Customs Broker Examination cheat sheet

Customs broker license is required for any person who, for others and for compensation, transacts customs business with CBP; the license is issued by the port director after the applicant passes the broker exam and the background investigation clears.

Individual broker license requirements: be a U.S. citizen, at least 18 years old, not an employee of the federal government, of good moral character, and pass the written exam with a score of at least 75 percent.

Corporate/partnership/association brokers must be organized under U.S. state law, have at least one licensed individual officer actively employed and responsible for customs business, and hold a valid national permit (19 CFR 111).

National permit is issued by the port director where the broker's records are kept; a broker must maintain a district/port permit for each additional location where it transacts customs business, plus a responsible licensed individual at each permit location.

Continuing broker education: an individual broker must complete 36 continuing education credit hours per 3-year cycle (effective for cycles beginning after the final rule), covering customs business topics.

Triennial report: brokers must file a report with the port director every 3 years, updating license/permit data; failure to file can result in suspension or revocation proceedings.

Grounds for disciplinary action include making false statements on entry documents, failure to exercise due diligence, failure to follow CBP directives, and conviction of a felony; penalties range from reprimand to license revocation.

A broker must retain records for 5 years from the date of entry or from the date the record was created, whichever is later, and make them available to CBP on request (19 CFR 163).

Power of attorney: a broker may not transact customs business for a client without a valid POA; the POA must be retained and be available for CBP inspection.

Classification follows the General Rules of Interpretation (GRI) in order: GRI 1 uses heading text and Section/Chapter Notes; GRI 2(a) covers incomplete/unassembled articles; GRI 2(b) covers mixtures and combinations; GRI 3 covers competing headings (3(a) most specific, 3(b) essential character, 3(c) heading last in numerical order); GRI 4 covers goods not otherwise provided for (ejusdem generis); GRI 5 covers cases and packing; GRI 6 applies subheadings.

Customs value is generally transaction value under 19 U.S.C. 1401a: the price actually paid or payable for the merchandise when sold for exportation to the U.S., plus packing costs, selling commissions, assists, royalties/license fees related to the imported goods, and proceeds of resale accruing to the seller.

Deductions from transaction value include international freight, insurance, and other CIF charges to the port of importation; U.S. duties and internal taxes are also excluded.

When transaction value is unavailable, use the secondary methods in order: identical merchandise value, similar merchandise value, deductive value, computed value, and finally the fallback method.

Related-party transactions: transaction value is acceptable only if the relationship did not influence the price; CBP may test with transaction value of identical/similar merchandise or deductive/computed value.

Assists: goods/services supplied free or at reduced cost by the buyer to the producer (materials, tools, dies, molds, engineering/design work done outside the U.S.) must be added to the price actually paid or payable.

HTSUS structure: Sections, Chapters, Headings (4 digits), Subheadings (6 digits), and statistical suffixes (8-10 digits); the 6-digit level is internationally harmonized under the WCO.

Royalties and license fees are dutiable if related to the imported merchandise and a condition of sale of the merchandise for export to the U.S.; post-importation U.S. activities are excluded.

Entry types: formal entry (commercial, merchandise over $2,500 or requiring a bond/formal entry), informal entry (personal shipments up to $2,500 or certain commercial goods), and de minimis (Section 321) shipments valued at $800 or less per person per day are duty-free.

Formal entry requires: CBP Form 3461 (entry/entry summary), CBP Form 7501 (entry summary), commercial invoice, packing list, bill of lading/air waybill, and evidence of right to make entry (bill of lading, air waybill, or carrier certificate).

Entry must be filed within 15 calendar days of the date of arrival of the importing vessel/aircraft; entry summary (CBP Form 7501) must be filed within 10 working days after entry.

Importer of record must be the owner or purchaser of the merchandise, or a licensed customs broker acting under POA; a non-resident may be IOR but must appoint a resident agent for service of process.

Immediate delivery (CBP Form 3461) allows release before entry summary for perishable or time-sensitive goods; entry summary must follow within 10 working days.

Immediate transportation (CBP Form 7512) moves goods in bond from port of arrival to another port for entry; the bond must cover the value plus duties.

