When the Broker Must be the Importer of Record

The Importer of Record, or “IOR” has a lot of liability for entry.  Any penalties resulting from discrepancies relating to classification of the goods or admissibility issues, and the duties to be paid, must be covered financially by the IOR.   Changed from when I got my Customs broker’s license in 1978 is the fact that today the IOR must have a financial interest in the merchandise. No longer can it just be a nominal consignee.  This is to guarantee Customs that the importer is not a straw man, but has sufficient knowledge of the import so as to identify its appropriate duty rate, etc.   The sole exception to the rule is that a licensed Customs broker an always serve as IOR, though most are justifiably loathe to do so.

We encountered a very unusual case in which a CHB was put in the position of being the only possible importer of a DDTC licensable product.  In this case, European aircraft parts were being imported by an American company. The American repair station requested that the basis for delivery be “DDP” which means that the seller would have sole responsibility for making sure that the product properly clears customs and was delivered, “duty paid”.  Because the agreement was that it would be DDP, the consignee repair station refused to be the IOR. However, the goods were DDTC licensable.  Because the a DDTC license is only given to U.S.-located companies, the European seller could not be the IOR either. This leaves only one individual who is able to accomplish both: the Customs Broker.

The customs broker was left in the unenviable position of having to serve as the IOR for their European client.  Given the broker’s understandable lack of knowledge of the intricacies of aviation spares, it runs the risk of being responsible for any penalties from a mistake on the entry it files. In order to avoid this, we recommended indemnification.  Indemnification ensures that if something goes wrong, the broker will be put in the same position they’d have been in had they not agreed to assist- meaning that the seller will cover any monetary penalties, legal fees, etc. in the event of any demand.

The below paragraph was the language we suggested to our client’s customs broker, in order to make them feel comfortable that they are indemnified against all liabilities arising from the  agreement to serve as IOR. This absolves the broker from any responsibility if the duty is found to be incorrect or other problems arise, and it is among standard CHB terms and conditions.

Where a bond is required by U.S. Customs to be given for the production of any document or the performance of any act, the Customer shall be deemed bound by the terms of the bond notwithstanding the fact that the bond has been executed by the Company as principal, it being understood that the Company entered into such undertaking at the instance and on behalf of the Customer, and the Customer shall indemnify and hold the Company harmless for the consequences of any breach of the terms of the bond. (b) On an export at a reasonable time prior to the exportation of the shipment the Customer shall furnish to the Company the commercial invoice in proper form and number, a proper consular declaration, weights, measures, values and other information in the language of and as may be required by the laws and regulations of the U.S. and the country of destination of the goods. (c) On an export or import the Company shall not in any way be responsible or liable for increased duty, penalty, fine or expense unless caused by the negligence or other fault of the Company, in which event its liability to the Customer shall be governed by the provisions of paragraphs 8 – 10 below. The Customer shall be bound by and warrant the accuracy of all invoices, documents and information furnished to the Company by the Customer or its agent for export, entry or other purposes and the Customer agrees to indemnify and hold harmless the Company against any increased duty, penalty, fine or expense including attorneys’ fees, resulting from any inaccuracy, incomplete statement, omission or any failure to make timely presentation, even if not due to any negligence of the Customer.

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