AGENCY:

U.S. Customs and Border Protection, DHS; Department of the Treasury.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

This document proposes to amend the U.S. Customs and Border Protection (CBP) regulations to eliminate customs broker district permit fees. Concurrently with this document, CBP is publishing a notice of proposed rulemaking to, among other things, eliminate customs broker districts (see “Modernization of the Customs Brokers Regulations” RIN 1651-AB16). Specifically, CBP proposes to transition all brokers to national permits and to expand the scope of the national permit authority to allow national permit holders to conduct any type of customs business throughout the customs territory of the United States. By transitioning to a national permit, CBP also proposes to eliminate the requirements for brokers to maintain district permits. As a result, CBP proposes the conforming amendments discussed in this document to eliminate customs broker district permit fees.

DATES:

Comments must be received on or before August 4, 2020.

ADDRESSES:

You may submit comments, identified by docket number, by one of the following methods:

• Federal eRulemaking Portal at http://www.regulations.gov. Follow the instructions for submitting comments via Docket No. USCBP-2020-0010.
• Mail: Trade and Commercial Regulations Branch, Regulations and Rulings, Office of Trade, U.S. Customs and Border Protection, 90 K Street NE, 10th Floor, Washington, DC 20229-1177.

Instructions: All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to http://www.regulations.gov, including any personal information provided. For detailed instructions on submitting comments and additional information on the rulemaking process, see the “Public Participation” heading of the SUPPLEMENTARY INFORMATION section of this document.

Docket: For access to the docket to read background documents or comments received, go to http://www.regulations.gov. Submitted comments may be inspected during regular business days between the hours of 9 a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch, Regulations and Rulings, Office of Trade, U.S. Customs and Border Protection, 90 K Street NE, 10th Floor, Washington, DC. Arrangements to inspect submitted comments should be made in advance by calling Ms. Cammy Canedo at (202) 325-0439.

FOR FURTHER INFORMATION CONTACT:

Melba Hubbard, Chief, Broker Management Branch, (202) 863-6986, melba.hubbard@cbp.dhs.gov.

SUPPLEMENTARY INFORMATION:

Public Participation

Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of this proposed rule. U.S. Customs and Border Protection (CBP) also invites comments that relate to the economic, environmental, or federalism effects that might result from this regulatory change. Comments that will provide the most assistance to CBP will reference a specific portion of the rule, explain the reason for any recommended change, and include data, information or authority that support such recommended change.

Background

Section 641 of the Tariff Act of 1930, as amended (19 U.S.C. 1641), provides that individuals and business entities must hold a valid customs broker's license and permit to transact customs business on behalf of others. The statute also sets forth standards for the issuance of broker 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 authorizes the Secretary of the Treasury to prescribe rules and regulations relating to the customs business of brokers as may be necessary to protect the public 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 title 19 of the Code of Federal Regulations (CFR) (19 CFR part 111) and provide for, among other things, fee payment requirements applicable to brokers under section 641 and 19 U.S.C. 58c(a)(7).

The current customs brokers regulations are based on a district system in which ports within a district handle entry, entry summary, and post-summary activity and for which a broker district permit is required.

Discussion of Proposed Amendments

In a concurrent notice of proposed rulemaking, published elsewhere in this issue of the Federal Register (see “Modernization of the Customs Brokers Regulations” RIN 1651-AB16), CBP proposes to amend the CBP regulations by modernizing the customs brokers regulations to coincide with the development of CBP trade initiatives including the Automated Commercial Environment (ACE) and the Centers of Excellence and Expertise (Centers). Specifically, CBP is proposing to transition all brokers to national permits and to expand the scope of the national permit authority to allow national permit holders to conduct any type of customs business throughout the customs territory of the United States. To accomplish this, CBP proposes to eliminate broker districts and district permits, which also eliminates the need for district permit waivers and for brokers to maintain district offices. This document proposes conforming amendments to Parts 24 and 111 to eliminate customs broker district permit fees.

