refund would be appropriate only in
the circumstance covered by modified Sec. 111.13(d)).
2. In paragraph (c), which concerns the $125 annual permit user
fee, references to a ``national permit'' have been added to clarify
that the fee applies to a permit issued under Sec. 111.19(f). In
addition, as in the case of Sec. 111.19(c), the text has been modified
to clarify that the fee is payable upon issuance of a district permit
for which an application was not submitted (that is, when an initial
district permit is issued concurrently with a license under
Sec. 111.19(a)).
Comments
Before adopting this proposed regulation as a final rule,
consideration will be given to any written comments timely submitted to
Customs, including comments on the clarity of this proposed rule and
how it may be made easier to understand. Comments submitted will be
available for public inspection in accordance with the Freedom of
Information Act (5 U.S.C. 552), Sec. 1.4 of the Treasury Department
Regulations (31 CFR 1.4), and Sec. 103.11(b) of the Customs Regulations
(19 CFR 103.11(b)), on regular business days between the hours of 9:00
a.m. and 4:30 p.m. at the Regulations Branch, Office of Regulations and
Rulings, U.S. Customs Service, 1300 Pennsylvania Avenue, N.W., 3rd
Floor, Washington, D.C.
Executive Order 12866
This document does not meet the criteria for a ``significant
regulatory action'' as specified in E.O. 12866.
Regulatory Flexibility Act
Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), it is certified that, if adopted, the proposed
amendments will not have a significant economic impact on a substantial
number of small entities. The regulatory amendments primarily represent
a clarification of existing statutory and regulatory requirements.
Accordingly, the proposed amendments are not subject to the regulatory
analysis or other requirements of 5 U.S.C. 603 and 604.
Paperwork Reduction Act
The collections of information contained in this notice of proposed
rulemaking have been submitted to the Office of Management and Budget
(OMB) for review in accordance with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507).
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
The collections of information that are republished and referenced
in Secs. 111.12, 111.13, 111.17, 111.19, and 111.28 of these proposed
regulations have previously been reviewed and approved by OMB and
assigned control number 1515-0076. The information to be collected is
necessary for the issuance of customs broker licenses and permits and
for monitoring the performance of brokers in the conduct of customs
business.
The new collections of information in these proposed regulations
are in
[[Page 22734]]
Sec. Sec. 111.30, 111.36, 111.60, and 111.76. The information to be
collected is necessary for monitoring the performance of brokers in the
conduct of customs business and in connection with the institution of
disciplinary actions against brokers. The likely respondents are
individuals, partnerships, associations, and corporations, including
individuals and such organizations that are licensed brokers.
Estimated total annual reporting and/or recordkeeping burden: 1500
hours.
Estimated average annual burden per respondent/recordkeeper: 1
hour.
Estimated number or respondents and/or recordkeepers: 1500.
Estimated annual number of responses: 1500.
Comments on the collection of information should be sent to the
Office of Management and Budget, Attention: Desk Officer for the
Department of the Treasury, Office of Information and Regulatory
Affairs, Washington, D.C. 20503. A copy should also be sent to Customs
at the address set forth previously. Comments should be submitted
within the time frame that comments are due regarding the substance of
the proposal.
Comments are invited on: (a) Whether the collection of information
is necessary for the proper performance of the functions of the agency,
including whether the information shall have practical utility; (b) the
accuracy of the agency's estimate of the information collection burden;
(c) ways to enhance the quality, utility, and clarity of the
information to be collected; (d) ways to minimize the information
collection burden on respondents, including through the use of
automated collection techniques or other forms of information
technology; and (e) estimates of capital or start up costs and costs of
operations, maintenance, and purchase of services to provide
information.
Drafting information: The principal author of this document was
Francis W. Foote, Office of Regulations and Rulings, U.S. Customs
Service. However, personnel from other offices participated in its
development.
List of Subjects in 19 CFR Part 111
Administrative practice and procedure, Brokers, Customs duties and
inspection, Imports, Licensing, Penalties, Reporting and recordkeeping
requirements.
Proposed Amendments to the Regulations
For the reasons stated above, it is proposed to revise Part 111 of
the Customs Regulations (19 CFR Part 111) as set forth below.
PART 111--CUSTOMS BROKERS
Sec.
111.0 Scope.
Subpart A--General Provisions
111.1 Definitions.
111.2 License and district permit required.
111.3 [Reserved]
111.4 Transacting customs business without a license.
111.5 Representation before Government agencies.
Subpart B--Procedure To Obtain License or Permit
111.11 Basic requirements for a license.
111.12 Application for license.
111.13 Written examination for individual license.
111.14 Investigation of the license applicant.
111.15 Issuance of license.
111.16 Denial of license.
111.17 Review of the denial of a license.
111.18 Reapplication for license.
111.19 Permits.
Subpart C--Duties and Responsibilities of Customs Brokers
111.21 Record of transactions.
111.22 [Reserved]
111.23 Retention of records.
111.24 Records confidential.
111.25 Records shall be available.
111.26 Interference with examination of records.
111.27 Audit or inspection of records.
111.28 Responsible supervision.
111.29 Diligence in correspondence and paying monies.
111.30 Notification of change of business address, organization,
name, or location of business records; status report; termination of
brokerage business.
111.31 Conflict of interest.
111.32 False information.
111.33 Government records.
111.34 Undue influence upon Government employees.
111.35 Acceptance of fees from attorneys.
111.36 Relations with unlicensed persons.
111.37 Misuse of license or permit.
111.38 False representation to procure employment.
111.39 Advice to client.
111.40 Protests.
111.41 Endorsement of checks.
111.42 Relations with person who is notoriously disreputable or
whose license is under suspension, canceled ``with prejudice,'' or
revoked.
111.43 [Reserved]
111.44 [Reserved]
111.45 Revocation by operation of law.
Subpart D--Cancellation, Suspension, or Revocation of License or
Permit, or Monetary Penalty in Lieu Thereof
111.50 General.
111.51 Cancellation of license or permit.
111.52 Voluntary suspension of license or permit.
111.53 Grounds for suspension or revocation of license or permit.
111.54 [Reserved]
111.55 Investigation of complaints.
111.56 Review of report on investigation.
111.57 Determination by Assistant Commissioner.
111.58 Content of statement of charges.
111.59 Preliminary proceedings.
111.60 Request for additional information.
111.61 Decision on preliminary proceedings.
111.62 Contents of notice of charges.
111.63 Service of notice and statement of charges.
111.64 Service of notice of hearing and other papers.
111.65 Extension of time for hearing.
111.66 Failure to appear.
111.67 Hearing.
111.68 Proposed findings and conclusions.
111.69 Recommended decision by hearing officer.
111.70 Additional submissions.
111.71 Immaterial mistakes.
111.72 Dismissal subject to new proceedings.
111.73 [Reserved]
111.74 Decision and notice of suspension or revocation or monetary
penalty.
111.75 Appeal from the Secretary's decision.
111.76 Reopening the case.
111.77 Notice of vacated or modified order.
111.78 Reprimands.
111.79 Employment of broker who has lost license.
111.80 [Reserved]
111.81 Settlement and compromise.
Subpart E--Monetary Penalty and Payment of Fees
111.91 Grounds for imposition of a monetary penalty; maximum
penalty.
111.92 Notice of monetary penalty.
111.93 Petition for relief from monetary penalty.
111.94 Decision on monetary penalty.
111.95 Supplemental petition for relief from monetary penalty.
111.96 Fees.
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States), 1624, 1641. Section 111.3
also issued under 19 U.S.C. 1484, 1498; Section 111.96 also issued
under 19 U.S.C. 58c, 31 U.S.C. 9701.
Sec. 111.0 Scope.
This part sets forth regulations providing for the licensing of,
and granting of permits to, persons desiring to transact customs
business as customs brokers, the qualifications required of applicants,
and the procedures for applying for licenses and permits. This part
also prescribes the duties and responsibilities of brokers, the grounds
and procedures for disciplining brokers, including the assessment of
monetary penalties, and the revocation or suspension of licenses.
[[Page 22735]]
Subpart A--General Provisions
Sec. 111.1 Definitions.
When used in this part, the following terms shall have the meanings
indicated:
Assistant Commissioner. ``Assistant Commissioner'' means the
Assistant Commissioner, Office of Field Operations, United States
Customs Service, Washington, DC.
Broker. ``Broker'' means a customs broker.
Customs broker. ``Customs broker'' means a person who is licensed
under this part to transact customs business on behalf of others.
Customs business. ``Customs business'' means those activities
involving transactions with Customs concerning the entry and
admissibility of merchandise, its classification and valuation, the
payment of duties, taxes, or other charges assessed or collected by
Customs on merchandise by reason of its importation, and the refund,
rebate, or drawback of such duties, taxes, or other charges. ``Customs
business'' also includes the preparation, and activities relating to
the preparation, of documents in any format and the electronic
transmission of documents and parts thereof intended to be filed with
Customs in furtherance of any other customs business activity, whether
or not signed or filed by the preparer. However, ``customs business''
does not include the mere electronic transmission of data received for
transmission to Customs.
District. ``District'' means the geographic area covered by a
customs broker permit other than a national permit. A listing of each
district, and the ports thereunder, will be published periodically.
Employee. ``Employee'' means a person who meets the common law
definition of employee and is in the service of a customs broker.
Freight forwarder. ``Freight forwarder'' means a person engaged in
the business of dispatching shipments in foreign commerce between the
United States, its territories or possessions, and foreign countries,
and handling the formalities incident to such shipments, on behalf of
other persons.
Officer of an association or corporation. ``Officer of an
association or corporation'' means a person who has been elected,
appointed, or designated as an officer of an association or corporation
in accordance with statute and the articles of incorporation, articles
of agreement, charter, or bylaws of the association or corporation.
