9.2 Responsible Supervision and Control

9.2 Responsible Supervision and Control

Core Regulatory Mandate: 19 U.S.C. § 1641(b)(4) | 19 CFR 111.28(a) | Scope of "Customs Business" (19 CFR 111.1) vs. Logistics Clerical Exemptions | The 13 CBP Regulatory Evaluation Factors | Mandatory Written Plan of Supervision for Remote Workforces | Civil Monetary Penalty Not to Exceed $30,000 in Total for a Violation or Violations (19 U.S.C. 1641(d)(2)(A); 19 CFR 111.91).

The Statutory Mandate of Responsible Supervision and Control (19 U.S.C. § 1641(b)(4) & 19 CFR 111.28(a))

Congress established the customs broker as a trusted professional partner in the administration of the nation's tariff laws. Because a licensed broker acts as an agent for importers and a frontline guardian of federal trade policy, the broker cannot operate as a passive shell or an absentee credential-lender. Under Section 641(b)(4) of the Tariff Act of 1930 (19 U.S.C. § 1641(b)(4)), every licensed customs broker is statutorily mandated to exercise responsible supervision and control over the customs business conducted by its employees.

This statutory requirement is codified and expanded in 19 CFR 111.28(a), which dictates that every individual broker operating as a sole proprietor, every partnership, and every corporate or association licensee must actively oversee all customs operations carried out by unlicensed staff. Under the doctrine of vicarious regulatory liability, a licensed broker is held strictly accountable by CBP for the errors, omissions, statutory noncompliance, and negligence of its unlicensed employees. An employer cannot defend against customs penalties by asserting that an unlicensed entry writer made an unauthorized clerical error or failed to follow unwritten instructions; the failure of the employee is legally imputed to the supervising broker.

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Definition and Legal Scope of "Customs Business" (19 CFR 111.1)

To determine the exact perimeter of activities requiring responsible supervision and control, candidates must master the statutory and regulatory definition of "Customs Business" set forth in 19 CFR 111.1.

What Constitutes Customs Business

Under 19 CFR 111.1, customs business encompasses activities involving transactions with CBP concerning:

1. The entry and admissibility of merchandise into the customs territory of the United States.
2. The tariff classification of merchandise under the Harmonized Tariff Schedule of the United States (HTSUS).
3. The appraisement and customs valuation of merchandise under 19 U.S.C. § 1401a.
4. The payment of customs duties, excise taxes, or other charges assessed or collected by CBP on imported merchandise.
5. The refund, rebate, or duty drawback thereof.
6. The preparation of documents, declarations, or electronic transmissions (such as ACE entry summaries and Partner Government Agency data sets) intended to be filed with CBP in furtherance of such transactions, whether or not signed or filed by the preparer.
7. The filing of administrative protests under 19 U.S.C. § 1514 and 19 CFR Part 174, Post-Summary Corrections (PSCs), and binding ruling requests under 19 CFR Part 177.

Activities Expressly Excluded from Customs Business

Importantly, 19 CFR 111.1 specifically excludes general transportation and logistics functions from the definition of customs business. Unlicensed individuals and non-broker freight entities may legally perform these tasks without broker oversight:

• Carriage and Booking: Contracting for ocean, air, rail, or motor carriage, booking cargo space with international shipping lines, and issuing commercial bills of lading.
• Physical Cargo Handling: Cartage, drayage, stuffing, unstuffing, warehousing, and physical consolidation of freight.
• Marine Insurance: Procuring marine cargo insurance policies for exporters or importers.
• Carrier Manifest Filings: Transmitting advance electronic cargo manifests (such as the Automated Manifest System - AMS, or e-Manifest) strictly on behalf of international vessel or air carriers.
• Pure Data Transmission: The mere electronic transmission of raw data provided by a client without altering, reviewing, or classifying that data.
• Commercial Documentation: Preparing commercial packing lists, pro forma commercial invoices, or consular invoices that do not assign tariff classifications or declare customs values.

Whenever an employee crosses the line from physical logistics into assigning an HTSUS classification, determining transaction value, or declaring duty liability on an entry summary, that employee is transacting customs business and must be subject to responsible supervision and control.