Part 24

Part 24 of title 19 of the CFR (19 CFR part 24) sets forth the regulations regarding customs financial and accounting procedures. Section 24.22 describes the customs Consolidated Omnibus Budget Reconciliation Act (COBRA) user fees and limitations for certain services. Specifically, paragraph (h) of section 24.22 describes the customs broker permit user fee. CBP proposes conforming amendments to sections 24.22(h) and (i)(9) to eliminate the customs broker district permit fee.

Part 111

Elimination of District Permits

Section 111.19 provides the procedures for obtaining broker permits, responsible supervision and control requirements for permits, and review procedures for the denial of a permit. As further described in the concurrent notice of proposed rulemaking, published elsewhere in this issue of the Federal Register, CBP is proposing to eliminate district permits and move to a national permit-only system (see “Modernization of the Customs Brokers Regulations” RIN 1651-AB16).

Section 111.19(c) describes permit fees. As CBP is proposing to eliminate district permits in a concurrent notice of proposed rulemaking, this document proposes conforming amendments to this section by eliminating fees for district permits. In addition, CBP proposes removing the specific permit application and permit user fee amounts and replacing the numerical figures with a reference to the relevant fee provision in sections 111.96(b) and (c). The proposed changes to section 111.96(b) can be found in the concurrent notice of proposed rulemaking.

Elimination of District Permit Fees

Section 111.96 describes fees required throughout part 111. Paragraph (c) of section 111.96 describes the permit user fee. To reflect the proposed elimination of district permits, CBP proposes to eliminate the customs broker district permit fee. CBP also proposes to specify that the user fee is for national permits issued under section 111.19(a).

As discussed in the concurrent proposal “Modernization of the Customs Brokers Regulations” RIN 1651-AB16, CBP published an interim final rule that transferred certain trade functions from the port director to the Center director. Similarly, certain broker management functions previously performed by the port director will be transferred to the Centers as part of this proposed rule. CBP proposes to revise the last sentence of paragraph (c) by splitting it into two sentences, with the second sentence providing that the director of the designated Center will notify the broker in writing of the failure to pay and the revocation of the permit.

Other Conforming Amendments

The authority for part 111 currently provides a specific authority citation for section 111.3. When the text of section 111.3 was transferred to section 111.2 in a final rule published in the Federal Register (65 FR 13880) on March 15, 2000, CBP inadvertently did not revise the specific authority citation for either section. CBP proposes to correct this by revising the specific authority citation for section 111.2 by adding that this section is also issued under 19 U.S.C. 1484 and 4798, and by removing the specific authority citation for section 111.3. An identical amendment is proposed in the concurrent document, “Modernization of the Customs Brokers Regulations” RIN 1651-AB16.

Executive Orders 13563, 12866, and 13771

Executive Orders 13563 and 12866 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Executive Order 13771 (“Reducing Regulation and Controlling Regulatory Costs”) directs agencies to reduce regulation and control regulatory costs and provides that “for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”

This rule is not a “significant regulatory action,” under section 3(f) of Executive Order 12866. Accordingly, OMB has not reviewed this regulation. As this rule is not a significant regulatory action, this rule is exempt from the requirements of Executive Order 13771. See OMB's Memorandum titled “Guidance Implementing Executive Order 13771, Titled `Reducing Regulation and Controlling Regulatory Costs'” (April 5, 2017). However, this rule is considered a deregulatory action under Executive Order 13771 and the estimated annualized savings to the public are $481,089. CBP has prepared the following analysis to help inform stakeholders of the impacts of this proposed rule.

1. Need and Purpose of Rule

The current customs brokers regulations are based on the district system in which entry, entry summary, and post-summary activity are all handled by the ports within a permit district. In the rule published concurrently (RIN 1651-AB16) with this proposed rule, CBP proposes to modernize the regulations governing customs brokers to better reflect the current work environment and streamline the customs broker permitting process to save money.

2. Background

The customs territory of the United States is divided into seven customs regions. Within each region, the customs territory of the United States is further divided into districts; there are currently 40 customs districts.^[1] Currently, a district permit is required for each district in which a customs broker intends to conduct customs business. Each district permit requires a one-time permit fee of $100 and an annual user fee of $141.70. A customs broker has the option of receiving his/her first district permit concurrently with the receipt of the customs broker license in which case the $100 permit fee is waived. In an effort to modernize the permitting process for customs brokers, the proposed rule published concurrently in the FR (RIN 1651-AB16) will eliminate the district permitting process and automatically grant each district permit holder a national permit.

