On March 26, 2012, CBP published withdrawal notice (77 Fed.Reg. 17,367) that has gotten rid of proposed rulemaking (75 Fed.Reg. 66,050) to allow brokers, upon client’s consent in a written authorization, to share client information with affiliated entities. The withdrawal is an indication by CBP of what customs brokers cannot do. But it is poorly written. According to CBP’s withdrawal notice, customs brokers may not, even with the written client’s consent:
1) Share client information with affiliated entities related to the broker so that these entities may offer non-customs business services to the broker’s clients
2) Use a third-party to perform photocopying, scanning, and delivery of client records for the broker.
This requirement pertains to confidentiality of client’s records under 19 CFR 111.24. The proposed rule, would modify only the second part, relating to photocopying and scanning services. It would have stated “A broker may provide its clients’ records to a third-party service provider for photocopying and/or scanning without violating the prohibitions set forth in the provisions of this part pertaining to confidentiality…”
The other part remains in tact under long history of interpretative guidance, including the following citations:
- Headquarters ruling letters (HQ) 116025 (September 29, 2003) and HQ 116190 (June 14, 2004), CBP was asked whether a broker within a family of companies (such as related affiliates, subsidiaries, and parent companies) may share certain client background or aggregate revenue information with related affiliates who were not licensed brokers, but who were separately-incorporated and owned by the same parent company. CBP has consistently held that separately-incorporated companies constitute separate legal entities under the law, notwithstanding common ownership (see HQ 223804 (June 29, 1992); HQ 114166 (February 2, 1998); HQ 115248 (August 28, 2001)). Therefore, CBP found that absent a written release from the client authorizing disclosure of client information, section 111.24 precludes a broker from sharing client information with separately-incorporated affiliates of the same parent company. In CBP’s view, client background and aggregate revenue information is collected and compiled from, and connected with, records pertaining to the business of clients serviced by the broker. As such, that information falls within the protection of Sec. 111.24. CBP’s position is that brokers can secure waivers of confidentiality from their clients in order not to violate the confidentiality requirements of section 111.24.
- In HQ 114404 (March 16, 1999), CBP held that a licensed broker must ensure that it will not disclose its clients’ records to a parent company, unless disclosure is authorized by the client.
- In HQ 114758 (November 7, 2000), the question presented was whether a licensed broker may transfer its ancillary financial functions to a related or affiliated company that is not a licensed broker. In that instance, CBP reiterated its position that disclosure to an unauthorized party of any information emanating from a transaction with a client of the broker would constitute a violation, and would subject the violating broker to possible penalty or other disciplinary action. CBP found that outsourcing ancillary financial and administrative services would run afoul of the broker confidentiality provisions, since the records sought to be outsourced would contain financial data or information derived from clients’ files pertaining to customs business.
Therefore, one may conclude that, so long as, there is written consent from a client, a customs broker may disclose what would otherwise would be considered confidential information to its clients. Under current business practices companies usually insert written consent clauses into their Power of Attorney agreements. One example of the written consent clause the following provision: “Authorize other Customs Brokers duly licensed within the territory to act as grantor’s agent; to receive, endorse and collect checks issued for CBP duty refunds in grantor’s name drawn on the Treasurer of the United States; if the grantor is a nonresident of the United States, to accept service of process on behalf of the grantor.”