CBP Limits the Use of AI by Companies Submitting Customs Data

Earlier this year, after an inquiry was made regarding whether a company conducting customs business without a license was violating applicable regulatory requirements, U.S. Customs and Border Protection (CBP) ruled that companies without proper customs broker licenses are "impermissibly conducting customs business" by developing OCR tools that identify what data will appear on an entry, deriving HTSUS subheading suggestions via AI classification tools, and submitting and certifying CBP forms on behalf of others. Here's what you need to know:

Facts of the Case

The unlicensed company in question was a foreign entity operating an online platform providing services to importers for a fee. The principal services provided were: connecting importers to customs brokers in order to submit customs documentation for entry, utilizing OCR tools to extract data from shipping documents and deriving Harmonized Tariff Schedule of the United States (HTSUS) subheading suggestions for specific articles via an AI classification tool. The company also certified and submitted CBP forms on behalf of new importers.

Legal Requirements for Customs Business

CBP makes it clear that it is permissible for a company to enable an importer to liaise with a broker for the purpose of making a customs entry if the company does not actively participate in deciding what information must be transmitted to the customs broker for entry purposes, nor participate in making the entry, as these are the elements that legally constitute "customs business".

"Pursuant to 19 U.S.C. § 1641(b)(1), no person may conduct customs business on behalf of another unless the person holds a valid customs broker's license. A broker may not allow an unlicensed third party to conduct customs business on its behalf."

CBP's primary objection in this ruling was with the use of an AI classification system and automated document ready via OCR or Optical Character Recognition to cull entry data from shipping documents. OCR software scans uploaded documents and identifies information that can pre-fill customs forms for importers and transmit it directly to CBP. According to the ruling, "CBP has consistently held that an unlicensed entity is precluded from inputting entry data into a filing that will be transmitted to CBP", particularly when that company is offshore.

Finally, pursuant to 19 C.F.R. § 111.3(a), "customs business must be conducted within the customs territory of the United States", which is defined as the States, the District of Columbia and Puerto Rico. The unlicensed company referenced in this ruling is a foreign entity operating customs business outside of the U.S., which is not permissible per regulatory requirements.

What This Means

Companies utilizing third-party platforms to liaise with customs brokers should ensure that they are conducting all customs related business per CBP requirements. This includes only conducting "customs business" with entities operating within the U.S. and ensuring that they are not utilizing AI-based tools that do not comply with regulatory standards.

It is critical that companies engage with compliant U.S. providers with legitimate customs and trade expertise. To learn more about the CBP ruling and to speak with Sourcemap's team of experts, reach out today.