3. Proposed Rule Amendments: Costs and Benefits

Concurrently with this document, CBP is publishing a notice of proposed rulemaking that eliminates customs broker districts (see “Modernization of the Customs Brokers Regulations” RIN 1651-AB16). CBP proposes to transition all brokers to national permits and to expand the scope of the national permit authority to allow national permit holders to conduct any type of customs business throughout the customs territory of the United States. By transitioning to a national permit, CBP proposes to eliminate the requirements for brokers to maintain district permits and pay the annual user fee. Consequently CBP proposes to eliminate customs broker district permit annual user fees. CBP has prepared the following analysis to help inform stakeholders of the impacts of this proposed rule.

3.1 Permit User Fee

Currently, the payment of an annual permit user fee of $141.70 is required for each permit that is granted to an individual, partnership, association, or corporate broker. The permit user fee is payable for each district and/or national permit a customs broker has, including when a district permit is issued concurrently with the broker's license. As a result of the concurrent CBP rule, district permits will be eliminated and customs brokers will only need to pay an annual user fee on a single national permit.^[2]

According to data from CBP's Broker Management Branch, as of January 2017 there were 2,093 ^[3] brokers holding one or more district permits ^[4] that have 3,067 active district permits. This is an average of approximately 1.5 district permits per customs broker permit holder. Using this figure we can now project how many district permits brokers who currently hold at least one permit, would have had over the period of the analysis, from 2017 through 2021 under the baseline condition (i.e., if this rule is not promulgated). This is shown in Exhibit 1 below.

Absent this rule, there would be 4,654 new individual licenses and 581 new corporate licenses issued for a total of 5,235 licenses (see Exhibit 1). Using the aforementioned ratio of district permits to customs broker permit holders of 1.5 district permits to 1 customs broker permit holder, these 5,235 broker licenses would result in 7,853 district permits. According to CBP's Broker Management Branch, in addition to the 7,853 district permits that would be granted over the period of analysis, approximately 150 national permits are issued annually. This means that over the period of analysis from 2017 through 2021, 750 national permits will be granted to customs brokers in addition to the 7,853 district permits for a total of 8,603 permits. Absent this rule, these 8,603 permits would result in permit user fee charges of $1,219,045 (8,603 total permits * $141.70 annual permit user fee) over the period of the analysis. With this rule in place, the 5,235 total brokers would only receive a single national permit each for a total of 5,235 permits. This would result in permit user fee charges over the period of analysis of $741,800 (5,235 national permits * $141.70 annual permit user fee). This represents total savings to new customs brokers of $477,245 ($1,219,045 − $741,800) over the period of analysis. Please see Exhibit 2, below, for the estimated annual cost savings.

Current brokers that have more than one permit will also benefit from this rule. According to CBP's Broker Management Branch, as of January 2017 there were 1,319 brokers that either have more than one district permit or a combination of at least one district permit and a national permit. These 1,319 brokers currently hold a total of 3,613 permits which results in a ratio of 2.73 permits per broker (some of the existing brokers hold significantly more than the average of 1.5 permits per customs broker permit holder). Absent this rule, these permits would result in an annual permit user fee charge in 2017 of $511,962 (3,613 permits * $141.70 annual permit user fee) or $2,559,810 over the period of analysis from 2017 through 2021. As a result of this rule, the 1,319 brokers would only need to hold a single national permit for a total of 1,319 permits. This would result in an annual permit user fee charge in 2017 of $186,902 (1,319 national permits * $141.70 annual permit user fee) or $934,510 over the period of analysis. This represents an annual savings in 2017 of $325,060 ($511,962−$186,902) or $1,956,192 over the period of analysis to customs brokers who currently hold more than one permit. This also represents a decrease in the transfer payment from customs brokers to the government of $1,956,192 over the period of analysis from 2017 through 2021. Please see Exhibit 3, below, for the estimated annual cost savings for existing license holders.

3.2 Total Costs

The elimination of the annual user fee for district permits does not result in any costs to brokers, but as noted above the rule yields the aforementioned cost savings.