Permit. ``Permit'' means any permit issued to a broker under
Sec. 111.19.
Person. ``Person'' includes individuals, partnerships,
associations, and corporations.
Records. ``Records'' means documents, data and information referred
to in, and required to be made or maintained under, this part and any
other records, as defined in Sec. 163.1(a) of this chapter, that are
required to be maintained by a broker under part 163 of this chapter.
Region. ``Region'' means the geographic area covered by a waiver
issued pursuant to Sec. 111.19(d).
Responsible supervision and control. ``Responsible supervision and
control'' means that degree of supervision and control necessary to
ensure the proper transaction of the customs business of a broker,
including actions necessary to ensure that an employee of a broker
provides substantially the same quality of service in handling customs
transactions that the broker is required to provide. While the
determination of what is necessary to perform and maintain responsible
supervision and control will vary depending upon the circumstances in
each instance, factors which Customs will consider include, but are not
limited to: The training required of employees of the broker; the
issuance of written instructions and guidelines to employees of the
broker; the volume and type of business of the broker; the reject rate
for the various customs transactions; the maintenance of current
editions of the Customs Regulations, the Harmonized Tariff Schedule of
the United States, and Customs issuances; the availability of an
individually licensed broker for necessary consultation with employees
of the broker; the frequency of supervisory visits of an individually
licensed broker to another office of the broker that does not have a
resident individually licensed broker; the frequency of audits and
reviews by an individually licensed broker of the customs transactions
handled by employees of the broker; the extent to which the
individually licensed broker who qualifies the district permit is
involved in the operation of the brokerage; and any circumstance which
indicates that an individually licensed broker has a real interest in
the operations of a broker.
Treasury Department or any representative thereof. ``Treasury
Department of any representative thereof'' means any office, officer,
or employee of the U.S. Department of the Treasury, wherever located.
Sec. 111.2 License and district permit required.
(a) License--(1) General. Except as otherwise provided in paragraph
(a)(2) of this section, a person shall obtain the license provided for
in this part in order to transact customs business as a broker.
(2) Transactions for which license is not required--(i) For one's
own account. An importer or exporter transacting customs business
solely on his own account and in no sense on behalf of another is not
required to be licensed, nor are his authorized regular employees or
officers who act only for him in the transaction of such business.
(ii) As employee of broker--(A) General. An employee of a broker,
acting solely for his employer, is not required to be licensed where:
(1) Authorized to sign documents. The broker has authorized the
employee to sign documents pertaining to customs business on his
behalf, and has executed a power of attorney for that purpose. The
broker is not required to file the power of attorney with the port
director, but shall provide proof of its existence to Customs upon
request. Only employees who are residents of the United States may be
authorized to sign such documents; or
(2) Authorized to transact other business. The broker has filed
with the port director a statement identifying the employee as
authorized to transact customs business on his behalf. However, no such
statement will be necessary when the broker is transacting customs
business under an exception to the district permit rule.
(B) Broker supervision; withdrawal of authority. Where an employee
has been given authority under paragraph (a)(2)(ii) of this section,
the broker must exercise such supervision of the employee as will
ensure proper conduct on the part of the employee in the transaction of
customs business, and the broker will be held strictly responsible for
the acts or omissions of such an employee within the scope of his
employment and for any other acts or omissions of the employee which,
through the exercise of reasonable care and diligence, the broker
should have foreseen. The broker shall promptly notify the port
director if authority granted to an employee under paragraph (a)(2)(ii)
of this section is withdrawn. The withdrawal of authority shall be
effective upon receipt by the port director.
(iii) Marine transactions. A person transacting business in
connection with entry or clearance of vessels or other regulation of
vessels under the navigation laws is not required to be licensed as a
broker.
[[Page 22736]]
(iv) Transportation in bond. Any carrier bringing merchandise to
the port of arrival or any bonded carrier transporting merchandise for
another may make entry for such merchandise for transportation in bond
without being a broker.
(v) Noncommercial shipments. An individual entering noncommercial
merchandise for another party is not required to be a broker, provided
that the requirements of Sec. 141.33 of this chapter are met.
(vi) Foreign trade zone activities. A foreign trade zone operator
or user need not be licensed as a broker in order to engage in
activities within a zone that do not involve the transfer of
merchandise to the customs territory of the United States.
(b) District permit--(1) General. Except as otherwise provided in
paragraph (b)(2) of this section, a separate permit (see Sec. 111.19)
is required for each district in which a broker conducts customs
business.
(2) Exceptions to district permit rule--(i) Employee working in
client's facility. When a broker places an employee in the facility of
a client for whom the broker is filing entries at one or more other
locations covered by a district permit issued to the broker, and
provided that the employee's activities are limited to customs business
in support of that broker and on behalf of that client but do not
involve the filing of entries or other documents with Customs, the
broker need not obtain a permit for the district within which the
client's facility is located.
(ii) Manual filing of drawback claims. A broker granted a permit
for one district may manually file drawback claims at the drawback
office that has been designated by Customs for the purpose of filing
such claims, and may represent his client before that office in matters
concerning those drawback claims, even though the broker does not have
a permit for the district in which that drawback office is located. The
electronic filing of drawback claims in a district for which a broker
does not have a permit may be done only pursuant to a national permit
issued to the broker (see paragraph (b)(2)(iii) of this section).
(iii) National permit. A broker who is a participant in the
National Customs Automation Program (NCAP) may electronically file
entries for merchandise from a remote location and may electronically
transact other customs business that is provided for and operational
under the NCAP even though such entry is filed, or such other customs
business is transacted, within a district for which the broker does not
have a district permit, provided that the broker has a national permit
issued under Sec. 111.19(f) for such purpose.
(iv) Representations after entry acceptance. After an entry of
merchandise filed with Customs has been completed and accepted, and
except when a broker files that entry as importer of record, another
broker who did not file the entry, but who has been appointed by the
importer of record, may orally or in person or in writing or
electronically represent the importer of record before Customs on any
issue arising out of that entry or concerning the merchandise covered
by that entry even though the broker does not have a permit for the
district within which those representations are made, provided that the
broker has been issued a national permit (see paragraph (b)(2)(iii) of
this section and Sec. 111.19(f)) and provided that, if requested by
Customs, the broker submits appropriate evidence of his right to
represent the client on the matter at issue.
Sec. 111.3 [Reserved]
Sec. 111.4 Transacting customs business without a license.
Any person who intentionally transacts customs business, other than
as provided in Sec. 111.2(a)(2), without holding a valid broker's
license, shall be liable for a monetary penalty for each such
transaction as well as for each violation of any other provision of 19
U.S.C. 1641. The penalty shall be assessed in accordance with subpart E
of this part.
Sec. 111.5 Representation before Government agencies.
(a) Agencies within the Treasury Department. A broker who
represents a client in the importation or exportation of merchandise
may represent the client before the Treasury Department or any
representative thereof on any matter concerning such merchandise.
(b) Agencies not within the Treasury Department. In order to
represent a client before any agency not within the Treasury
Department, a broker shall comply with any regulations of such agency
governing the appearance of representatives before it.
Subpart B--Procedure To Obtain License or Permit
Sec. 111.11 Basic requirements for a license.
(a) Individual. In order to obtain a broker's license, an
individual must:
(1) Be a citizen of the United States on the date of submission of
the application referred to in Sec. 111.12(a) and not an officer or
employee of the United States Government;
(2) Attain the age of 21 prior to the date of submission of the
application referred to in Sec. 111.12(a);
(3) Be of good moral character; and
(4) Have established, by attaining a passing (75 percent or higher)
grade on a written examination taken within the 3-year period before
submission of the application referred to in Sec. 111.12(a), that he
has sufficient knowledge of customs and related laws, regulations and
procedures, bookkeeping, accounting, and all other appropriate matters
to render valuable service to importers and exporters.
(b) Partnership. In order to obtain a broker's license, a
partnership must:
(1) Have at least one member of the partnership who is a broker;
and
(2) Establish that it will have an office within the district in
which its customs transactions will be performed by a member of the
partnership who is a broker or by an employee under the responsible
supervision and control of such a licensed member.
(c) Association or corporation. In order to obtain a broker's
license, an association or corporation must:
(1) Be empowered under its articles of association or articles of
incorporation to transact customs business as a broker;
(2) Have at least one officer who is a broker; and
(3) Establish that it will have an office within the district in
which its customs transactions will be performed by an officer of the
association or corporation who is a broker or by an employee under the
responsible supervision and control of such a licensed officer.
Sec. 111.12 Application for license.
(a) Submission of application and fee. An application for a
broker's license shall be submitted in duplicate to the director of the
port where the applicant intends to do business. The application shall
be under oath and executed on Customs Form 3124. The application shall
be accompanied by the $200 application fee prescribed in Sec. 111.96(a)
and one copy of the appropriate attachment required by the application
form (Articles of Agreement or an affidavit signed by all partners,
Articles of Agreement of the association, or the Articles of
Incorporation). If the applicant proposes to operate under a trade or
fictitious name in one or more States, evidence of the applicant's
authority to use the name in each such State must accompany the
application. An application for an individual license must be submitted
within the 3-year period after the applicant took and passed the
written examination referred to in Secs. 111.11(a)(4) and 111.13. The
port director may require an individual
[[Page 22737]]
applicant to provide a copy of the notification that he passed the
written examination (see Sec. 111.13(e)) and shall require the
applicant to submit fingerprints on Standard Form 87 at the time of
filing the application. The port director may reject an application as
improperly filed if the application, on its face, demonstrates that one
or more of the basic requirements set forth in Sec. 111.11 have not
been met at the time of filing, in which case the application and fee
will be returned to the filer without further action.
