Proposed Revisions To Customs Broker "Recordkeeping" Regulations

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1 NATIONAL CUSTOMS BROKERS & I200 I ~ T HST.,NW, SUITE901 WASHINGTON, DC FORWARDERS ASSOCIATION OF AMERICA, INC. PHONE 202/ FAX 202/ U.S. Customs and Border Protection 1400 L Street, N.W. Washington, DC August 27,2007 Attention: Daniel Baldwin Assistant Commissioner Re: Proposed Revisions To Customs Broker "Recordkeeping" Regulations Dear Assistant Commissioner Baldwin: This letter sets forth a request by the National Customs Brokers and Forwarders Association of America, Inc., ("NCBFAA") to approve two much needed revisions of the current regulatory requirements relating to recordkeeping requirements for licensed customs brokers. Section 163.3(b)(2)(iii), C.R.' Pursuant to section 163.5(b)(2), C.R., many of our members have received permission from Customs and Border Protection ("CBP") to maintain the entry records in an alternative, electronic, format. The approved methods maintain permanent copies of the original documents. In practice, all records relating to a broker's customs business are filed as the broker receives them and/or at the time the broker files the entry. However, solely because of section 1 Section 163.5(b)(2)(iii) presently provides that, "Except in the case of packing lists (see (b)(2)), entry records must be maintained in their original formats for a period of 120 calendar days from the end of the release or conditional release period, whichever is later, or, if a demand for return to Customs custody has been issued, for a period of 120 calendar days either from the date the goods are redelivered or from the date specified in the demand as the latest redelivery date if redelivery has not taken place;

2 163.5(b)(2)(iii), the broker must keep the or_q~ginal "entry records" for a minimum of 120 days after release of the imported merchandise, irrespective of the fact that the paper document has been electronically stored. In essence, this requires that the brokers who have been approved for electronic storage must also maintain a separate "paper" filing system. Further, because the period for retention varies, depending upon the extent of the "conditional release" period and/or whether a redelivery notice has been issued, a broker is precluded from establishing a reliable schedule for the routine systematic destruction of the original documents. In most cases, the result is that the broker maintains these records for the entire recordkeeping period set forth under 19 C.F.R While customs brokers clearly understand and appreciate that paper "entry records" are no longer automatically filed with and/or maintained by CBP, the retention of the original paper documents creates an unnecessary burden on our member brokers. Certainly, at the time the regulations were promulgated, no one could foresee the great strides that would occur in electronic imaging and storage. In addition, under amended 19 U.S.C. 1509, the importer is the primary keeper of the "entry records." In many instances, the customs broker only receives co_gpies of these source documents from the importer and, paradoxically, that is the record that the broker is now required to keep. In a practical and legal sense, they are "evidence" of the record the broker relied upon in submitting the entry/entry summary. An electronic image of the documents serves exactly the same purpose. In view of the above, we request that your office give favorable consideration to amending the provisions of Section 163 to allow for the retention of an electronic copy of entry records without a "hard copy" retention period by eliminating the requirement imposed by 163(b)(2)(iii) or to clarify that the importer (or its designated record keeper) is responsible to retain the original entry record. Enclosed is our suggested language. SERVICE " INTEGRITY TRUST

3 Section ~C.R. 2 Pursuant to section 19 C.F.R (a), licensed customs brokers are required to maintain records "within the broker district that covers the port to which they relate. 3 The Regulations (19 C.F.R. 119(b)(6)) also provide that in connection with an application for a "Permit," the broker shall provide CBP with "The place where the applicant s brokerage records will be retained and the name of the applicant s designated recordkeeping contact." The difficulty with this regulation is best illustrated by those brokers who have multiple permitted offices (and may in fact have multiple offices within a single district) and file entries for a single client through more than one location. In these cases, it is not uncommon for the client s documents to be directed to a single location (point of contact) for processing even though the entries may be transmitted from multiple locations. It may not be possible to designate a recordkeeping consolidation point or redistribute records to the ports of entry except at great risk to record integrity. Our members are mindful of the requirement, under 19 C.F.R , that these records "must be made available upon reasonable notice" by an authorized Customs official, at the district office that submitted the entry, irrespective of where they are located. Notwithstanding the fact that documents are routinely placed in storage at remote locations, in today s business environment those records can either be printed on any networked computer terminal (if stored electronically)or transferred between offices on an "overnight" basis. Thus, our members would - Section , C.R., provides in relevant part as follows: Retention of records. (a) Place and period retention- (l) Place. Records must 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 locations, and provides advance notice of that consolidation to Customs, in accordance with paragraph (b) of this section. **** (b) Notification of consolidated records- (I) Applicability. Subject to the requirements of paragraph (b)(2) of this section and except when a restriction applies under 163.5(b) of this chapter, the option of maintaining records on a consolidated system basis is 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 The written notice must 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; **** 3 Under 19 C.F.R , they include both its "records of account" and those relating to its "customs business." INTEliNET: SERVICE INTL 3GRITY " TRUST ." staff@ncbfaa.org

4 be able to satisfy the requirement that they be "reasonably" available at the permitted location, although not stored there. In order to accomplish this result, we ask that you modify the current regulations so as to require only that the licensee provide the name of the individual, located within the particular broker district, designated as the "record keeper," without also requiring the specific location of the records. Attached for your consideration are our suggestions to accomplish this. We would be pleased to meet with you or representatives of your staff to further discuss these matters. Please do not hesitate to contact me at (212) should further information be required. Sincerely, Alan R. Klestadt Customs Counsel Enclosures SERVICE INTi~GRITY TRUST

5 NCBFAA Proposed Amendment to Part 163 Either, eliminate section 163.5(b)(1) from the Customs Regulations, or Amend the provision to require only that the importer maintain the original record for the required period, as follows: Methods for storage of records (b) Alternative method of storage- (2) Standards for alternative storage methods. Methods commonly used in standard business practice for storage of records include, but are not limited to, machine readable data, CD ROM, and microfiche. Methods that are in compliance with generally accepted business standards will generally satisfy CBP requirements, provided that the method used allows for retrieval of records requested within a reasonable time after the request and provided that adequate provisions exist to prevent alteration, destruction, or deterioration of the records. The following standards must be applied by recordkeepers when using alternative storage methods: (iii) Except in the case of packing lists (see 163.4(b)(2)), entry records must be maintained by the importer in their original formats for a period of 120 calendar days from the end of the release or conditional release period, whichever is later, or, if a demand for return to CBP custody has been issued, for a period of 120 calendar days either from the date the goods are redelivered or from the date specified in the demand as the latest redelivery date if redelivery has not taken place; SERVICE INTEGRITY TRUST DRAFT

6 PROPOSED CHANGES TO PART 111, C.R. Amend section (b)(6) to read: The name of the applicant s designated recordkeeping contact (see and )." Amend section to read: (a) Place and period of retention- (I) Place. Records must be retained by a broker in accordance with the provisions of this part and part 163 of this chapter and shall be made available upon reasonable notice 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 that consolidation to Customs, in accordance with paragraph (b) of this section _1 SERVICE INTEGRITY TRUST DRAFT