[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]]

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Part IV





Department of the Treasury





_______________________________________________________________________



Customs Service



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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

[[Page 22745]]

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

[[Page 22747]]

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