Bond requirements: a single transaction bond or continuous bond is required for formal entries; continuous bond minimum is $50,000 (or 10% of duties/taxes/fees plus 10% of prior-year duties, whichever is greater).

ISF (10+2) Importer Security Filing must be filed 24 hours before cargo is loaded on a vessel destined for the U.S.; the vessel stow plan and container status messages are carrier obligations.

Document retention: entry records must be kept for 5 years from the date of entry; records demanded by CBP under 19 CFR 163 must be produced within a reasonable time (generally 30 days).

Duty types: ad valorem (percentage of value), specific (fixed amount per unit), compound (ad valorem + specific), and tariff-rate quota (in-quota vs. over-quota rates).

Duty calculation: ad valorem duty = entered value × rate; total duty = sum of all applicable duties plus merchandise processing fee (MPF) and harbor maintenance fee (HMF) where applicable.

Merchandise Processing Fee (MPF): 0.3464% of entered value, with minimum and maximum caps adjusted annually (min ~$32.71, max ~$634.62 for FY2024); not applicable to informal entries under $2,500 or certain goods.

Harbor Maintenance Fee (HMF): 0.125% of commercial cargo value for vessel imports; does not apply to air, rail, or truck imports.

Duty payment: for entries with a continuous bond or single transaction bond, duties may be paid within 10 working days after entry summary; otherwise duties are due at time of entry.

Protest: an importer may file a protest (CBP Form 19) within 180 days of the date of liquidation (or the date of the decision being protested); CBP has 30 days to review and may deny or allow.

Liquidation: entries are liquidated (finalized) within 314 days of entry; liquidation may be extended; notice of liquidation is posted and the importer has 180 days to protest.

Reliquidation and voluntary tenders: importers may file a prior disclosure or post-summary correction (PSC) within 300 days of entry summary to correct errors, avoiding penalties.

Drawback: refund of up to 99% of duties, taxes, and fees paid on imported merchandise that is subsequently exported or destroyed; must be claimed within 5 years of importation (or 3 years for certain claims).

USMCA (effective July 1, 2020, replacing NAFTA): rules of origin require regional value content (RVC) or tariff shift; certificates of origin are not required to be filed with CBP but must be in the importer's possession and retained for 5 years.

USMCA de minimis: goods with less than 10% non-originating content (by value) may still qualify as originating for most goods; textiles/apparel have different rules.

USMCA automotive rules: RVC thresholds phase in (75% for passenger vehicles/light trucks by 2023), plus labor value content (LVC) requirements and steel/aluminum sourcing rules.

GSP (Generalized System of Preferences): duty-free treatment for eligible products from designated developing countries; expired/lapsed status must be verified; requires direct shipment and 35% value-added in the beneficiary country.

CBERA/CBTPA: duty-free or preferential treatment for Caribbean Basin goods; requires 35% regional value content and direct shipment.

Section 301 tariffs: additional duties on Chinese-origin goods under specified HTSUS subheadings; exclusions may apply and must be claimed; rates vary by list.

Section 232 tariffs: national security-based duties (e.g., steel 25%, aluminum 10%); quota or tariff-rate quota alternatives may apply; exclusions require BIS approval.

First sale rule: importer may use the price paid in an earlier bona fide sale for export to the U.S. as the transaction value, if the sale is arm's-length and the goods are clearly destined for export.

Foreign Trade Zones (FTZ): goods admitted to an FTZ are not entered for duty until they leave the zone for domestic consumption; duty is based on the condition/value at the time of entry into the U.S., and zone-to-zone transfers are permitted.

Section 592 (19 U.S.C. 1592) civil penalties for false statements/omissions: negligence - lesser of 2× lost revenue or 20% of dutiable value; gross negligence - lesser of 4× lost revenue or 40% of dutiable value; fraud - domestic value of the merchandise.

Prior disclosure: if the importer discloses a violation before CBP begins an investigation, penalties are limited to interest on lost duties (fraud) or the duties themselves (negligence/gross negligence); disclosure must be made in writing and include the circumstances.

Criminal penalties under 18 U.S.C. 542 (smuggling) and 18 U.S.C. 545 (fraudulent importation) can include fines and imprisonment up to 20 years.

