[Federal Register Volume 77, Number 111 (Friday, June 8, 2012)]
[Rules and Regulations]
[Pages 33964-33967]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13907]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 111 and 163

[CBP Dec. 12-12; USCBP-2009-0019]
RIN 1515-AD66 (Formerly RIN 1505-AC12)


Customs Broker Recordkeeping Requirements Regarding Location and 
Method of Record Retention

AGENCIES: U.S. Customs and Border Protection, Department of Homeland 
Security; Department of the Treasury.

ACTION: Final rule.

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SUMMARY: This document adopts as a final rule, with an additional 
technical correction, proposed amendments to the Customs and Border 
Protection (CBP) regulations regarding customs broker recordkeeping 
requirements as they pertain to the location and method of record 
retention. The amendments permit a licensed customs broker, under 
prescribed conditions, to store records relating to his or her customs 
transactions at any location within the customs territory of the United 
States. The amendments also remove the requirement, as it currently 
applies to brokers who maintain separate electronic records, that 
certain entry records must be retained in their original format for the 
120-day period after the release or conditional release of imported 
merchandise. These changes maximize the use of available technologies 
and serve to conform CBP's recordkeeping requirements to reflect modern 
business practices without compromising the agency's ability to monitor 
and enforce recordkeeping compliance.

DATES: Effective July 9, 2012.

FOR FURTHER INFORMATION CONTACT: Anita Harris, Broker Compliance 
Branch, Trade Policy and Programs, Office of International Trade, 
Customs and Border Protection, 202-863-6069.

SUPPLEMENTARY INFORMATION: 

Background

    On March 23, 2010, U.S. Customs and Border Protection (CBP) 
published in the Federal Register (75 FR 13699) a proposal to amend 
title 19 of the Code of Federal Regulations (19 CFR) regarding customs 
broker recordkeeping requirements as they pertain to the location and 
method of record retention. In that document, CBP proposed amendments 
to the CBP regulations to permit a licensed customs broker to store 
records relating to his or her customs transactions at any location 
within the customs territory of the United States, so long as the 
broker's designated recordkeeping contact, identified in the broker's 
permit application, makes all records available to CBP within a 
reasonable period of time from request at the broker district that 
covers the CBP port to which the records relate. The document also 
proposed to remove the requirement, as it applied to brokers who 
maintain separate electronic records, that certain entry records must 
be retained in their original format for the 120-day period after the 
release or conditional release of imported merchandise.
    CBP solicited comments on the proposed rulemaking.

Discussion of Comments

    Eleven commenters responded to the solicitation of public comment 
in the proposed rule. Eight commenters expressed support for the 
proposed rulemaking, noting in particular that the proposed amendments 
serve to maximize the use of available technologies, increase 
efficiency and reduce the cost of storing records. Several of these 
eight commenters included additional suggestions.
    A description of the comments received, together with CBP's 
analyses, is set forth below.
    Comment: One commenter requested that CBP issue guidance to the 
ports as to what constitutes a ``reasonable time

[[Page 33965]]