(b) Posting notice of application. Following receipt of the
application, the port director shall post a notice that the application
has been filed. The notice shall be posted conspicuously for at least 2
consecutive weeks in the customhouse at the port and similarly at any
other port where the applicant also proposes to maintain an office. The
notice shall give the name and address of the applicant and, if the
applicant is a partnership, association, or corporation, the names of
the members or officers thereof who are licensed as brokers. The notice
shall invite written comments or information regarding the issuance of
the license.
(c) Withdrawal of application. An applicant for a broker's license
may withdraw the application at any time prior to issuance of the
license by providing written notice of the withdrawal to the port
director. However, withdrawal of the application does not entitle the
applicant to a refund of the $200 application fee.
Sec. 111.13 Written examination for individual license.
(a) Scope of examination. The written examination for an individual
broker's license shall be designed to determine the individual's
knowledge of customs and related laws, regulations and procedures,
bookkeeping, accounting, and all other appropriate matters necessary to
render valuable service to importers and exporters. The examination
will be prepared and graded at Customs Headquarters, Washington, D.C.
(b) Date and place of examination. Written examinations will be
given on the first Monday in April and October. An individual who
intends to take the written examination must so advise the port
director in writing at least 30 calendar days prior to the scheduled
examination date and must remit the $200 examination fee prescribed in
Sec. 111.96(a) at that time. The port director shall give notice of the
exact time and place for the examination.
(c) Special examination. If a partnership, association, or
corporation loses the required member or officer having an individual
broker's license (see Secs. 111.11(b)(1) and (c)(2)) and its license
would be revoked by operation of law under the provisions of 19 U.S.C.
1641(b)(5) and Sec. 111.45(a) before the next scheduled written
examination, Customs may authorize a special written examination for a
prospective applicant for an individual license who would serve as the
required licensed member or officer. Customs may also authorize a
special written examination for an individual for purposes of
continuing the business of a sole proprietorship broker. A special
written examination for an individual may also be authorized by Customs
if a brokerage firm loses the individual broker who was exercising
responsible supervision and control over an office in another district
(see Sec. 111.19(d)) and the permit for that additional district would
be revoked by operation of law under the provisions of 19 U.S.C.
1641(c)(3) and Sec. 111.45(b) before the next scheduled written
examination. A request for a special written examination must be
submitted to the port director in writing and must describe the
circumstances giving rise to the need for the examination; if the
request is granted, the port director will notify the prospective
examinee of the exact time and place for the examination. If the
individual attains a passing grade on the special written examination,
the application for the license may be submitted in accordance with
Sec. 111.12. The examinee shall be responsible for all additional costs
incurred by Customs in preparing and administering the special
examination that exceed the $200 examination fee prescribed in
Sec. 111.96(a), and such additional costs shall be reimbursed to
Customs before the examination is given.
(d) Failure to appear for examination. If a prospective examinee
advises the port director at least 2 working days prior to the date of
a regularly scheduled written examination that he will not appear for
the examination, the port director shall refund the $200 examination
fee referred to in paragraph (b) of this section; however, no refund of
the examination fee or additional reimbursed costs will be made in the
case of a special written examination provided for under paragraph (c)
of this section.
(e) Notice of examination result. Customs will provide to each
examinee written notice of the result of the examination taken under
this section. A failure of an examinee to attain a passing grade on the
examination shall preclude the submission of an application under
Sec. 111.12 but shall not preclude the examinee from taking an
examination again at a later date in accordance with paragraph (b) of
this section.
(f) Appeal of failing grade on examination. If an examinee fails to
attain a passing grade on the examination taken under this section, the
examinee may challenge that result by filing a written appeal with
Trade Compliance, Office of Field Operations, U.S. Customs Service,
Washington, DC 20229 within 60 calendar days after the date of the
written notice provided for in paragraph (e) of this section. Customs
will provide to the examinee written notice of the decision on the
appeal. If the Customs decision on the appeal affirms the result of the
examination, the examinee may request review of the decision on the
appeal by writing to the Secretary of the Treasury within 60 calendar
days after the date of the notice of that decision.
Sec. 111.14 Investigation of the license applicant.
(a) Referral of application for investigation. The port director
shall immediately refer an application for an individual, partnership,
association, or corporation license to the special agent in charge or
other entity designated by Headquarters for investigation and report.
(b) Scope of investigation. An investigation under this section
shall ascertain facts relevant to the question of whether the applicant
is qualified and shall cover, but need not be limited to:
(1) The accuracy of the statements made in the application;
(2) The business integrity of the applicant; and
(3) When the applicant is an individual (including a member of a
partnership or an officer of an association or corporation), the
character and reputation of the applicant.
(c) Referral to Headquarters. The port director shall forward the
originals of the application and the report of investigation to the
Assistant Commissioner. The port director shall also submit his
recommendation for action on the application.
(d) Additional investigation or examination. The Assistant
Commissioner may require further investigation to be conducted if
additional facts are deemed necessary to pass upon the application. The
Assistant Commissioner may also require the applicant (or in the case
of a partnership, association, or corporation, one or more of its
members or officers) to appear in person before
[[Page 22738]]
him or before one or more representatives of the Assistant Commissioner
for the purpose of undergoing additional written or oral examination
into the applicant's qualifications for a license.
Sec. 111.15 Issuance of license.
If the Assistant Commissioner finds that the applicant is qualified
and has paid all applicable fees prescribed in Sec. 111.96(a), he will
issue a license. A license for an individual who is a member of a
partnership or an officer of an association or corporation will be
issued in the name of the individual licensee and not in his capacity
as a member or officer of the organization with which he is connected.
The license shall be forwarded to the port director, who shall deliver
it to the licensee.
Sec. 111.16 Denial of license.
(a) Notice of denial. If the Assistant Commissioner determines that
the application for a license should be denied for any reason, notice
of denial shall be given by him to the applicant and to the director of
the port at which the application was filed. The notice of denial shall
state the reasons why the license was not issued.
(b) Grounds for denial. The grounds sufficient to justify denial of
an application for a license shall include, but need not be limited to:
(1) Any cause which would justify suspension or revocation of the
license of a broker under the provisions of Sec. 111.53;
(2) The failure to meet any requirement set forth in Sec. 111.11;
(3) A failure to establish the business integrity and good
character of the applicant;
(4) Any willful misstatement of pertinent facts in the application
for the license;
(5) Any conduct which would be deemed unfair in commercial
transactions by accepted standards; or
(6) A reputation imputing to the applicant criminal, dishonest, or
unethical conduct, or a record of such conduct.
Sec. 111.17 Review of the denial of a license.
(a) By the Assistant Commissioner. Upon the denial of an
application for a license, the applicant may file with the Assistant
Commissioner, in writing, a request that further opportunity be given
for the presentation of information or arguments in support of the
application by personal appearance, or in writing, or both. This
request must be received by the Assistant Commissioner within 60
calendar days of the denial.
(b) By the Secretary. Upon the decision of the Assistant
Commissioner affirming the denial of an application for a license, the
applicant may file with the Secretary of the Treasury, in writing, a
request for such additional review as the Secretary shall deem
appropriate. This request must be received by the Secretary within 60
calendar days of the Assistant Commissioner's affirmation of the denial
of the application for a license.
(c) By the Court of International Trade. Upon a decision of the
Secretary of the Treasury affirming the denial of an application for a
license, the applicant may appeal the decision to the Court of
International Trade, provided that the appeal action is commenced
within 60 calendar days after the date of entry of the Secretary's
decision.
Sec. 111.18 Reapplication for license.
An applicant who has been denied a license may reapply at any time
by complying with the provisions of Sec. 111.12.
Sec. 111.19 Permits.
(a) General. Each person granted a broker's license under this part
shall be concurrently issued a permit for the district in which the
port through which the application was submitted is located and without
the payment of the $100 fee required by Sec. 111.96(b), if it is shown
to the satisfaction of the port director that the person intends to
transact customs business within such district and the person otherwise
complies with the requirements of this part.
(b) Submission of application for initial permit or permit for
additional district. A broker who intends to conduct customs business
at a port within another district for which he does not have a permit,
or a broker who was not concurrently granted a permit with the broker's
license under paragraph (a) of this section, and except as otherwise
provided in paragraph (f) of this section, shall submit an application
for a permit in a letter to the director of the port at which he
intends to conduct customs business. Each application for a permit for
an additional district shall set forth or attach the following:
(1) The applicant's broker license number and date of issuance;
(2) The address where the applicant's office will be located within
the additional district and the telephone number of that office;
(3) A copy of a document which reserves the applicant's business
name with the state or local government;
(4) The name of the individual broker who will exercise responsible
supervision and control over the customs business transacted in the
additional district;
(5) A list of all other districts for which the applicant has a
permit to transact customs business;
(6) The place where the applicant's brokerage records will be
retained and the names of the applicant's recordkeeping officer and
back-up recordkeeping officer (see Secs. 111.21 and 111.23); and
(7) A list of all identifiable persons who will be employed by the
applicant in the additional district, together with the specific
employee information prescribed in Sec. 111.28(b)(1)(i) for each such
prospective employee.
(c) Fees. Each application for a permit under paragraph (b) or (f)
of this section shall be accompanied by the $100 and $125 fees
specified in Secs. 111.96(b) and (c). The $125 fee specified in
Sec. 111.96(c) also must be paid in connection with the issuance of an
initial permit concurrently with a license under paragraph (a) of this
section.
