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As if importers and brokers did not have to manage with the ever changing tariff landscape, yesterday, U.S. Customs and Border Protection (CBP) published a 31 page “Interim Final Rule” in the Federal Register that fundamentally changes who may act as an importer of record (IOR) in the United States.
Under the rule, a foreign IOR may not enter merchandise for consumption unless it is itself Customs Trade Partnership Against Terrorism (CTPAT) validated or designates a licensed customs broker that is CTPAT validated.
The rule also requires every IOR claiming U.S. status to declare that status on each entry and entry summary, and it imposes a new obligation on customs brokers to verify, with documentation, that their clients actually qualify as U.S. IORs.
The rule takes effect 60 days from yesterday (January 5, 2027), and comments are due on the same date. Brokers may request delayed compliance with the new verification duty, but all brokers are expected to be in full compliance no later than May 6, 2027.
Background
The rule implements Section 2 of Executive Order 14411, "Strengthening Customs Enforcement," signed on June 3, 2026. The Executive Order directed DHS to prohibit foreign IORs from making informal entry and to require foreign IORs making formal entry to be CTPAT validated or to use a CTPAT validated licensed customs broker.
CBP justifies the rule by pointing to its difficulty collecting from foreign IORs, many of which appear in ACE as U.S.-based shell companies with nothing more than a mailing address in the United States. CBP reports $1.01 billion in unpaid principal on open bills owed by non-CTPAT foreign IORs, and a collection rate of only 3.1% on audit-identified revenue loss from foreign IORs, compared to 15.2% for U.S. IORs. Notably, CBP issued the rule without prior notice and comment, invoking both the foreign affairs and good cause exceptions under the Administrative Procedure Act.
Description of the New Requirements
1. New Definitions of "U.S. Importer of Record" and "Foreign Importer of Record"
New 19 CFR Part 110 defines, for the first time, who qualifies as a U.S. IOR. An individual qualifies if he or she is a U.S. citizen or lawful permanent resident. An entity qualifies only if it (i) is located in the United States, (ii) is organized under U.S. law, and (iii) either (A) at all times has at least 51% of its beneficial owners who are U.S. citizens or lawful permanent residents and have control of the entity, or (B) at all times maintains direct ownership of a significant amount of unencumbered real property in the United States. Any IOR that does not meet these criteria is a foreign IOR.
"Beneficial owner" is defined, drawing on the FinCEN definition, as a natural person who exercises substantial control over the entity or owns or controls at least 25% of its ownership interests, looking through multiple layers of entity ownership. Importantly, a U.S.-incorporated subsidiary of a foreign parent may be treated as a foreign IOR under this test.
U.S. IOR status is subject to CBP verification. CBP may consider, among other things, whether the entity's principal place of business is in the United States; whether it has a substantial U.S. physical presence; whether it holds sufficient unencumbered "physical domestic assets" (U.S. bank deposits, U.S. Treasury bonds, and U.S.-located real property, inventory, machinery, and equipment, but not receivables); whether its gross sales generally exceed cost of goods sold; and whether it is sufficiently capitalized. The determination will be made by the appropriate Center of Excellence and Expertise Director. Importantly, yesterday's publication does not provide details on what criteria the CEE Director will use to determine sufficiency or substantiality, nor does it provide guidance on whether or how review of CEE determinations will be made.
2. Restrictions on Entry by Foreign IORs
Under new 19 CFR 141.21, a foreign IOR may enter merchandise for consumption only if (i) it is CTPAT validated, in which case it may file itself or use any licensed broker, or (ii) it designates a licensed customs broker that is CTPAT validated to make entry or to act as the IOR. The restriction applies to all formal entries and to informal entries filed on CBP Form 3461 or 7501 (operationally, entry types 11, 12, and 13). Where the principal on the power of attorney is not the owner or purchaser of the goods, the CTPAT validated broker must itself act as the IOR. Use of a CTPAT validated broker does not confer CTPAT benefits on the client.
CBP did not adopt a full ban on informal entries by CTPAT validated foreign IORs at this time, but stated it will monitor these entries and may prohibit them entirely, and specifically invites comment on that alternative.
3. U.S. IOR Declaration on Every Entry
Under new 19 CFR 141.22, at the time of filing each entry and entry summary, the IOR (or its broker) must declare whether the IOR qualifies as a U.S. IOR, using a new checkbox (or "Yes"/"No" indicator in the electronic equivalents) on CBP Forms 3461 and 7501. A second checkbox identifies cases where the broker is acting as IOR on behalf of a principal; a non-CTPAT broker must then identify the principal, which must have a CBP Form 5106 on file. The updated forms must be used beginning on the effective date.
