Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Identity Theft Takes Yet Another New Turn

Originally published in the Journal of Commerce On-Line edition in August 2010

In the May edition, the latest "twist and turns" arising out of instances of corporate identity theft were described. To summarize, corporate identity theft occurs when "bad guys" use the identity of a real, legitimate corporation in an attempt to get their often counterfeit goods imported. Customs is becoming more adept at finding such shipments prior to arrival and so the number of seizures of counterfeit goods is ever-increasing. At the same time, Customs has taken to doing something new. While its intentions are good, one has to ask the question – is this the proper way to do it? Is this the most effective way for the agency to accomplish its goal?

As a further means to investigate identity theft, Customs has begun issuing Requests for Information to importers, with copies to their customs brokers, demanding the following:

1) A clear copy of the power of attorney;

2) The entry package, including the entry summary, invoice, packing list, single entry bond (if applicable), plus proof of billing and receipt of payment;

3) An explanation of how the power of attorney was obtained and who provided it, specifically calling for a name and "active" phone number;

4) Questioning whether there was direct contact with the importer, including the name and "active" phone number of the contact person; and

5) An explanation as to the steps taken to verify the power of attorney.

The CBP Form 28 then goes on to threaten that unless the requested information is provided within thirty (30) days of the issuance date, penalty action will follow relying on 19 U.S.C. 1641.

There are a number of legal and practical questions issuance of such a Notice raises. First, if CBP wants information about the broker’s activities, then a CBP Form 28 is the wrong method. These 28s are being issued to the importer, not the broker, but the details being requested are often directed to the company whose identity has been stolen. So, how would the importer have the requested information? They do not, and realistically, what CBP is trying to do is obtain information and documentation from the broker. Third, the basis for the penalty which is threatened is 19 U.S.C. 1641 and the failure to exercise responsible supervision. The standard of care for an importer is reasonable care, see 19 U.S.C. 1484. The standard of care for a customs broker is responsible supervision. How does relying on a form designed to obtain details about issues related to an entry even apply in these circumstances?

What we see here is an attempt by Customs to fit a round peg into a square hole. In other words, apparently Customs has decided the easiest way to gather the documents is by making demand for them in writing. While a written demand certainly makes sense, sending a demand to an importer who has no knowledge about a problematic shipment really seems ridiculous. Clearly, Customs hopes the broker will step up and respond, and often the broker does just that. However, are there better ways? The answer to that question has to be yes. Let’s start with the obvious. Given the size of the identity theft issue, why hasn’t Customs sat down with the National Customs Brokers and Forwarders Association of America and opened a dialog on changing the regulations as to how powers of attorney are validated. Right now, the regulations provide only that the contents of the power of attorney must meet the minimum standards articulated at 19 C.F.R. 141.32 which calls for nothing more than: "[i]f a Customs power of attorney is not on a Customs Form 5291, it shall be either a general power of attorney with unlimited authority or a limited power of attorney as explicit in its terms and executed in the same manner as a Customs Form 5291." That’s it!

In September 2009, CBP issued some guidelines or best practices about powers of attorney. In it, CBP proposed: with a referral to the BIS lists).

  • To the greatest extent possible, have POAs completed in person so the grantor’s personal identification (driver’s license, passport, etc.) can be reviewed.
  • Check applicable Web sites to verify the POA grantor’s business and registration with State authorities.
  • If the principal uses a trade or fictitious name in doing business, confirm that the name appears on the POA.
  • Verify that the importer’s name, importer number and Employer Identification Number (also known as the Federal Tax Identification Number) on the POA match what is in ACS.
  • Check whether the POA grantor is named as a sanctioned or restricted person or entity by the U.S. Government. (

Indeed identity theft is so great that CBP should do more. Isn’t one logical place to start with a revision to the regulations? Such a regulatory change would require a level playing field and minimize the likelihood that individual customs broker practices would facilitate uneven power of attorney validation, thereby making it more difficult for the cheaters? Of course, it also would make more sense for Customs to actually interview the brokers whose documentation they want, as face-to-face communications provide invaluable information to the trained interviewer, but then that takes a lot more planning and effort than just sending out a form. The question is which is liable to get you more reliable information?

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