(d) Responsible supervision and control--(1) General. The applicant
for a permit for an additional district shall have a place of business
at the port where the application is filed, or shall have made firm
arrangements satisfactory to the port director to establish such a
place of business, and shall exercise responsible supervision and
control over that place of business once the permit is granted. Except
as otherwise provided in paragraph (d)(2) of this section, the
applicant shall employ in each district for which a permit is granted
at least one individual broker to exercise responsible supervision and
control over the customs business conducted in the district.
(2) Exception to district rule. If the applicant can demonstrate to
the satisfaction of Customs that he regularly employs at least one
individual broker in a larger geographical area in which the district
is located and that adequate procedures exist for such individual
broker to exercise responsible supervision and control over the customs
business conducted in the district, Customs may waive the requirement
for an individual broker in that district. A request for a waiver under
this paragraph, supported by information on the volume and type of
customs business conducted, or planned to be conducted, and supported
by evidence demonstrating that the applicant is able to exercise
responsible supervision and control through the individual broker
employed in the larger geographical area, shall be sent to the port
director in the district in which the waiver is sought. The port
director
[[Page 22739]]
shall review the request for a waiver and make recommendations which
will be sent to the Office of Field Operations, Customs Headquarters
for review and decision. A written decision on the waiver request shall
be issued by the Office of Field Operations and, if the waiver is
granted, the decision letter shall specify the region covered by the
waiver.
(e) Action on application; list of permitted brokers. The port
director who receives the application shall issue a written decision on
the permit application and shall issue the permit if the applicant
meets the requirements of paragraphs (b), (c), and (d) of this section.
If the port director is of the opinion that the permit should not be
issued, he shall submit his written reasons for that opinion to the
Office of Field Operations, Customs Headquarters, for appropriate
instructions on whether to grant or deny the permit. Each port director
shall maintain and make available to the public an alphabetical list of
brokers permitted through his port.
(f) National permit. A broker must be a participant in the National
Customs Automation Program (NCAP) under section 411, et seq., Tariff
Act of 1930, as amended (19 U.S.C. 1411 et seq.), and must have a
national permit in order to electronically file entries from a remote
location (that is, a location other than the place designated in the
entry for examination), or in order to electronically file drawback
claims or transact other customs business pursuant to an NCAP component
that is in operation, whenever such entry or drawback claim is filed or
such other customs business is transacted within a district for which
the broker does not have a district permit. An application for a
national permit under this paragraph shall be in the form of a letter
addressed to the Office of Field Operations, U.S. Customs Service,
Washington, DC 20229, and shall:
(1) Identify the applicant's broker license number and date of
issuance;
(2) Set forth the address and telephone number of the office
designated by the applicant as the office of record for purposes of
administration of the provisions of this part in respect of all
activities of the applicant conducted under the national permit. That
office will be noted in the national permit when issued;
(3) Set forth the name, broker license number, office address, and
telephone number of the individual broker who will exercise responsible
supervision and control over the activities of the applicant conducted
under the national permit;
(4) Include a statement that the applicant meets all applicable
requirements for remote location filing or other NCAP participation set
forth in this chapter; and
(5) Attach a receipt or other evidence showing that the fees
specified in Secs. 111.96(b) and (c) have been paid at the port having
jurisdiction over, or nearest to, the office of record identified under
paragraph (f)(2) of this section.
(g) Review of the denial of a permit--(1) By the Assistant
Commissioner. Upon the denial of an application for a permit under this
section, the applicant may file with the Assistant Commissioner, in
writing, a request that further opportunity be given for the
presentation of information or arguments in support of the application
by personal appearance, or in writing, or both. This request must be
received by the Assistant Commissioner within 60 calendar days of the
denial.
(2) By the Court of International Trade. Upon a decision of the
Assistant Commissioner affirming the denial of an application for a
permit under this section, the applicant may appeal the decision to the
Court of International Trade, provided that the appeal action is
commenced within 60 calendar days after the date of entry of the
Assistant Commissioner's decision.
Subpart C--Duties and Responsibilities of Customs Brokers
Sec. 111.21 Record of transactions.
(a) Each broker shall keep current in a correct, orderly, and
itemized manner records of account reflecting all his financial
transactions as a broker. He shall keep and maintain on file copies of
all his correspondence and other records relating to his customs
business.
(b) Each broker shall comply with the provisions of this part and
part 163 of this chapter when maintaining records that reflect on his
transactions as a broker.
(c) Each broker shall designate a knowledgeable company employee to
be the contact for Customs for broker-wide customs business and
financial recordkeeping requirements.
Sec. 111.22 [Reserved]
Sec. 111.23 Retention of records.
(a) Place and period of retention--(1) Place. Records shall be
retained by a broker in accordance with the provisions of this part and
part 163 of this chapter within the broker district that covers the
Customs port to which they relate unless the broker chooses to
consolidate records at one or more other locations, and provides
advance notice of such consolidation to Customs, in accordance with
paragraph (b) of this section.
(2) Period. The records described in paragraph (a)(1) of this
section, other than powers of attorney, shall be retained for at least
5 years after the date of entry. Powers of attorney shall be retained
until revoked, and revoked powers of attorney and letters of revocation
shall be retained for 5 years after the date of revocation or for 5
years after the date the client ceases to be an ``active client'' as
defined in Sec. 111.29(b)(2)(ii), whichever period is later. When
merchandise is withdrawn from a bonded warehouse, copies of papers
relating to the withdrawal shall be retained for 5 years from the date
of withdrawal of the last merchandise withdrawn under the entry.
(b) Notification of consolidated records--(1) Applicability.
Subject to the requirements of paragraph (b)(2) of this section, the
option of maintaining records on a consolidated system basis is
generally available to brokers who have been granted permits to do
business in more than one district.
(2) Form and content of notice. If consolidated storage is desired
by the broker, he must submit a written notice addressed to the
Director, Regulatory Audit Division, U.S. Customs Service, 909 S.E.
First Avenue, Miami, Florida 33131. The written notice shall include:
(i) Each address at which the broker intends to maintain the
consolidated records. Each such location must be within a district
where the broker has been granted a permit;
(ii) A detailed statement describing all the records to be
maintained at each consolidated location, the methodology of record
maintenance, a description of any automated data processing to be
applied, and a list of all the broker's customs business activity
locations; and
(iii) An agreement that there will be no change in the records, the
manner of recordkeeping, or the location at which they will be
maintained, unless the Director, Regulatory Audit Division, in Miami is
first notified.
Sec. 111.24 Records confidential.
The records referred to in this part and pertaining to the business
of the clients serviced by the broker shall be considered confidential,
and the broker shall not disclose their contents or any information
connected therewith to any persons other than such clients, their
surety on a particular entry, and the Field Director, Regulatory Audit
Division, the special agent in charge, the port director, or other duly
accredited officers or agents of the United States, except on subpoena
by a court of competent jurisdiction.
[[Page 22740]]
Sec. 111.25 Records shall be available.
During the period of retention, the broker shall maintain the
records referred to in this part in such manner that they may readily
be examined. Records required to be made or maintained under the
provisions of this part shall be made available upon reasonable notice
for inspection, copying, reproduction or other official use by Customs
regulatory auditors or special agents or other authorized Customs
officers within the prescribed period of retention or within any longer
period of time during which they remain in the possession of the
broker. Records subject to the requirements of part 163 of this chapter
shall be made available to Customs in accordance with the provisions of
that part.
Sec. 111.26 Interference with examination of records.
Except in accordance with the provisions of part 163 of this
chapter, a broker shall not refuse access to, conceal, remove, or
destroy the whole or any part of any record relating to his
transactions as a broker which is being sought, or which the broker has
reasonable grounds to believe may be sought, by the Treasury Department
or any representative thereof, nor shall he otherwise interfere, or
attempt to interfere, with any proper and lawful efforts to procure or
reproduce information contained in such records.
Sec. 111.27 Audit or inspection of records.
The Field Director, Regulatory Audit Division, shall make such
audit or inspection of the records required by this subpart to be kept
and maintained by a broker as may be necessary to enable the port
director and other proper officials of the Treasury Department to
determine whether or not the broker is complying with the requirements
of this part.
Sec. 111.28 Responsible supervision.
(a) General. Every individual broker operating as a sole proprietor
and every licensed member of a partnership that is a broker and every
licensed officer of an association or corporation that is a broker
shall exercise responsible supervision and control over the transaction
of the customs business of such sole proprietorship, partnership,
association, or corporation.
(b) Employee information.
(1) Current employees--(i) General. Each broker shall submit, in
writing, to the director of each port at which the broker intends to
transact customs business, a list of the names of persons currently
employed at that port. The list of employees shall be submitted upon
issuance of a permit for an additional district under Sec. 111.19, or
upon the opening of an office at a port within a district for which the
broker already has a permit, and before the broker begins to transact
customs business as a broker at the port. For each such employee, the
broker also shall provide the current home address, last prior home
address, social security number, date and place of birth, and, if the
employee has been employed by the broker for less than 3 years, the
name and address of each former employer and dates of employment for
the 3-year period preceding current employment with the broker. After
the initial submission, the list shall be updated and submitted with
the status report required by Sec. 111.30(d).
(ii) New employees. In the case of a new employee, the broker shall
submit to the port director the written information required under
paragraph (b)(1)(i) of this section within 10 calendar days after the
new employee has been employed by the broker for 30 consecutive days.
(2) Terminated employees. Within 30 calendar days after the
termination of employment of any person employed longer than 30
consecutive days, the broker shall submit the name of the terminated
employee, in writing, to the director of the port at which the person
was employed.
(3) Broker's responsibility. Notwithstanding a broker's
responsibility for providing the information required in paragraph
(b)(1) of this section, in the absence of culpability by the broker,
Customs will not hold him responsible for the accuracy of such
information when provided to the broker by the employee.