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The 13 Regulatory Factors of Responsible Supervision and Control (19 CFR 111.28(a))

Rather than imposing a single rigid metric, CBP evaluates whether a broker exercises responsible supervision and control by examining the totality of circumstances against thirteen (13) distinct regulatory factors codified in 19 CFR 111.28(a):

1. Training Provided to Broker's Employees: The existence, frequency, and depth of structured training programs for unlicensed personnel regarding customs laws, ACE entry filing, PGA admissibility rules, and tariff updates.
2. Standard Operating Procedures (SOPs) and Written Compliance Manuals: Whether the broker maintains comprehensive, current, and accessible written instructions, desk procedures, and compliance manuals governing the preparation and filing of customs declarations.
3. Audit Procedures and Internal Verification Reviews: The existence and effectiveness of internal quality control programs, including pre-filing entry reviews and post-summary sampling audits to detect and rectify errors.
4. Ratio of Licensed Brokers to Unlicensed Employees: The numerical balance between licensed supervisory brokers and unlicensed operational staff. A disproportionate ratio (e.g., one broker supervising 100 entry writers) creates a severe regulatory presumption of deficient supervision.
5. Availability of Licensed Broker for Consultation: The accessibility of a licensed broker to unlicensed staff during normal working hours for immediate legal and procedural consultation via phone, video, chat, or in-person dialogue.
6. Proximity of Licensed Broker to Employees: The physical or virtual operational closeness between the supervising broker and the operational staff executing customs entries.
7. Volume and Complexity of Customs Business: The scale and character of transactions processed. A firm handling complex commodities (such as antidumping/countervailing duties, tariff-rate quotas, Section 301/232 duties, or FDA/EPA/USDA regulated goods) requires substantially closer supervision than one handling low-risk commodities.
8. Access to Reference Materials: Ensuring unlicensed staff have immediate, unrestricted access to the current HTSUS, Title 19 CFR, CBP Bulletins, CROSS rulings, ACE business rules, and relevant PGA directives.
9. Timeliness of Processing Transactions: The operational efficiency with which entry documentation, duty payments, and responses to CBP requests are handled, avoiding rejected entries or delinquent summaries.
10. Remedial Action Taken Upon Discovering Errors: The speed, transparency, and thoroughness with which the broker remedies systemic or individual errors, including filing Post-Summary Corrections, initiating Prior Disclosures, and disciplining or retraining errant staff.
11. Employee Turnover and Qualifications: The screening, competence, retention, and stability of the unlicensed workforce. High turnover rates that lead to chronic operational instability undermine supervisory adequacy.
12. Communications with Clients Regarding Customs Errors: Whether the broker promptly advises clients in writing upon discovering noncompliance or entry errors pursuant to 19 CFR 111.39.
13. Actual Daily Operational Involvement: Evidence that the licensed broker is actively and substantively engaged in daily entry review, operational decision-making, and client problem resolution, rather than serving as a passive, detached figurehead.

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Modern Remote Work and the Mandatory Plan of Supervision

With the enactment of the 2022 Customs Broker Modernization Regulations and the widespread adoption of telework and distributed operations, CBP eliminated port-specific physical presence rules. However, CBP explicitly affirmed that remote operations do not dilute supervisory accountability.

Requirements for Distributed and Teleworking Workforces

Brokers utilizing remote, telework, or geographically dispersed employees must establish a documented Plan of Supervision:

• Centralized Electronic Auditing: Real-time sampling of electronic entries filed by remote staff prior to and immediately following ACE transmission.
• Direct Electronic Accessibility: Establishing verified real-time communications channels (messaging, video conferencing, screen sharing) ensuring licensed brokers are continuously accessible during operational hours.
• Information Security Protocols: Implementation of secure Virtual Private Networks (VPNs), multi-factor authentication, and encrypted data repositories to safeguard confidential client customs records pursuant to 19 CFR 111.23.
• Documented Escalation Trees: Clear written instructions designating mandatory trigger points where an unlicensed remote employee must halt processing and escalate an entry to a licensed broker (e.g., AD/CVD applicability, assists declarations, or PGA red-flag shipments).

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Detailed Evaluation Matrix: The 13 Factors in CBP Audits