Reasonable care: importers must exercise reasonable care to ensure entry documents are accurate and complete; the standard is a key defense against negligence penalties.

Recordkeeping penalties: failure to maintain or produce records can result in a $10,000 per entry penalty (or 10% of value) under 19 U.S.C. 1509; separate from Section 592.

Seizure and forfeiture: goods may be seized for violations of law (e.g., smuggling, prohibited merchandise, failure to pay duties); administrative forfeiture or judicial forfeiture may follow.

Focused Assessment (FA) program: CBP audits importers' compliance with trade laws; noncompliance can lead to penalties and increased scrutiny.

Importer Self-Assessment (ISA): voluntary program allowing importers to self-audit and report violations; participants may receive reduced penalties.

Voluntary tender: payment of unpaid duties before CBP discovers the error can mitigate penalties; a prior disclosure is the formal mechanism for penalty protection.

A customs broker license is required to transact customs business for others for compensation; the license is issued by the port director after exam passage and background check.

Individual license requirements include: U.S. citizenship, age 18 or older, good moral character, not a federal employee, and a passing score of at least 75% on the broker exam.

Corporate brokers must be organized under state law, have at least one licensed individual officer actively employed, and hold a valid national permit.

A national permit is issued by the port director where records are kept; additional port permits require a responsible licensed individual at each location.

Brokers must complete 36 continuing education credit hours per 3-year cycle covering customs business topics.

Brokers must file a triennial report with the port director every 3 years updating license and permit data.

Disciplinary grounds include false statements, failure to exercise due diligence, and failure to follow CBP directives; penalties range from reprimand to revocation.

Brokers must retain records for 5 years from the date of entry or record creation, whichever is later, and make them available to CBP.

A valid power of attorney is required before a broker may transact customs business for a client; the POA must be retained for inspection.

GRI order: GRI 1 heading text and notes; GRI 2(a) incomplete/unassembled articles; GRI 2(b) mixtures; GRI 3(a) most specific, 3(b) essential character, 3(c) last in numerical order; GRI 4 ejusdem generis; GRI 5 cases/packing; GRI 6 subheadings.

Transaction value is the price actually paid or payable for goods sold for export to the U.S., plus packing, selling commissions, assists, royalties/license fees related to the goods, and proceeds of resale.

Deductions from transaction value include international freight, insurance, and other CIF charges to the port of importation, plus U.S. duties and internal taxes.

Secondary valuation methods in order: identical merchandise, similar merchandise, deductive value, computed value, fallback method.

Related-party transaction value is acceptable only if the relationship did not influence the price; CBP may test with identical/similar merchandise values or deductive/computed value.

Assists include materials, tools, dies, molds, and engineering/design work done outside the U.S. supplied free or at reduced cost by the buyer; these must be added to the price.

HTSUS structure: Sections, Chapters, 4-digit Headings, 6-digit Subheadings (internationally harmonized), and 8-10 digit statistical suffixes.

Royalties and license fees are dutiable if related to the imported merchandise and a condition of sale for export to the U.S.; post-importation U.S. activities are excluded.

Entry types: formal entry (commercial, over $2,500 or requiring a bond), informal entry (up to $2,500 or certain commercial goods), and de minimis (Section 321) shipments valued at $800 or less per person per day are duty-free.

Formal entry requires CBP Form 3461, CBP Form 7501, commercial invoice, packing list, bill of lading/air waybill, and evidence of right to make entry.

Entry must be filed within 15 calendar days of arrival; entry summary (CBP Form 7501) must be filed within 10 working days after entry.

The importer of record must be the owner or purchaser, or a licensed broker acting under POA; non-resident IORs must appoint a resident agent for service of process.

Immediate delivery (CBP Form 3461) allows release before entry summary for perishable/time-sensitive goods; entry summary must follow within 10 working days.

Immediate transportation (CBP Form 7512) moves goods in bond from port of arrival to another port for entry; the bond must cover value plus duties.

Bond requirements: single transaction or continuous bond for formal entries; continuous bond minimum is $50,000 or 10% of duties/taxes/fees plus 10% of prior-year duties, whichever is greater.