(c) Termination of qualifying member or officer. In the case of an
individual broker who is a qualifying member of a partnership for
purposes of Sec. 111.11(b)(1) or who is a qualifying officer of an
association or corporation for purposes of Sec. 111.11(c)(2), that
individual broker shall immediately provide written notice to the
Assistant Commissioner when his employment as a qualifying member or
officer terminates and shall send a copy of the written notice to the
director of each port through which a permit has been granted to the
partnership, association, or corporation.
(d) Change in ownership. If the ownership of a broker changes and
ownership shares in the broker are not publicly traded, the broker
shall immediately provide written notice of that fact to the Assistant
Commissioner and shall send a copy of the written notice to the
director of each port through which a permit has been granted to the
broker. When the change in ownership results in the addition of a new
principal to the organization, Customs reserves the right to conduct a
background investigation on the new principal. The port director will
notify the broker if Customs objects to the new principal, and the
broker will be given a reasonable period of time to remedy the
situation. If the investigation uncovers information which would have
been the basis for a denial of an application for a broker's license
and the principal's interest in the broker is not terminated to the
satisfaction of the port director, suspension or revocation proceedings
may be initiated under subpart D of this part. For purposes of this
paragraph, a ``principal'' means any person having at least a 5 percent
capital, beneficiary or other direct or indirect interest in a broker
or in the business of a broker.
Sec. 111.29 Diligence in correspondence and paying monies.
(a) Due diligence by broker. Each broker shall exercise due
diligence in making financial settlements, in answering correspondence,
and in preparing or assisting in the preparation and filing of records
relating to any customs business matter handled by him as a broker.
Payment of duty, tax, or other debt or obligation owing to the
Government for which the broker is responsible, or for which the broker
has received payment from a client, shall be made to the Government on
or before the date that payment is due. Payments received by a broker
from a client after the due date shall be transmitted to the Government
within 5 working days from receipt by the broker. Each broker shall
provide a written statement to a client accounting for funds received
for the client from the Government, or received from a client where no
payment to the Government has been made, or received from a client in
excess of the Governmental or other charges properly payable as part of
the client's customs business, within 60 calendar days of receipt. No
written statement is required if there is actual payment of such funds
by a broker.
(b) Notice to client of method of payment--(1) All brokers shall
provide their clients with the following written notification:
If you are the importer of record, payment to the broker will
not relieve you of liability for Customs charges (duties, taxes, or
other debts owed Customs) in the event the charges are not paid by
the broker. Therefore, if you pay by check, Customs charges may be
paid with a separate check payable to the ``U.S. Customs Service''
which shall be delivered to Customs by the broker.
[[Page 22741]]
(2) The written notification set forth in paragraph (b)(1) of this
section shall be provided by brokers as follows:
(i) On, or attached to, any power of attorney provided by the
broker to a client for execution on or after September 27, 1982; and
(ii) To each active client no later than February 28, 1983, and at
least once at any time within each 12-month period thereafter. An
active client means a client from whom a broker has obtained a power of
attorney and for whom the broker has transacted customs business on at
least two occasions within the 12-month period preceding notification.
Sec. 111.30 Notification of change of business address, organization,
name, or location of business records; status report; termination of
brokerage business.
(a) Change of address. When a broker changes his business address,
he shall immediately give written notice of his new address to each
director of a port that is affected by the change of address. In
addition, if an individual broker is not actively engaged in
transacting business as a broker and changes his non-business mailing
address, he shall give written notice of the new address in the status
report required by paragraph (d) of this section.
(b) Change in an organization. A partnership, association, or
corporation broker shall immediately provide written notice of any of
the following to the director of each port through which it has been
granted a permit:
(1) The date on which a licensed member or officer ceases to be the
qualifying member or officer for purposes of Sec. 111.11(b)(1) or
(c)(2), and the name of the broker who will succeed as the qualifying
member or officer; and
(2) Any change in the Articles of Agreement, Charter, or Articles
of Incorporation relating to the transaction of customs business, or
any other change in the legal nature of the organization.
(c) Change in name. A broker who changes his name, or who proposes
to operate under a trade or fictitious name in one or more States
within the district in which he has been granted a permit and is
authorized by State law to do so, shall submit to the Office of Field
Operations, U.S. Customs Service, Washington, DC 20229, evidence of his
authority to use such name. The name shall not be used until the
approval of Headquarters has been received. In the case of a trade or
fictitious name, the broker shall affix his own name in conjunction
with each signature of the trade or fictitious name when signing
customs documents.
(d) Status report--(1) General. Each broker shall file a written
status report with Customs on February 1, 1979, and on February 1 of
each third year thereafter. The report shall be accompanied by the fee
prescribed in Sec. 111.96(d) and shall be addressed to the director of
the port through which the broker's license was issued. A report
received during the month of February will be considered filed timely.
No form or particular format is required.
(2) Individual. Each individual broker shall state in the report
required under paragraph (d)(1) of this section whether he is actively
engaged in transacting business as a broker. If he is so actively
engaged, he shall also:
(i) State the name under which, and the address at which, his
business is conducted if he is a sole proprietor;
(ii) State the name and address of his employer if he is employed
by another broker, unless his employer is a partnership, association or
corporation broker for which he is a qualifying member or officer for
purposes of Sec. 111.11(b)(1) or (c)(2); and
(iii) State whether or not he still meets the applicable
requirements of Sec. 111.11 and Sec. 111.19 and has not engaged in any
conduct that could constitute grounds for suspension or revocation
under Sec. 111.53.
(3) Partnership, association or corporation. Each corporation,
partnership or association broker shall state in the report required
under paragraph (d)(1) of this section the name under which its
business as a broker is being transacted, its business address, the
names and addresses of the licensed members of the partnership or
licensed officers of the association or corporation who qualify it for
a license under Sec. 111.11(b)(1) or (c)(2), and whether it is actively
engaged in transacting business as a broker, and the report shall be
signed by such a licensed member or officer.
(4) Failure to file timely. If a broker fails to file the report
required under paragraph (d)(1) of this section by March 1 of the
reporting year, the broker's license is suspended by operation of law
on that date. By March 31 of the reporting year, the port director
shall transmit written notice of the suspension to the broker by
certified mail, return receipt requested, at the address reflected in
Customs records. If the broker files the required report and pays the
required fee within 60 calendar days of the date of the notice of
suspension, the license shall be reinstated. If the broker does not
file the required report within that 60-day period, the broker's
license is revoked by operation of law without prejudice to the filing
of an application for a new license. Notice of the revocation shall be
published in the Customs Bulletin.
(e) Custody of records. Upon the permanent termination of a
brokerage business, written notification of the name and address of the
party having legal custody of the brokerage business records shall be
provided to the director of each port where the broker was transacting
business within each district for which a permit has been issued to the
broker. Such notification shall be the responsibility of:
(1) The individual broker, upon the permanent termination of his
brokerage business;
(2) Each member of a partnership who holds an individual broker's
license, upon the permanent termination of a partnership brokerage
business; or
(3) Each association or corporate officer who holds an individual
broker's license, upon the permanent termination of an association or
corporate brokerage business.
Sec. 111.31 Conflict of interest.
(a) Former officer or employee of U.S. Government. A broker who was
formerly an officer or employee in U.S. Government service shall not
represent a client before the Treasury Department or any representative
thereof in any matter to which the broker gave personal consideration
or gained knowledge of the facts while in U.S. Government service,
except as provided in 18 U.S.C. 207.
(b) Relations with former officer or employee of U.S. Government. A
broker shall not knowingly assist, accept assistance from, or share
fees with a person who has been employed by a client in a matter
pending before the Treasury Department or any representative thereof to
which matter such person gave personal consideration or gained personal
knowledge of the facts or issues thereof while in U.S. Government
service.
(c) Importations by broker or employee. A broker who is an importer
himself shall not act as broker for an importer who imports merchandise
of the same general character as that imported by the broker unless the
client has full knowledge of the facts. The same restriction shall
apply if a broker's employee is an importer.
Sec. 111.32 False information.
A broker shall not file or procure or assist in the filing of any
claim, or of any document, affidavit, or other papers, known by such
broker to be false. Nor shall a broker knowingly give, or solicit or
procure the giving of, any false or misleading information or
[[Page 22742]]
testimony in any matter pending before the Treasury Department or any
representative thereof.
Sec. 111.33 Government records.
A broker shall not procure or attempt to procure, directly or
indirectly, information from Government records or other Government
sources of any kind to which access is not granted by proper authority.
Sec. 111.34 Undue influence upon Government employees.
A broker shall not influence or attempt to influence the conduct of
any representative of the Treasury Department in any matter pending
before the Treasury Department or any representative thereof by the use
of duress or a threat or false accusation, or by the offer of any
special inducement or promise of advantage, or by bestowing any gift or
favor or other thing of value.
Sec. 111.35 Acceptance of fees from attorneys.
With respect to customs transactions, a broker shall not demand or
accept from any attorney (whether directly or indirectly, including,
for example, from a client as a part of any arrangement with an
attorney) on account of any case litigated in any court of law or on
account of any other legal service rendered by an attorney any fee or
remuneration in excess of an amount measured by or commensurate with
the time, effort and skill expended by the broker in performing his
services.
Sec. 111.36 Relations with unlicensed persons.
(a) Employment by unlicensed person other than importer. When a
broker is employed for the transaction of customs business by an
unlicensed person who is not the actual importer, the broker shall
transmit to the actual importer either a copy of his bill for services
rendered or a copy of the entry, unless the merchandise was purchased
for delivery on an all-free basis (duty and brokerage charges paid by
the unlicensed person) or unless the importer has in writing waived
transmittal of the copy of the entry or bill for services rendered.