period'' within which a broker must produce requested documentation. 
The commenter also suggested that CBP allow brokers to submit requested 
entry documents to any port in an electronic format.
    CBP Response: In an effort to maintain uniform standards at its 
ports, CBP is amending 19 CFR 111.23(a) in this final rule by replacing 
the term ``reasonable time period'' with ``30 calendar days, or such 
longer time as specified by CBP.'' Regarding the submission of 
requested entry-related documentation in an electronic format, CBP 
intends, through the Automated Commercial Environment (ACE) and related 
technology, to allow for the submission of entry-related documentation 
through electronic imaging.
    Comment: One commenter inquired whether the ability to reproduce 
entry data that is generated by an application-based software program, 
as opposed to data stored in an electronic Portable Document Format 
(PDF) or Tagged Image File (TIF) format, satisfies CBP's electronic 
recordkeeping requirements.
    CBP Response: Yes, but unless otherwise excepted, documents must be 
maintained in their original format for 120 days.
    Comment: One commenter inquired whether a broker's electronic 
(imaged file) documentation can be maintained on a server physically 
located outside the customs territory of the United States.
    CBP Response: For purposes of complying with CBP's broker 
recordkeeping requirements, a broker's electronic documentation must be 
maintained on a server physically located within the customs territory 
of the United States wherein CBP has jurisdiction to issue a summons 
under 19 U.S.C. 1509(a)(2).
    Comment: Two commenters recommended that CBP further amend 19 CFR 
163.5(b)(2)(iii) by removing the requirement for express consignment 
brokers who are also serving as importers of record to maintain records 
in their original format for 120 days following the end of release or 
conditional release. The commenters stated that many brokers are the 
importer of record for numerous shipments and the 120-day recordkeeping 
requirement is burdensome. Additionally, removing this requirement 
would allow these brokers to manage their recordkeeping 
responsibilities in a systemic manner which parallels their day-to-day 
business practices.
    CBP Response: CBP will not remove the requirement for brokers who 
are also serving as importers of record to maintain records in their 
original format for the prescribed 120-day period. The intent of the 
proposed amendments is to eliminate duplicative record retention 
requirements, and not to alter the importer of record's ultimate 
responsibility.
    Comment: Two commenters noted that most large customs brokers 
operate nationally (in 42 districts) and are not limited to the 
specific district in which they are physically located. Unless a broker 
is able to obtain a waiver from CBP, he or she is faced with the burden 
of procuring 42 permit qualifiers. The commenters also stated that the 
recent promulgation of the Remote Location Filing regulations is 
indicative of the fact that modern business practices allow a customs 
broker to operate nationally regardless of their actual locations. In 
light of the above, the commenters suggested that CBP should revise the 
current regulations that require an individual licensed broker to be 
designated as a permit qualifier in each customs district. The 
commenters are of the view that having one national permit without 
local district permit qualifiers will have no impact on broker 
responsibilities or liability, as CBP can easily obtain required 
information and records without the need to have a person available to 
contact locally in each district.
    CBP Response: The recommendation to revise the current regulations 
that require an individual licensed broker to be designated as a permit 
qualifier in each district is beyond the scope of this proposed 
rulemaking. CBP is, however, engaged in a comprehensive review of the 
role of brokers, and will consider the proposal in that context.
    Comment: One commenter noted that there does not appear to be any 
reason to distinguish ``packing lists'' from the other types of records 
associated with an import transaction and, therefore, CBP should remove 
the existing exception in 19 CFR 163.5(b)(2)(iii) which excludes 
``packing lists'' from the types of records that a broker must maintain 
for the requisite 120-day period. The commenter recommended that the 
final rule provide that the obligation for maintaining original 
records, including packing lists, rests with the importer of record in 
accordance with 19 U.S.C. 1509. At a minimum, the commenter suggested 
that the final rule clarify that the obligation to maintain packing 
lists in original form does not extend to brokers.
    CBP Response: CBP notes that Sec.  163.4(b)(2) requires, in 
pertinent part, that packing lists must be retained for a shorter 60-
day, rather than a 120-day, period. It is further noted that the intent 
of the proposed rulemaking is not to alter the scope of a broker's 
recordkeeping requirements; therefore, the obligation to maintain 
packing lists will continue to apply.
    Comment: One commenter suggested the following technical amendments 
to the final rule:
     The word ``broker'' should be removed from 19 CFR 
111.23(a) in that there is no such thing as a ``broker district.''
     Section 163.5(b)(3) has been modified to provide that 
changes to alternative storage procedures must be approved by 
Regulatory Audit in Charlotte, North Carolina. However, Sec. Sec.  
111.23(b)(2), 163.5(b)(1), 163.12(b)(2) and 163.12(c)(1) still require 
that approval be sought from Regulatory Audit in Miami. These locations 
should be harmonized.
     Several references to ``Customs'' throughout the cited 
sections should be changed to ``CBP.''
    CBP Response: CBP does not agree that the word ``broker'' should be 
deleted from 19 CFR 111.23(a). CBP still recognizes broker districts in 
the administration of broker permits even though districts and regions 
were eliminated in the agency reorganization of 1995.
    The regulatory provisions cited by the commenter, in fact, 
currently reflect the Regulatory Audit office located in Charlotte, 
N.C., and do not need to be amended. See CBP Dec. 07-82 of October 19, 
2007 (72 FR 59174).
    When CBP proposes to amend a regulatory provision, it endeavors to 
change all outdated references in the section to ``Customs'' and 
replace it with either ``CBP'' or ``customs,'' as appropriate. The 
proposed rulemaking omitted one such reference in Sec.  163.5(b)(2)(i), 
and this document corrects such omission.

