NCBFAA to Include Clause in Terms and Conditions for Broker Reporting of Client Wrongdoing
NEW ORLEANS -- The National Customs Brokers & Forwarders Association of America is in the process of making a change to the NCBFAA Terms and Conditions to include a provision “that has indemnification and hold harmless” for customs brokers reporting importer client wrongdoing to CBP, as required by recent changes to the Part 111 customs broker regulations, Lenny Feldman of Sandler Travis said during the group's annual conference April 26.
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The provision is intended “to help send a message to your client” and make sure importer clients know that brokers have the obligation to report their clients under amended 19 CFR 111.32, and say “you really can’t sue me,” said Feldman, the NCBFAA’s customs counsel. However, the provision is “not necessarily going to stop your client from still bringing a clause of action or claim or demand against you,” he said during a panel discussion.
The issue of customs broker “overreporting” more minor fraud issues to CBP is not going to cause issues for the agency, which will be “very appreciative” of the broker handing over a potentially new audit target. But clients that have been reported to CBP will take issue, claiming that the broker was being overly aggressive.
Attorneys agree the problem “should be pretty rare,” Feldman said. “This shouldn’t be that, if you have a disagreement with your client or think that there’s an issue, you’re just going to pick up the phone or send an email” to CBP to report fraud or criminal activity. But attorneys don’t agree on the standard for reporting importer wrongdoing. “Sometimes it’s very difficult. It’s very fact-specific.”
For an importer to have a case against a broker for overreporting, there does have to be “some sort of financial loss,” said Patrice Lafayette, vice president at Roanoke Insurance Group. If that does happen, there are policies brokers can get from their sureties “that could help -- it’s obviously not guaranteed,” she said. One is a general liability policy, which could be useful if falsely accusing an importer client gets them put on sanctions and renders them unable to import, which would cause a financial loss. Also helpful would be “slander or libel or defamation type coverage” under a personal injury policy, she said.
Another pitfall for brokers is if an employee accidentally reports importer wrongdoing to CBP and “it was a complete error on the employee’s part,” Lafayette said. That would fall under an errors and omissions policy. Also useful could be a “first dollar defense,” which pays for legal expenses and “does not include your deductible,” she said. “So the policy will pay to actually defend you in this case and pay the legal fees to go to court.”