CBP Is Making It Harder To Ship Into America
U.S. Customs and Border Protection (CBP) on November 6 has finalized a rule that changes how foreign Importers Of Record (IOR) can bring goods into the US which takes effect on January 5, 2027.
CBP is changing their rules around who can be registered as an IOR after estimating that foreign IORs owed an estimated $1 billion in duties between 2020 and 2026.
While this will help bridge that gap, the CBP has effectively made it harder for foreign companies to start a physical products business in the US.
These new rulings will be enforced starting 5, January 2027. While the CBP has allowed eligible brokers to request for delays, they have added a hard deadline: May 6, 2027.
There aren't any exception to the shipments either; the new ruling applies to all shipments whether formal or informal consumption entries. But it is important to note that CBP has not banned all informal entries by foreign importers.
What The US CBP Changed
The new ruling also states that a CTPAT validated broker must act as the IOR for the entry when the foreign party isn't the owner or purchaser of the merchandise.
| Situation | Who can be the IOR? |
|---|---|
| Foreign IOR is CTPAT validated | The foreign IOR can remain the IOR and file itself, or use a licensed broker, whether CTPAT validated or not. |
| Foreign IOR is not CTPAT validated, but is the owner or purchaser | It must use a licensed, CTPAT-validated broker. The foreign owner or purchaser can remain the IOR while the broker files the entry. |
| Foreign principal is not the owner or purchaser | The designated CTPAT-validated licensed broker must become the IOR. |
| U.S. IOR | It does not need CTPAT validation, but must satisfy CBP's new U.S.-IOR eligibility criteria and declare that status. |
Brokers Are Liable To Shoulder Consequences
Under the new ruling, the validated broker must act as the IOR when the foreign party isn't the owner or purchaser of the merchandise.
This means that the broker assumes the legal responsibilities associated with being the IOR, which opens them up to huge liabilities. An example of this would be that the brokers will be directly responsible for paying U.S. customs duties to the government for that shipment.
Separately, the broker will be responsible for depositing estimated duties and fees and paying amounts determined to be due by the government.
This means that the broker is directly exposed to:
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Unpaid or underpaid customs duties.
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Additional duties arising from incorrect tariff classification or valuation.
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Taxes and applicable fees.
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Interest on unpaid amounts.
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Applicable claims for liquidated damages under the importation bond.
This means that the registered broker would have to pay for multiple charges even when the initial commercial transaction was conducted by their foreign client.
CBP is also expanding the potential consequences for customs brokers who violate the new law.
That statute covers material false statements, omissions, or other violations committed through:
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Fraud
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Gross negligence
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Negligence
The statutory maximum penalties can be substantial:
| Violation | Potential maximum penalty |
|---|---|
| Fraud | Up to the domestic value of the merchandise |
| Gross negligence | Up to the lesser of domestic value or four times the duties, taxes and fees lost |
| Negligence | Up to the lesser of domestic value or twice the duties, taxes and fees lost |
Under the new law, CBP may pursue a broker for violations through monetary penalties of up to $30,000, while other sections also expose brokers to penalties based on the value of the merchandise.
Prior to this new ruling, foreign companies were allowed to serve as the Importer of Record (IOR) without needing CTPAT validation.
CBP's New U.S. Importer Verification Requirements
The CBP also changed what they consider to be a “U.S. Importer”.
For an individual, the person must be a U.S. citizen or lawful permanent resident.
For a business entity, it must:
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Be located in the United States.
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Be organized under U.S. law.
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Have either at least 51% U.S. citizen or lawful permanent resident beneficial ownership and control, or directly own a significant amount of unencumbered real property in the United States.
A U.S.-registered company is therefore not automatically considered a U.S. IOR.
What Does This Mean For Importers?
For foreign importers, the new rules mean that there are a lot more hoops to jump through. Importing items into the US could also increase in price, given the risks that the customs brokers will have to face.
Foreign Importers effectively have 2 options:
- Become a CTPAT-validated foreign importer
- This will allow you to become your own importer of record, file your own customs entries and hire a regular customs broker, CTPAT validated or not.
- Use a CTPAT-validated licensed customs broker
- The broker can make the customs entry on behalf of you as a foreign importer.
- However, the foreign importer can still remain as the IOR if they are the owner or purchaser of the merchandise.
- If not, the customers broker has to be registered as the IOR.
If you want to qualify as a U.S. IOR, the company must meet the following requirements:
- Be organized under U.S. law.
- Be located in the U.S.
- Maintain either at least 51% beneficial ownership and control by U.S. citizens or lawful permanent residents, or directly own a significant amount of unencumbered U.S. real property.
This all goes to say that importing into the USA as a foreigner is going to be more expensive.
What Should Foreign Importers Do Before January 5, 2027?
Foreign companies importing into the United States should:
- Determine whether the company qualifies as a U.S. IOR or foreign IOR under the new definitions.
- Establish whether the company is the actual owner or purchaser of the imported merchandise.
- Determine whether CTPAT validation is commercially practical.
- If not CTPAT validated, identify and appoint a CTPAT-validated licensed customs broker.
- Review existing powers of attorney, customs bonds, and broker agreements.
- Clarify who will be responsible for duties, penalties, additional assessments, and other potential customs liabilities.