Conclusion

    After analysis of the comments and further review of the matter, 
CBP has determined to adopt as final, with the technical change noted 
above in Sec.  163.5(b)(2)(i), and a clarification, the proposed rule 
published in the Federal Register (75 FR 13699) on March 23, 2010. The 
change to 19 CFR 111.23(a) clarifies that ``the reasonable time 
period'' within which a designated recordkeeping contact must make all 
records available to CBP is ``30 calendar days, or such longer time as 
specified by CBP.''

The Regulatory Flexibility Act and Executive Order 12866

    Because these amendments liberalize broker recordkeeping 
requirements and

[[Page 33966]]

place no new regulatory requirements on small entities to change their 
business practices, pursuant to the provisions of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., it is certified that the 
amendments will not have a significant economic impact on a substantial 
number of small entities. Further, these amendments do not meet the 
criteria for a ``significant regulatory action'' as specified in E.O. 
12866.

Paperwork Reduction Act

    The information collections contained in this rule have been 
previously submitted and approved by the Office of Management and 
Budget (OMB) and assigned OMB control numbers 1651-0076 and 1651-0034. 
An agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a valid 
control number assigned by OMB.

Signing Authority

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

List of Subjects

19 CFR Part 111

    Administrative practice and procedure, Brokers, Customs duties and 
inspection, Licensing, Penalties, Reporting and recordkeeping 
requirements.

19 CFR Part 163

    Administrative practice and procedure, Customs duties and 
inspection, Penalties, Reporting and recordkeeping requirements.

Amendments to the Regulations

    For the reasons stated in the preamble, parts 111 and 163 of title 
19 of the CFR (19 CFR parts 111 and 163) are amended as set forth 
below.

PART 111--CUSTOMS BROKERS

0
1. The authority citation for part 111 continues to read in part as 
follows:

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

0
2. Section 111.23 is revised to read as follows:


Sec.  111.23  Retention of records.

    (a) Place of retention. A licensed customs broker may retain 
records relating to its customs transactions at any location within the 
customs territory of the United States in accordance with the 
provisions of this part and part 163 of this chapter. Upon request by 
CBP to examine records, the designated recordkeeping contact identified 
in the broker's applicable permit application, in accordance with Sec.  
111.19(b)(6) of this chapter, must make all records available to CBP 
within 30 calendar days, or such longer time as specified by CBP, at 
the broker district that covers the CBP port to which the records 
relate.
    (b) Period of retention. The records described in this section, 
other than powers of attorney, must be retained for at least 5 years 
after the date of entry. Powers of attorney must be retained until 
revoked, and revoked powers of attorney and letters of revocation must 
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, records relating to the 
withdrawal must be retained for 5 years from the date of withdrawal of 
the last merchandise withdrawn under the entry.

PART 163--RECORDKEEPING

0
3. The authority citation for part 163 continues to read in part as 
follows:

    Authority:  5 U.S.C. 301; 19 U.S.C. 66, 1484, 1508, 1509, 1510, 
1624.

0
4. In Sec.  163.5:
0
a. Paragraph (a) is amended in the first sentence by removing the word 
``shall'' and adding in its place the word ``must'', and in the second 
sentence by removing the word ``Customs'' and adding in its place the 
term ``CBP'';
0
b. Paragraph (b)(2) introductory text is amended in the second sentence 
by removing the word ``Customs'' and adding in its place the term 
``CBP'';
0
c. Paragraph (b)(2)(i) is amended by removing the word ``Customs'' and 
adding in its place the term ``CBP'';
0
d. Paragraph (b)(2)(iii) is revised;
0
e. Paragraph (b)(2)(v) is amended by removing the word ``Customs'' and 
adding in its place the term ``CBP'';
0
f. Paragraph (b)(2)(vi) is amended by removing the word ``shall'' and 
adding in its place the word ``must'';
0
g. Paragraph (b)(3) is amended by removing the words ``the Miami 
regulatory audit field office'' and adding in their place the language, 
``Regulatory Audit, Office of International Trade, Customs and Border 
Protection, 2001 Cross Beam Drive, Charlotte, North Carolina 28217'';
0
h. Paragraph (b)(4) is amended by removing the words ``shall be'' and 
adding in their place the word ``are''; and
0
i. Paragraph (b)(5) is revised.
    The revisions read as follows:


Sec.  163.5  Methods for storage of records.

