Updating the Definition of Responsible Supervision and Control

1. Updating the Definition of Responsible Supervision and Control ROTB Webinar September 20, 2012

2. RSC 19 USC 1641(b)(4). Duties. A customs broker shall exercise responsible supervision and control over the customs business that it conducts. Regulations defining responsible supervision and control are issued by CBP pursuant to the statutory authority provided in 19 USC 1641(f).

3. RSC • “Failure to exercise responsible supervision and control penalties” are the most common broker penalties • These penalties can cover a wide array of broker violations, including: • Continuously making errors on entries • Failing to produce required records • Failing to have a working knowledge of any operation material to ability to render valuable service to others in the conduct of Customs business

4. RSC 19 CFR 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 must exercise responsible supervision and control (see §111.1) over the transaction of the customs business of the sole proprietorship, partnership, association, or corporation.

5. RSC 19 CFR 111.1. Responsible Supervision and Control. -“[T]hat degree of supervision and control necessary to ensure the proper transaction of the customs business of the 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 CBP will consider include, but are not limited to: …” / 19 CFR § 111.1

6. RSC 10 Factors of Responsible Supervision and Control • 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 various customs transactions; • the maintenance of current editions of CBP Regulations, the HTSUS, and CBP 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 the 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 other circumstance which indicates that an individually licensed broker has a real interest in the operations of a broker.

7. RSC Issues/difficulties with current definition: • Factors of RSC are not relevant to violation • CBP does not usually have access to 10 factors • These will usually require a broker visit or interview • Violations may be discovered later in time and factors may have changed • Violations may still occur even if broker rates well on 10 factors • Broker may rate poorly on 10 factors and not commit violations

8. RSC Challenge: • Update definition of RSC to provide CBP with a mechanism to fairly penalize brokers that do not consistently provide a high quality of service in handling customs transactions • Definition should incorporate current commercial practices and realities • Definition should not require consideration of factors which are not relevant or to which CBP does not usually have access