(b) Service to others not to benefit unlicensed person. Except as
otherwise provided in paragraph (c) of this section, a broker shall not
enter into any agreement with an unlicensed person to transact Customs
business for others in such manner that the fees or other benefits
resulting from the services rendered for others inure to the benefit of
the unlicensed person.
(c) Relations with a freight forwarder. A broker may compensate a
freight forwarder for services rendered in obtaining brokerage
business, subject to the following conditions:
(1) The importer or other party in interest is notified in advance
by the forwarder or broker of the name of the broker selected by the
forwarder for the handling of his Customs transactions;
(2) The broker transmits directly to the importer or other party in
interest:
(i) A true copy of his brokerage charges if the fees and charges
are to be collected by or through the forwarder, unless this
requirement is waived in writing by the importer or other party in
interest; or
(ii) A statement of his brokerage charges and an itemized list of
any charges to be collected for the account of the freight forwarder if
the fees and charges are to be collected by or through the broker;
(3) No part of the agreement of compensation between the broker and
the forwarder, nor any action taken pursuant thereto, forbids or
prevents direct communication between the importer or other party in
interest and the broker; and
(4) In making the agreement and in all actions taken pursuant
thereto, the broker shall remain subject to all other provisions of
this part.
Sec. 111.37 Misuse of license or permit.
A broker shall not allow his license, permit or name to be used by
or for any unlicensed person (including a broker whose license or
permit is under suspension), other than his own employees authorized to
act for him, in the solicitation, promotion or performance of any
customs business or transaction.
Sec. 111.38 False representation to procure employment.
A broker shall not knowingly use false or misleading
representations to procure employment in any customs matter. Nor shall
a broker represent to a client or prospective client that he can obtain
any favors from the Treasury Department or any representative thereof.
Sec. 111.39 Advice to client.
(a) Withheld or false information. A broker shall not withhold
information relative to any customs business from a client who is
entitled to the information. Moreover, a broker shall exercise due
diligence to ascertain the correctness of any information which he
imparts to a client, and he shall not knowingly impart to a client
false information relative to any customs business.
(b) Error or omission by client. If a broker knows that a client
has not complied with the law or has made an error in, or omission
from, any document, affidavit, or other paper which the law requires
such client to execute, he shall advise the client promptly of such
noncompliance, error, or omission.
(c) Illegal plans. A broker shall not knowingly suggest to a client
or prospective client any illegal plan for evading payment of any duty,
tax, or other debt or obligation owing to the U.S. Government.
Sec. 111.40 Protests.
A broker shall not act on behalf of any person, or attempt to
represent any person, in respect of any protest unless he is authorized
to do so in accordance with Sec. 174.3 of this chapter.
Sec. 111.41 Endorsement of checks.
A broker shall not endorse or accept, without authority of his
client, any U.S. Government draft, check, or warrant drawn to the order
of such client.
Sec. 111.42 Relations with person who is notoriously disreputable or
whose license is under suspension, canceled ``with prejudice,'' or
revoked.
(a) General. Except as otherwise provided in paragraph (b) of this
section, a broker shall not knowingly and directly or indirectly:
(1) Accept employment to effect a Customs transaction as associate,
correspondent, officer, employee, agent, or subagent from any person
who is notoriously disreputable or whose broker license was revoked for
any cause or is under suspension or was cancelled ``with prejudice;''
(2) Assist in the furtherance of any customs business or
transactions of any person described in paragraph (a)(1) of this
section;
(3) Employ, or accept assistance in the furtherance of any customs
business or transactions from, any person described in paragraph (a)(1)
of this section, without the approval of the Assistant Commissioner
(see Sec. 111.79);
(4) Share fees with any person described in paragraph (a)(1) of
this section; or
(5) Permit any person described in paragraph (a)(1) of this section
to participate, directly or indirectly and whether through ownership or
otherwise, in the promotion, control, or direction of the business of
the broker.
(b) Client exception. Nothing in this section shall prohibit a
broker from transacting customs business on behalf of a bona fide
importer or exporter who may be notoriously disreputable or whose
broker license is under suspension or was cancelled ``with prejudice''
or revoked.
[[Page 22743]]
Sec. 111.43 [Reserved]
Sec. 111.44 [Reserved]
Sec. 111.45 Revocation by operation of law.
(a) License. If a broker that is a partnership, association, or
corporation fails to have, during any continuous period of 120 days, at
least one member of the partnership or at least one officer of the
association or corporation who holds a valid individual broker's
license, such failure shall, in addition to any other sanction that may
be imposed under this part, result in the revocation by operation of
law of the license and any permits issued to the partnership,
association, or corporation. The Assistant Commissioner will notify the
broker in writing of an impending revocation by operation of law under
this section 30 calendar days before the revocation is due to occur.
(b) Permit. If a broker who has been granted a permit for an
additional district fails, for any continuous period of 180 days, to
employ within that district (or region, if an exception has been
granted pursuant to Sec. 111.19(d)) at least one person who holds a
valid individual broker's license, such failure shall, in addition to
any other sanction that may be imposed under this part, result in the
revocation of the permit by operation of law.
(c) Notification. If the license or an additional permit of a
partnership, association, or corporation is revoked by operation of law
under paragraph (a) or (b) of this section, the Assistant Commissioner
will notify the organization of the revocation. If an additional permit
of an individual broker is revoked by operation of law under paragraph
(b) of this section, the Assistant Commissioner will notify the broker.
Notice of any revocation under this section will be published in the
Customs Bulletin.
(d) Applicability of other sanctions. Notwithstanding the operation
of paragraph (a) or (b) of this section, each broker still has a
continuing obligation to exercise responsible supervision and control
over the conduct of its brokerage business and to otherwise comply with
the provisions of this part. Any failure on the part of a broker to
meet that continuing obligation during the 120 or 180-day period
referred to in paragraph (a) or (b) of this section, or during any
shorter period of time, may result in the initiation of suspension or
revocation proceedings or the assessment of a monetary penalty under
subpart D or subpart E of this part.
Subpart D--Cancellation, Suspension, or Revocation of License or
Permit, or Monetary Penalty in Lieu Thereof
Sec. 111.50 General.
This subpart sets forth provisions relating to cancellation,
suspension, or revocation of a license or a permit, or assessment of a
monetary penalty in lieu thereof, under section 641(d)(2)(B), Tariff
Act of 1930, as amended (19 U.S.C. 1641(d)(2)(B)). The provisions
relating to assessment of a monetary penalty under sections 641 (b)(6)
and (d)(2)(A), Tariff Act of 1930, as amended (19 U.S.C. 1641 (b)(6)
and (d)(2)(A)), are set forth in subpart E of this part.
Sec. 111.51 Cancellation of license or permit.
(a) Without prejudice. The Assistant Commissioner may cancel a
broker's license or permit ``without prejudice'' upon written
application by the broker if the Assistant Commissioner determines that
the application for cancellation was not made in order to avoid
proceedings for the suspension or revocation of the license or permit.
If the Assistant Commissioner determines that the application for
cancellation was made in order to avoid such proceedings, he may cancel
the license or permit ``without prejudice'' only with authorization
from the Secretary of the Treasury.
(b) With prejudice. The Assistant Commissioner may cancel a
broker's license or permit ``with prejudice'' when specifically
requested to do so by the broker. The effect of a cancellation ``with
prejudice'' is in all respects the same as if the license or permit had
been revoked for cause by the Secretary except that it shall not give
rise to a right of appeal.
Sec. 111.52 Voluntary suspension of license or permit.
The Assistant Commissioner may accept a broker's written voluntary
offer of suspension of the broker's license or permit for a specific
period of time under such terms and conditions as the parties may
agree.
Sec. 111.53 Grounds for suspension or revocation of license or permit.
The appropriate Customs officer may initiate proceedings for the
suspension, for a specific period of time, or revocation of the license
or permit of any broker for any of the following reasons:
(a) The broker has made or caused to be made in any application for
any license or permit under this part, or report filed with Customs,
any statement which was, at the time and in light of the circumstances
under which it was made, false or misleading with respect to any
material fact, or has omitted to state in any application or report any
material fact which was required;
(b) The broker has been convicted, at any time after the filing of
an application for a license under Sec. 111.12, of any felony or
misdemeanor which:
(1) Involved the importation or exportation of merchandise;
(2) Arose out of the conduct of customs business; or
(3) Involved larceny, theft, robbery, extortion, forgery,
counterfeiting, fraudulent concealment, embezzlement, fraudulent
conversion, or misappropriation of funds;
(c) The broker has violated any provision of any law enforced by
Customs or the rules or regulations issued under any such provision;
(d) The broker has counseled, commanded, induced, procured, or
knowingly aided or abetted the violations by any other person of any
provision of any law enforced by Customs or the rules or regulations
issued under any such provision;
(e) The broker has knowingly employed, or continues to employ, any
person who has been convicted of a felony, without written approval of
such employment from the Assistant Commissioner;
(f) The broker has, in the course of customs business, with intent
to defraud, in any manner willfully and knowingly deceived, misled or
threatened any client or prospective client; or
(g) The broker no longer meets the applicable requirements of
Sec. 111.11 and Sec. 111.19.
Sec. 111.54 [Reserved]
Sec. 111.55 Investigation of complaints.
Every complaint or charge against a broker which may be the basis
for disciplinary action shall be forwarded for investigation to the
special agent in charge of the area in which the broker is located. The
special agent in charge shall submit a report on the investigation to
the director of the port and send a copy of it to the Assistant
Commissioner.
Sec. 111.56 Review of report on investigation.
