Many parcel shippers find that using a licensed customs broker is essential when making international shipments, since every cross-border shipment is both an import and export transaction involving two different governments. Many parcel shippers, especially those just venturing into international trade, may also engage the services of a customs broker without a full understanding of the legal role of the customs broker and the parcel shipper’s legal obligations to the government as the party actually responsible for the import or export transaction.

Customs brokers are licensed by US Customs and Border Protection (CBP) to transact “customs business” on behalf of others (19 U.S.C. §1641). Their licensing and performance of services are subject to CBP regulation (19 CFR Part 111). A licensed customs broker can provide advice on what documents are required to clear merchandise through customs; how to determine the country of origin and the proper classification of the merchandise under the Harmonized Tariff System (HTS); and how to calculate the valuation and amount of taxes and duties owed on the import. They can advise on other laws and regulations that may apply to the importation and exportation of the shippers’ goods. They can also assist in the preparation and filing of required documents and engage in communications with government agencies on behalf of their client as the entry is processed.

However, the fact that the customs broker can and does provide such advice and services does not mean that using a customs broker is an alternative to the parcel shipper’s own legal obligations to know and comply with the laws governing its international shipment. Understanding the legal framework that governs both the importer and the customs broker is essential to effectively working with a customs broker. US import-export regulations set the legal framework for the relationship, but the relationship will also usually be supplemented by the contractual terms and conditions that customs brokers frequently include in their Power of Attorney (POA).

US customs law is based on a shared responsibility regulatory compliance system imposing a duty of “Reasonable Care” upon the importer, 19 U.S.C. §1484, combined with an obligation of CBP to provide information to the trade community to assist importers in complying with the laws. “Reasonable Care,” combined with “Informed Compliance,” imposes on the importer of record a legal obligation to file an entry of merchandise with accurate information to determine its classification and the amount of duties, taxes, and fees to be paid by the importer and to thus allow Customs to admit and release the merchandise into the United States While consulting with a customs broker may be one factor that Customs will consider in determining whether an importer has exercised reasonable care, it is not the only factor.

A POA does not necessarily create a contract. However, in addition to transacting customs business, many customs brokers also provide other services to their customers, for example, preparing and filing export documentation and arranging for forwarding and logistics services. Providing these services also frequently requires a power of attorney subject to the regulations of such agencies as the Bureau of Census. Industry trade associations have thus developed model POA standard contractual terms and conditions regarding the range of services that a customs broker may provide. Customs brokers frequently use variations of these terms and conditions when entered into POAs with their customers.

As with any contractual relationship, a customs broker’s power of attorney and incorporated terms and conditions should always be read and understood by the parcel shipper before being signed. While they vary from broker to broker, customs brokers’ POAs will frequently have provisions stating that the broker is only acting as the customer’s agent; that the broker is relying on the accuracy of the information provided by the customer; and that the customer will review the accuracy of all documents prepared or filed with government agencies on its behalf and advise if there are errors.

Customs brokers frequently require their customers to indemnify and hold harmless the broker from any liability, including fines, penalties, and attorney’s fees, arising from the exportation or importation of the importer’s merchandise, including liability arising from the inaccuracy of documents or information furnished by the customer to the broker. In addition to limiting both the time and place for lawsuits, customs brokers’ terms and conditions frequently contain provisions that limit the broker’s liability to negligent acts and, frequently, to a set dollar amount.

While CBP imposes regulatory obligations upon both customs brokers and importers for maintaining records, many broker POA terms and conditions have specific disclaimers that the broker will not maintain such records as an agent for the customer, frequently citing the requirements under U.S. law that the importer has the obligation to maintain records of its transactions.

Parcel shippers should be aware that in providing services that are not within the scope of the customs broker’s license the customs broker may also be required to have additional government licenses, for example, an ocean freight forwarder’s license or a registration as a motor carrier property broker. In addition, depending on the nature of the services and the licenses and regulations under which they are being provided, the referral and subcontracting relationships between customs brokers and other companies may be subject to regulations of agencies such as the CBP, the US Census Bureau, the Federal Maritime Commission, and other government agencies that govern the permissible scope of the relationships and required disclosures to the customer.

One service that many customs brokers provide for their clients is advancing or facilitating the payment of customs duties, as an agent, on behalf of their client. CBP regulations require that all broker POAs have a written notification to their customers that the fact that an importer of record has paid its customs broker the duties, taxes, or other debts owed to Customs on an import does not relieve the importer of its liability if the broker fails to pay the charges (19 CFR §111.29(b)(1)). There are many reasons for this regulation, but for parcel shippers relying on the services of customs brokers it is a reminder that the buck usually stops with the customer, not the broker it has hired.

Although there is no legal requirement that an importer of record use their services, customs brokers frequently have an expertise and depth of knowledge and experience that cannot be easily duplicated by small- and medium-sized companies that ship merchandise internationally. Customs brokers are thus crucial and valuable partners in many international transactions. Parcel shippers who understand the basic rules and roles that both customs brokers and their customers have in any international transaction – and the fact that their customs broker may wear many regulatory hats in providing services – will usually find that their working relationships with customs brokers are both more efficient and beneficial to all parties in the import or export of their merchandise.

Andrew M. Danas is Partner, Grove, Jaskiewicz and Cobert, LLP, Washington, D.C. Visit www.gjcobert.com or email adanas@danaslaw.com for more information. The information contained in this article is intended to be general background information. It does not constitute and should not be relied upon as legal advice. Readers should contact a qualified attorney should they have a specific legal question.

This article originally appeared in the 2022 Cross-Border and Global issue of PARCEL.