3.3 Total Benefits

The total annual monetized cost savings for customs brokers are the result of monetary savings from switching from a district permitting system to a national permitting system. Specifically, the cost savings are the result of the payment of the annual permit user fee for only a single national permit instead of for each of the potentially several district permits a broker holds. As shown in Exhibit 4 below, total savings over the period of analysis are approximately $2.4 million dollars.

Exhibit 5 shows the total and annualized savings over the period of analysis (2017-2021) at a three (3) and seven (7) percent discount rate, per guidance provided in OMB Circular A-4. Total benefits range from approximately $2.1 to $2.3 million over the period of analysis. Annualized benefits are approximately $480,000.

3.4 Net Benefits

Exhibit 6 summarizes the monetized costs and benefits of this rule to individual and business entity customs brokers. As shown, the total monetized present value net benefit of this rule over a 5-year period of analysis from 2017-2021 ranges from approximately $2.3 to $2.4 million and the annualized net benefit is approximately $500,000. In 2017, we estimate that 859 brokers will receive their broker licenses (762 individual licenses plus 97 corporate licenses). The adoption of this rule will result in an average annual net benefit per broker in 2017 of $560 ($481,089 annualized net benefit/859 total new brokers for 2017).

4. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as amended by the Small Business Regulatory Enforcement and Fairness Act of 1996, requires agencies to assess the impact of regulations on small entities. A small entity may be a small business (defined as any independently owned and operated business not dominant in its field that qualifies as a small business per the Small Business Act); a small not-for-profit organization; or a small governmental jurisdiction (locality with fewer than 50,000 people).

The proposed rule will apply to all customs brokers, regardless of size. Accordingly, the proposed rule will affect a substantial number of small entities. However, as stated above in the Executive Orders 13563, 12866, and 13771 section, the proposed rule will result in an average savings per customs broker of a discounted present value of $560. Since brokers, on average, will benefit as a result of this rule, and the savings are relatively small on a per broker basis, it will not have a significant impact on customs brokers. Accordingly, CBP certifies that this rule does not have a significant impact on a substantial number of small entities.

5. Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. 3507) an agency may not conduct, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number assigned by OMB. The collections of information contained in these regulations are provided for by OMB control number 1651-0034 (CBP Regulations Pertaining to Customs Brokers) and by OMB control number 1651-0076 (Recordkeeping Requirements). This rule does not change the burden under these information collections.

Signing Authority

This regulation is being issued in accordance with 19 CFR 0.1(a)(1) pertaining to the Secretary of the Treasury's authority (or that of his delegate) to approve regulations related to certain customs revenue functions.

List of Subjects

19 CFR Part 24

• Accounting
• Claims
• Customs duties and inspection
• Harbors
• Reporting and recordkeeping requirements
• Taxes

19 CFR Part 111

• Administrative practice and procedure
• Brokers
• Customs duties and inspection
• Penalties
• Reporting and recordkeeping requirements

Proposed Amendments to the CBP Regulations

For the reasons set forth in the preamble, parts 24 and 111 of title 19 of the Code of Federal Regulations (19 CFR parts 24 and 111) are proposed to be amended as set forth below.

PART 24—CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE

1. The general authority citation for part 24 continues to read as follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 58a-58c, 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States), 1505, 1520, 1624; 26 U.S.C. 4461, 4462; 31 U.S.C. 3717, 9701; Pub. L. 107-296, 116 Stat. 2135 (6 U.S.C. 1 et seq.).

2. In § 24.22:

a. Paragraph (h) is amended by:

i. Removing the phrase “each district permit and for” in the first sentence;

ii. Removing the second sentence; and

iii. Removing the word “port” from the third sentence and adding in its place the words “designated Center”; and

b. Paragraph (i)(9) is amended by removing the phrase “: for district permits, class code 497;” from the first sentence.

PART 111—CUSTOMS BROKERS

3. The authority citation for part 111 is revised to read as follows:

Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States), 1624; 1641.

Section 111.2 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.

4. In § 111.19, revise the section heading and paragraph (c) to read as follows:

5. In § 111.96, paragraph (c) is revised to read as follows:

Footnotes