The port director shall review the report of investigation to
determine if there is sufficient basis to recommend that charges be
preferred against the broker. He shall then submit his recommendation
with supporting reasons to the Assistant Commissioner for final
determination together with a proposed statement of charges when
recommending that charges be preferred.
[[Page 22744]]
Sec. 111.57 Determination by Assistant Commissioner.
The Assistant Commissioner shall make a determination on whether or
not charges should be preferred, and he shall notify the port director
of his decision.
Sec. 111.58 Content of statement of charges.
Any statement of charges referred to in this subpart shall give a
plain and concise, but not necessarily detailed, description of the
facts claimed to constitute grounds for suspension or revocation of the
license or permit. The statement of charges also shall specify the
sanction being proposed (that is, suspension of the license or permit
or revocation of the license or permit), but if a suspension is
proposed the charges need not state a specific period of time for which
suspension is proposed. A statement of charges which fairly informs the
broker of the charges against him so that he is able to prepare his
response shall be deemed sufficient. Different means by which a purpose
might have been accomplished, or different intents with which acts
might have been done, so as to constitute grounds for suspension or
revocation of the license may be alleged in the alternative under a
single count in the statement of charges.
Sec. 111.59 Preliminary proceedings.
(a) Opportunity to participate. The port director shall advise the
broker of his opportunity to participate in preliminary proceedings
with an opportunity to avoid formal proceedings against his license or
permit.
(b) Notice of preliminary proceedings. The port director shall
serve upon the broker, in the manner set forth in Sec. 111.63, written
notice that:
(1) Transmits a copy of the proposed statement of charges;
(2) Informs the broker that formal proceedings are available to
him;
(3) Informs the broker that sections 554 and 558, Title 5, United
States Code, will be applicable if formal proceedings are necessary;
(4) Invites the broker to show cause why formal proceedings should
not be instituted;
(5) Informs the broker that he may make submissions and
demonstrations of the character contemplated by the cited statutory
provisions;
(6) Invites any negotiation for settlement of the complaint or
charge that the broker deems it desirable to enter into;
(7) Advises the broker of his right to be represented by counsel;
(8) Specifies the place where the broker may respond in writing;
and
(9) Advises the broker that the response must be received within 30
calendar days of the date of the notice.
Sec. 111.60 Request for additional information.
If, in order to prepare his response, the broker desires additional
information as to the time and place of the alleged misconduct, or the
means by which it was committed, or any other more specific information
concerning the alleged misconduct, he may request such information in
writing. The broker's request shall set forth in what respect the
proposed statement of charges leaves him in doubt and shall describe
the particular language of the proposed statement of charges as to
which additional information is needed. If in the opinion of the port
director such information is reasonably necessary to enable the broker
to prepare his response, he shall furnish the broker with such
information.
Sec. 111.61 Decision on preliminary proceedings.
The port director shall prepare a summary of any oral presentations
made by the broker or his attorney and forward it to the Assistant
Commissioner together with a copy of each paper filed by the broker.
The port director shall also give to the Assistant Commissioner his
recommendation on action to be taken as a result of the preliminary
proceedings. If the Assistant Commissioner determines that the broker
has satisfactorily responded to the proposed charges and that further
proceedings are not warranted, he shall so inform the port director who
shall notify the broker. If no response is filed by the broker or if
the Assistant Commissioner determines that the broker has not
satisfactorily responded to all of the proposed charges, he shall so
advise the port director and instruct him to prepare, sign, and serve a
notice of charges and the statement of charges. If one or more of the
charges in the proposed statement of charges was satisfactorily
answered by the broker in the preliminary proceedings, the Assistant
Commissioner shall instruct the port director to omit those charges
from the statement of charges.
Sec. 111.62 Contents of notice of charges.
The notice of charges shall inform the broker that:
(a) Sections 554 and 558, Title 5, United States Code, are
applicable to the formal proceedings;
(b) The broker may be represented by counsel;
(c) The broker will have the right to cross-examine witnesses;
(d) Within 10 calendar days after service of this notice, the
broker will be notified of the time and place of a hearing on the
charges; and
(e) Prior to the hearing on the charges, the broker may file, in
duplicate with the port director, a verified answer to the charges.
Sec. 111.63 Service of notice and statement of charges.
(a) Individual. The port director shall serve the notice of charges
and the statement of charges against an individual broker as follows:
(1) By delivery to the broker personally;
(2) By certified mail addressed to the broker, with demand for a
return card signed solely by the addressee;
(3) By any other means which the broker may have authorized in a
written communication to the port director; or
(4) If attempts to serve the broker by the methods prescribed in
paragraphs (a)(1) through (a)(3) of this section are unsuccessful, the
port director may serve the notice and statement by leaving them with
the person in charge of the broker's office.
(b) Partnership, association or corporation. The port director
shall serve the notice of charges and the statement of charges against
a partnership, association, or corporation broker as follows:
(1) By delivery to any member of the partnership personally or to
any officer of the association or corporation personally;
(2) By certified mail addressed to any member of the partnership or
to any officer of the association or corporation, with demand for a
return card signed solely by the addressee;
(3) By any other means which the broker may have authorized in a
written communication to the port director; or
(4) If attempts to serve the broker by the methods prescribed in
paragraphs (b)(1) through (b)(3) of this section are unsuccessful, the
port director may serve the notice and statement by leaving them with
the person in charge of the broker's office.
(c) Certified mail; evidence of service. When the service under
this section is by certified mail, the receipt of the return card duly
signed shall be satisfactory evidence of service.
Sec. 111.64 Service of notice of hearing and other papers.
(a) Notice of hearing. After service of the notice and statement of
charges, the port director shall serve upon the broker and his attorney
if known, by one of the methods set forth in Sec. 111.63 or by ordinary
mail, a written notice of the
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time and place of the hearing. The hearing shall be scheduled to take
place within 30 calendar days after service of the notice of hearing.
(b) Other papers. Other papers relating to the hearing may be
served by one of the methods set forth in Sec. 111.63 or by ordinary
mail or upon the broker's attorney.
Sec. 111.65 Extension of time for hearing.
If the broker or his attorney requests in writing a delay in the
hearing for good cause, the hearing officer designated pursuant to
Sec. 111.67(a) may reschedule the hearing and in such a case shall
notify the broker or his attorney in writing of the extension and the
new time for the hearing.
Sec. 111.66 Failure to appear.
If the broker or his attorney fails to appear for a scheduled
hearing, the hearing officer designated pursuant to Sec. 111.67(a)
shall proceed with the hearing as scheduled and shall hear evidence
submitted by the parties. The provisions of this part shall apply as
though the broker were present, and the Secretary of the Treasury may
issue an order of suspension of the license or permit for a specified
period of time or revocation of the license or permit, or of assessment
of a monetary penalty in lieu thereof, in accordance with Sec. 111.74
if he finds such action to be in order.
Sec. 111.67 Hearing.
(a) Hearing officer. The hearing officer shall be an administrative
law judge appointed pursuant to 5 U.S.C. 3105.
(b) Rights of the broker. The broker or his attorney shall have the
right to examine all exhibits offered at the hearing and shall have the
right to cross-examine witnesses and to present witnesses who shall be
subject to cross-examination by the Government representatives.
(c) Interrogatories. Upon the written request of either party, the
hearing officer may permit deposition upon oral or written
interrogatories to be taken before any officer duly authorized to
administer oaths for general purposes or in customs matters. The other
party to the hearing shall be given a reasonable time in which to
prepare cross-interrogatories and, if the deposition is oral, shall be
permitted to cross-examine the witness. The deposition shall become
part of the hearing record.
(d) Transcript of record. The port director shall provide a
competent reporter to make a record of the hearing. When the record of
the hearing has been transcribed by the reporter, the port director
shall deliver a copy of the transcript of record to the hearing
officer, the broker and the Government representative without charge.
(e) Government representatives. The Assistant Commissioner shall
designate one or more persons to represent the Government at the
hearing.
Sec. 111.68 Proposed findings and conclusions.
The hearing officer shall allow the parties a reasonable period of
time after delivery of the transcript of record in which to submit
proposed findings and conclusions and supporting reasons therefor as
contemplated by 5 U.S.C. 557(c).
Sec. 111.69 Recommended decision by hearing officer.
After review of the proposed findings and conclusions submitted by
the parties pursuant to Sec. 111.68, the hearing officer shall make his
recommended decision in the case and certify the entire record to the
Secretary of the Treasury. The hearing officer's recommended decision
shall conform to the requirements of 5 U.S.C. 557.
Sec. 111.70 Additional submissions.
Upon receipt of the record, the Secretary of the Treasury will
afford the parties a reasonable opportunity to make such additional
submissions as permitted under 5 U.S.C. 557(c) or as otherwise required
by the circumstances of the case.
Sec. 111.71 Immaterial mistakes.
The Secretary of the Treasury will disregard an immaterial misnomer
of a third person, an immaterial mistake in the description of any
person, thing, or place, or ownership of any property, any other
immaterial mistake in the statement of charges, or a failure to prove
immaterial allegations in the description of the broker's conduct.
Sec. 111.72 Dismissal subject to new proceedings.
If the Secretary of the Treasury finds that the evidence produced
at the hearing indicates that a proper disposition of the case cannot
be made on the basis of the charges preferred, he may instruct the port
director to serve appropriate charges as a basis for new proceedings to
be conducted in accordance with the procedures set forth in this
subpart.
Sec. 111.73 [Reserved]
Sec. 111.74 Decision and notice of suspension or revocation or
monetary penalty.
