Source: https://www.federalregister.gov/documents/2020/06/05/2020-04708/elimination-of-customs-broker-district-permit-fee
Timestamp: 2020-08-15 08:04:11
Document Index: 27875

Matched Legal Cases: ['art 111', 'art 111', 'arts 24', 'art 24', 'art 24', 'art 111', 'art 111', 'arts 24', 'arts 24', 'art 111', '§\u2009111', '§\u2009111', '§\u2009111', '§\u2009111', '§\u200924', '§\u2009111', '§\u2009111', '§\u200924', '§\u2009111']

Federal Register :: Elimination of Customs Broker District Permit Fee
A Proposed Rule by the U.S. Customs and Border Protection on 06/05/2020
Comments must be received on or before August 4, 2020.
85 FR 34549
Docket No. USCBP-2020-0010
1515-AE43
as of 08/15/2020 at 2:15 am EDT
USCBP-2020-0010
Elimination of District Permits
Elimination of District Permit Fees
1. Need and Purpose of Rule
3. Proposed Rule Amendments: Costs and Benefits
3.1 Permit User Fee
3.2 Total Costs
3.3 Total Benefits
3.4 Net Benefits
https://www.federalregister.gov/d/2020-04708
U.S. Customs and Border Protection, DHS; Department of the Treasury.
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.
Federal eRulemaking Portal at http://www.regulations.gov. Follow the instructions for submitting comments via Docket No. USCBP-2020-0010.
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 Start Printed Page 34550 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.
Melba Hubbard, Chief, Broker Management Branch, (202) 863-6986, melba.hubbard@cbp.dhs.gov.
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.
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 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.
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.
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.
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.Start Printed Page 34551
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.
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.
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.
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.
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.
Exhibit 1—Projection of New Individual and Corporate Permits
New individual licenses issued
New individual permits
New corporate licenses issues
New corporate permits
2017 762 1,143 97 146
2018 839 1,258 106 159
2019 922 1,384 115 173
2020 1,015 1,522 126 188
2021 1,116 1,674 137 205
Total 4,654 6,981 581 871
Note: Values may not sum to total due to rounding.
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.
Exhibit 2—Cost Savings From the Permit User Fee for New Licenses
[$2016]
New district permits
New national permits
Savings as a result of this proposed rule
2017 859 1,289 150 1,439 $82,186
2018 945 1,418 150 1,568 88,279
2019 1,037 1,556 150 1,706 94,797
2020 1,141 1,712 150 1,862 102,166
2021 1,253 1,880 150 2,030 110,101
Total 5,235 7,853 750 8,603 477,245
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 $1,956,192 over the period of analysis from 2017 through 2021. Please see Exhibit 3, below, for the estimated annual cost savings for existing license holders.
Exhibit 3—Cost Savings From the Permit User Fee for Existing Licenses Over Period of Analysis
Existing licenses 5
Number of permits absent rule
Number of permits with rule
Cost absent rule ($)
Cost with rule ($)
Annual cost savings over period of analysis ($)
2017 1,319 3,613 1,319 511,962 186,902 325,060
2018 1,444 3,943 1,444 558,716 204,658 354,058
2019 1,582 4,318 1,582 611,794 224,101 387,694
2020 1,732 4,728 1,732 669,915 245,390 424,525
2021 1,896 5,177 1,896 733,557 268,702 464,855
Total 3,085,945 1,129,753 1,956,192
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.
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 4—Total Annual Undiscounted Savings for Brokers ($2016), 2017-2021
2017 $407,246
2018 442,337
2019 482,491
2020 526,691
2021 574,956
Total 2,433,721
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.
Exhibit 5—Total Present Value and Annualized Benefits, From 2017-2021
Total present value benefits
$2,284,331 $2,110,639 $484,266 $481,089
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).
Exhibit 6—Present Value and Annualized Net Benefit of Rule ($2016), 2017-2021
Total Cost $0 $0 $0 $0
Total Benefit 2,284,331 484,266 2,110,639 481,089
Total Net Benefit 2,284,331 484,266 2,110,639 481,089
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 Start Printed Page 34554governmental 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.
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.
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.
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.
3. The authority citation for part 111 is revised to read as follows:
Section 111.2 also issued under 19 U.S.C. 1484, 1498;
4. In § 111.19, revise the section heading and paragraph (c) to read as follows:
National permit.
(c) Fees. A national permit issued under paragraph (a) of this section is subject to the permit application fee specified in § 111.96(b) and to the customs user permit fee specified in
(c). The fees must be paid at the designated Center (see § 111.1) or online with the submission of the permit application.
5. In § 111.96, paragraph (c) is revised to read as follows:
(c) Permit user fee. Payment of an annual permit user fee defined in § 24.22(h) of this chapter is required for a national permit granted to an individual, partnership, association, or corporate broker. The permit user fee is payable with the filing of an application for a national permit under § 111.19(b), and for each subsequent calendar year at the designated Center referred to in § 111.19(b). The permit user fee must be paid by the due date as published annually in the Federal Register, and must be remitted in accordance with the procedures set forth in § 24.22(i) of this chapter. When a broker submits an application for a national permit under § 111.19(b), the full permit user fee must be remitted with the application, regardless of the point during the calendar year at which the application is submitted. If a broker fails to pay the annual permit user fee by the published due date, the permit is revoked by operation of law. The director of the designated Center will notify the broker in writing of the failure to pay and the revocation of the permit.
Approved: March 3, 2020.
1. In addition to the 40 geographically defined customs districts, there are three special districts that are responsible for specific types of imported merchandise. These special districts include districts 60, 70 and 80. District 60 refers to entries made by vessels under their own power. District 70 refers to shipments with a value under $800. District 80 refers to mail shipments. These three special districts do not require the use of a licensed broker with a specific district permit and as a result are not affected by this proposal.
2. The reduction of the fee revenue will result in less funds available for CBP operations, but this is offset by the reduction in costs to process the permits. Thus, there is no net effect to CBP in reducing this revenue.
3. This figure represents all current licensed brokers that are permit holders, regardless of what year they received their license and is inclusive of the 1,258 brokers that hold at least one district permit concurrently with a national permit.
4. Note that 11,531 brokers (13,624 active broker licenses −2,093 customs broker permit holders) do not have any permits at all, and as a result, will not be affected by the permitting changes of this rule.
5. A growth rate of 9.5 percent was used to project the number of existing licenses over the period of analysis. The 9.5 percent figure is the average of the ten (10) percent calculated average growth rate for individual licenses and the nine (9) percent calculated average growth rate for corporate licenses that was used in the analysis.
[FR Doc. 2020-04708 Filed 6-4-20; 8:45 am]