ISF (10+2) must be filed 24 hours before cargo is loaded on a vessel destined for the U.S.; vessel stow plans and container status messages are carrier obligations.

Entry records must be retained for 5 years from the date of entry; records demanded by CBP under 19 CFR 163 must be produced within a reasonable time (generally 30 days).

Duty types: ad valorem (percentage of value), specific (fixed amount per unit), compound (ad valorem + specific), and tariff-rate quota (in-quota vs. over-quota rates).

Ad valorem duty = entered value × rate; total duty = sum of applicable duties plus merchandise processing fee (MPF) and harbor maintenance fee (HMF) where applicable.

MPF is 0.3464% of entered value with annual minimum and maximum caps; it does not apply to informal entries under $2,500 or certain goods.

HMF is 0.125% of commercial cargo value for vessel imports; it does not apply to air, rail, or truck imports.

Duties may be paid within 10 working days after entry summary when a continuous or single transaction bond is in place; otherwise duties are due at entry.

A protest (CBP Form 19) may be filed within 180 days of liquidation or the protested decision; CBP has 30 days to review and may deny or allow.

Entries are liquidated within 314 days of entry; liquidation may be extended; notice is posted and the importer has 180 days to protest.

A post-summary correction (PSC) may be filed within 300 days of entry summary to correct errors and avoid penalties.

Drawback refunds up to 99% of duties, taxes, and fees on imported merchandise later exported or destroyed; claims must be filed within 5 years of importation (3 years for certain claims).

USMCA (effective July 1, 2020, replacing NAFTA) requires rules of origin based on regional value content (RVC) or tariff shift; certificates of origin need not be filed with CBP but must be retained for 5 years.

USMCA de minimis: goods with less than 10% non-originating content by value may still qualify as originating for most goods; textiles/apparel follow different rules.

USMCA automotive rules phase in RVC thresholds (75% for passenger vehicles/light trucks by 2023) plus labor value content (LVC) and steel/aluminum sourcing rules.

GSP provides duty-free treatment for eligible products from designated developing countries; requires direct shipment and 35% value-added in the beneficiary country.

CBERA/CBTPA provide duty-free or preferential treatment for Caribbean Basin goods; requires 35% regional value content and direct shipment.

Section 301 tariffs impose additional duties on Chinese-origin goods under specified HTSUS subheadings; exclusions may apply and must be claimed.

Section 232 tariffs are national security-based duties (e.g., steel 25%, aluminum 10%); quota or tariff-rate quota alternatives may apply and exclusions require BIS approval.

The first sale rule allows the importer to use the price paid in an earlier bona fide sale for export to the U.S. as transaction value if the sale is arm's-length and goods are clearly destined for export.

Foreign Trade Zones (FTZ): goods admitted to an FTZ are not entered for duty until they leave the zone for domestic consumption; duty is based on condition/value at entry into the U.S., and zone-to-zone transfers are permitted.

Section 592 (19 U.S.C. 1592) civil penalties for false statements/omissions: negligence - lesser of 2× lost revenue or 20% of dutiable value; gross negligence - lesser of 4× lost revenue or 40% of dutiable value; fraud - domestic value of the merchandise.

Prior disclosure before CBP begins an investigation limits penalties to interest on lost duties (fraud) or the duties themselves (negligence/gross negligence); disclosure must be written and include the circumstances.

Criminal penalties under 18 U.S.C. 542 (smuggling) and 18 U.S.C. 545 (fraudulent importation) can include fines and imprisonment up to 20 years.

Reasonable care requires importers to ensure entry documents are accurate and complete; it is a key defense against negligence penalties.

Failure to maintain or produce records can result in a $10,000 per entry penalty (or 10% of value) under 19 U.S.C. 1509, separate from Section 592.

Goods may be seized for violations of law (smuggling, prohibited merchandise, failure to pay duties); administrative or judicial forfeiture may follow.

The Focused Assessment (FA) program audits importers' compliance with trade laws; noncompliance can lead to penalties and increased scrutiny.

The Importer Self-Assessment (ISA) program allows importers to self-audit and report violations; participants may receive reduced penalties.

Voluntary tender of unpaid duties before CBP discovers the error can mitigate penalties; prior disclosure is the formal mechanism for penalty protection.