If the Secretary of the Treasury finds that one or more of the
charges in the statement of charges is not sufficiently proved, he may
base a suspension, revocation, or monetary penalty action on any
remaining charges if the facts alleged in the charges are established
by the evidence. If the Secretary of the Treasury, in the exercise of
his discretion and based solely on the record, issues an order
suspending a broker's license or permit for a specified period of time
or revoking a broker's license or permit or, except in a case described
in Sec. 111.53(b)(3), assessing a monetary penalty in lieu of
suspension or revocation, the Assistant Commissioner shall promptly
provide written notification of the order to the broker and, unless an
appeal from the Secretary's order is filed by the broker (see
Sec. 111.75), the Assistant Commissioner shall publish a notice of the
suspension or revocation, or the assessment of a monetary penalty in
lieu thereof, in the Federal Register and in the Customs Bulletin. If
no appeal from the Secretary's order is filed, an order of suspension
or revocation or assessment of a monetary penalty shall become
effective 60 calendar days after issuance of written notification of
the order unless the Secretary finds that a more immediate effective
date is in the national or public interest. If a monetary penalty is
assessed and no appeal from the Secretary's order is filed, payment of
the penalty shall be tendered within 60 calendar days after the
effective date of the order, and, if payment is not tendered within
that 60-day period, the license or permit of the broker shall
immediately be suspended until payment is made.
Sec. 111.75 Appeal from the Secretary's decision.
An appeal from the order of the Secretary of the Treasury
suspending or revoking a license or permit, or assessing a monetary
penalty in lieu thereof, may be filed by the broker in the Court of
International Trade as provided in section 641(e), Tariff Act of 1930,
as amended (19 U.S.C. 1641(e)). The commencement of such proceedings
shall, unless specifically ordered by the Court, operate as a stay of
the Secretary's order.
Sec. 111.76 Reopening the case.
(a) Grounds for reopening. Provided that no appeal is filed in
accordance with Sec. 111.75, a person whose license or permit has been
suspended or revoked, or against whom a monetary penalty has been
assessed in lieu of suspension or revocation, may make written
application in duplicate to the Assistant Commissioner to reopen the
case and have the order of suspension or revocation or monetary penalty
assessment set aside or modified on the
[[Page 22746]]
ground that new evidence has been discovered or on the ground that
important evidence is now available which could not be produced at the
original hearing by the exercise of due diligence. The application
shall set forth the precise character of the evidence to be relied upon
and shall state the reasons why the applicant was unable to produce it
when the original charges were heard.
(b) Procedure. The Assistant Commissioner shall forward the
application, together with his recommendation for action thereon, to
the Secretary of the Treasury. The Secretary may grant or deny the
application to reopen the case and may order the taking of additional
testimony before the Assistant Commissioner. The Assistant Commissioner
shall notify the applicant of the Secretary's decision. If the
Secretary grants the application and orders a hearing, the Assistant
Commissioner shall set a time and place for such hearing and give due
written notice thereof to the applicant. The procedures governing the
new hearing and recommended decision of the hearing officer shall be
the same as those governing the original proceeding. The original order
of the Secretary shall remain in effect pending conclusion of the new
proceedings and issuance of a new order under Sec. 111.77.
Sec. 111.77 Notice of vacated or modified order.
If, pursuant to Sec. 111.76 or for any other reason, the Secretary
of the Treasury issues an order vacating or modifying an earlier order
under Sec. 111.74 suspending or revoking a broker's license or permit,
or assessing a monetary penalty in lieu thereof, the Assistant
Commissioner shall notify the broker in writing and shall publish a
notice of the new order in the Federal Register and in the Customs
Bulletin.
Sec. 111.78 Reprimands.
If a broker fails to observe and fulfill the duties and
responsibilities of a broker as set forth in this part but such failure
is not sufficiently serious to warrant initiation of suspension or
revocation proceedings, Headquarters, or the port director with the
approval of Headquarters, may serve the broker with a written
reprimand. Such a reprimand, and the facts on which it is based, may be
considered in connection with any future disciplinary proceeding that
may be instituted against the broker in question.
Sec. 111.79 Employment of broker who has lost license.
Five years after the revocation or cancellation ``with prejudice''
of a license, the ex-broker may petition the Assistant Commissioner for
authorization to assist, or accept employment with, a broker. Such a
petition shall not be approved unless the Assistant Commissioner is
satisfied that the petitioner has refrained from all activities
described in Sec. 111.42 and that the petitioner's conduct has been
exemplary during the period of disability. The Assistant Commissioner
shall also give consideration to the gravity of the misconduct which
gave rise to the petitioner's disability. In any case in which such
misconduct led to pecuniary loss to the Government or to any person,
the Assistant Commissioner shall also take into account whether the
petitioner has made restitution of such loss.
Sec. 111.80 [Reserved]
Sec. 111.81 Settlement and compromise.
The Assistant Commissioner, with the approval of the Secretary of
the Treasury, may settle and compromise any disciplinary proceeding
which has been instituted under this subpart according to the terms and
conditions agreed to by the parties including, but not limited to, the
assessment of a monetary penalty in lieu of any proposed suspension or
revocation of a broker's license or permit.
Subpart E--Monetary Penalty and Payment of Fees
Sec. 111.91 Grounds for imposition of a monetary penalty; maximum
penalty.
Customs may assess a monetary penalty or penalties as follows:
(a) In the case of a broker, in an amount not to exceed an
aggregate of $30,000 for one or more of the reasons set forth in
Secs. 111.53(a) through (f) other than those listed in
Sec. 111.53(b)(3), and provided that no license or permit suspension or
revocation proceeding has been instituted against the broker under
subpart D of this part for any of the same reasons; or
(b) In the case of a person who is not a broker, in an amount not
to exceed $10,000 for each transaction or violation referred to in
Sec. 111.4 and in an amount not to exceed an aggregate of $30,000 for
all such transactions or violations.
Sec. 111.92 Notice of monetary penalty.
If assessment of a monetary penalty under Sec. 111.91 is
contemplated, Customs shall issue a written notice which advises the
broker or other person of the allegations or complaints against him and
explains that the broker or other person has a right to respond to the
allegations or complaints in writing within 30 calendar days of the
date of mailing of the notice. The port director has discretion to
provide additional time for good cause.
Sec. 111.93 Petition for relief from monetary penalty.
A broker or other person who receives a notice issued under
Sec. 111.92 may file a petition for relief from the monetary penalty in
accordance with the procedures set forth in part 171 of this chapter.
Sec. 111.94 Decision on monetary penalty.
Customs shall follow the procedures set forth in part 171 of this
chapter in considering any petition for relief filed under Sec. 111.93.
After Customs has considered the allegations or complaints set forth in
the notice issued under Sec. 111.92 and any timely response made
thereto by the broker or other person, the Fines, Penalties, and
Forfeitures Officer shall issue a written decision to the broker or
other person setting forth the final determination and the findings of
fact and conclusions of law on which the determination is based. If the
final determination is that the broker or other person is liable for a
monetary penalty, the broker or other person shall pay the monetary
penalty, or make arrangements for payment thereof, within 60 calendar
days of the date of the written decision. If payment or arrangements
for payment are not timely made, Customs shall refer the matter to the
Department of Justice for institution of appropriate judicial
proceedings.
Sec. 111.95 Supplemental petition for relief from monetary penalty.
A decision of the Fines, Penalties, and Forfeitures Officer with
regard to any petition filed in accordance with part 171 of this
chapter may be the subject of a supplemental petition for relief. Any
supplemental petition also must be filed in accordance with the
provisions of part 171 of this chapter.
Sec. 111.96 Fees.
(a) License fee; examination fee; fingerprint fee. Each applicant
for a broker's license pursuant to Sec. 111.12 shall pay a fee of $200
to defray the costs to Customs in processing the application. Each
individual who intends to take the written examination provided for in
Sec. 111.13 shall pay a $200 examination fee before taking the
examination. An individual who submits an application for a license
shall also pay a fingerprint check and processing fee; the port
director shall inform the applicant of the current
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Federal Bureau of Investigation fee for conducting fingerprint checks
and the Customs fingerprint processing fee, the total of which must be
paid to Customs before further processing of the application will
occur.
(b) Permit fee. Each application for a permit pursuant to
Sec. 111.19, including an application for reinstatement of a permit
that was revoked by operation of law or otherwise, shall be accompanied
by a fee of $100 to defray the costs of processing the application.
(c) User fee. Payment of an annual user fee of $125 is required for
each permit, including a national permit under Sec. 111.19(f), granted
to an individual, partnership, association, or corporate broker. The
user fee is payable when an initial district permit is issued
concurrently with a license under Sec. 111.19(a), or upon filing the
application for the permit under Sec. 111.19(b) or (f), and for each
subsequent calendar year at the port through which the broker was
granted the permit or at the port referred to in Sec. 111.19(f)(5) in
the case of a national permit. The user fee shall be paid by the due
date as published annually in the Federal Register, and shall be
remitted in accordance with the procedures set forth in Sec. 24.22(i)
of this chapter. When a broker submits an application for a permit or
is issued an initial district permit under Sec. 111.19, the full $125
user fee shall be remitted with the application or when the initial
district permit is issued, regardless of the point during the calendar
year at which the application is submitted or the initial district
permit is issued. If a broker fails to pay the annual user fee by the
published due date, the appropriate port director shall notify the
broker in writing of the failure to pay and shall revoke the permit to
operate. The notice will constitute revocation of the permit.
(d) Status report fee. The status report required under
Sec. 111.30(d) shall be accompanied by a fee of $100 to defray the
costs of administering the reporting requirement.
(e) Method of payment. All fees prescribed under this section shall
be paid by check or money order payable to the United States Customs
Service.
Raymond W. Kelly,
Commissioner of Customs.
Approved: March 11, 1999.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 99-10127 Filed 4-26-99; 8:45 am]
BILLING CODE 4820-02-P