* * * * *
    (b) * * *
    (2) * * *
    (iii) Except in the case of packing lists (see Sec.  163.4(b)(2)), 
entry records must be maintained by the importer in their original 
formats for a period of 120 calendar days from the end of the release 
or conditional release period, whichever is later, or, if a demand for 
return to CBP custody has been issued, for a period of 120 calendar 
days either from the date the goods are redelivered or from the date 
specified in the demand as the latest redelivery date if redelivery has 
not taken place. Customs brokers who are not serving as the importer of 
record and who maintain separate electronic records are exempted from 
this requirement. This exemption does not apply to any document that is 
required by law to be maintained as a paper record.
* * * * *
    (5) Failure to comply with alternative storage requirements. If a 
person listed in Sec.  163.2 uses an alternative storage method for 
records that is not in compliance with the conditions and requirements 
of this section, CBP may issue a written notice informing the person of 
the facts giving rise to the notice and directing that the alternative 
storage method must be discontinued in 30 calendar days unless the 
person provides written notice to the issuing CBP office within that 
time period that explains, to CBP's satisfaction, how compliance has 
been achieved. Failure to timely respond to CBP will result in CBP 
requiring discontinuance of the alternative storage method until a 
written statement explaining how compliance has been achieved has been 
received and accepted by CBP.


Sec.  163.12  [Amended]

0
5. In Sec.  163.12:
0
a. Paragraph (a) is amended by removing the word ``Customs'' wherever 
it appears and adding in its place the term ``CBP'';
0
b. Paragraph (b)(2) is amended: by removing the word ``shall'' wherever 
it appears and adding in its place the word ``must'', and; in the 
second sentence, by removing the words ``Customs Recordkeeping'' and 
adding in their place the words ``CBP Recordkeeping'' and removing the 
language ``the Customs Electronic Bulletin Board (703-921-6155)'' and 
adding in its place the language, ``CBP's

[[Page 33967]]

Regulatory Audit Web site located at http://www.cbp.gov/xp/cgov/import/
regulatory--audit--program/archive/compliance--assessment/'';
0
c. Paragraph (b)(3) introductory text is amended: In the first, third 
and fourth sentences, by removing the word ``Customs'' wherever it 
appears and adding in its place the term ``CBP'', and; in the second 
sentence, by removing the word ``Customs'' and adding in its place the 
words ``all applicable'';
0
d. Paragraphs (b)(3)(iii), (iv), (v), and (vi) are amended by removing 
the word ``Customs'' wherever it appears and adding in its place the 
term ``CBP'';
0
e. Paragraph (c)(1) is amended by removing the word ``shall'' wherever 
it appears and adding in its place the word ``will'';
0
f. Paragraph (c)(2) is amended: By removing the word ``Customs'' and 
adding in its place the term ``CBP''; by removing the word ``Miami'' 
and adding in its place the word ``Charlotte'', and; by removing the 
word ``shall'' and adding in its place the word ``will'';
0
g. Paragraph (d)(1) is amended: In the first sentence, by removing the 
words ``Customs shall'' and adding in their place the words ``CBP 
will'', and; in the second sentence, by removing the word ``Customs'' 
and adding in its place the word ``CBP'';
0
h. The introductory text to paragraph (d)(2) is amended by removing the 
word ``shall'' and adding in its place the word ``must''; and
0
i. Paragraph (d)(3) is amended: By removing the word ``shall'' and 
adding in its place the word ``must''; and, by removing the word 
``Customs'' and adding in its place the term ``CBP''.

David V. Aguilar,
Acting Commissioner, U.S. Customs and Border Protection.
    Approved: June 4, 2012.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 2012-13907 Filed 6-7-12; 8:45 am]
BILLING CODE 9111-14-P