4. New Broker Verification and Recordkeeping Duties
New 19 CFR 111.29(a)(2) requires a broker, before declaring a client to be a U.S. IOR, to request and review the client's records, such as proof of citizenship or permanent residence, corporate charters, financial statements, purchase receipts, or documents of title, to confirm that the § 110.2 criteria are met. A non-CTPAT broker that determines a client is not a U.S. IOR must stop filing entries for that client. Verification records must be retained for five years from the date of verification. The rule also confirms that a power of attorney is required even when the broker acts as the IOR, revoking HQ Ruling 223772 to the extent inconsistent.
5. Expanded Enforcement Consequences
An inaccurate U.S. IOR declaration is now an express basis for CBP to require live entry (19 CFR 142.13(a)(5)) and to discontinue immediate delivery privileges (19 CFR 142.25(a)(5)), for both formal and informal entries. In addition, revised paragraph (K) of Appendix B to Part 171 allows CBP, in its discretion, to pursue brokers for any 19 U.S.C. 1592 violation under Section 1592 itself, not only under the Section 1641 regime that caps broker penalties at $30,000. Section 1592 penalties can reach the domestic value of the merchandise.
Key Compliance Risks
Accordingly, importers, non-resident entities, and customs brokers should keep the following key compliance risks in mind:
- U.S. subsidiaries of foreign companies may be "foreign IORs." A U.S.-organized entity whose beneficial owners are predominantly non-U.S. persons must rely on the real property prong, which requires a "significant" but undefined amount of unencumbered U.S. real property.
- Loss of access to non-CTPAT brokers. CBP estimates that roughly 32% of foreign IORs currently use non-CTPAT brokers and will be unable to import unless they switch brokers or become validated.
- Declaration exposure on every entry. An inaccurate U.S. IOR declaration can trigger live entry, loss of immediate delivery, and potential Section 1592 penalty exposure.
- Documentation burden for U.S. IORs. Every U.S. IOR should expect its brokers to request ownership, financial, and asset records, and must be able to produce them to CBP on request.
- Heightened broker liability. Brokers face both a new due diligence duty and the possibility of penalties up to the domestic value of the merchandise.
- Higher brokerage costs and transition friction. CBP expects CTPAT validated brokers to pass compliance costs on through higher fees, and switching brokers takes time.
Recommended Steps for Importers and Brokers
While importers and brokers should consult with their customs counsel as to what specific steps to take, the list below should serve as a useful starting point for discussions around how to prepare for the new requirements:
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Determine your IOR status now and continue to monitor it. Map beneficial ownership through every layer of your corporate structure and assess U.S. real property and other physical domestic assets against the § 110.2 criteria. Re-review at least annually to confirm whether ownership changes over time through mergers, acquisitions or other corporate ownership modifications.
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Assemble and maintain a U.S. IOR verification file. Gather corporate charters, ownership records, citizenship or permanent residence evidence, financial statements, and title documents so they can be provided to brokers and CBP promptly. Maintain and update files based on periodic reviews mentioned in paragraph 1 above.
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Confirm your broker's CTPAT status and consider whether importer should join CTPAT (if eligible). Foreign IORs, and entities uncertain of their status, should confirm that their broker is CTPAT validated before the effective date, and consider restructuring as IOR where appropriate. While this can be done by asking the broker for such confirmation and checking/reconfirming with the broker periodically, CTPAT status can change (i.e., be lost or withdrawn) and if not promptly communicated to the Foreign IOR, the Foreign IOR could be left unable to import until it locates and finds a new CTPAT broker. CBP also maintains a Status Verification Interface (SVI) in its CTPAT portal that can be used to monitor, in real time, the CTPAT status of a broker, but, currently, the SVI is only available to companies who are themselves CTPAT members. Eligible importers should also consider joining CTPAT, but remembering that the time from applying for CTPAT membership to being validated can take many months. Therefore, confirmation of broker's CTPAT status is critical.
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Brokers should evaluate delayed compliance. Eligible brokers should consider whether to submit a request for delayed compliance with the § 111.29 verification duty before the effective date. Delayed compliance requests may be advisable or desirable since eligible brokers now need to assess their client base and gather the required due diligence information between now and January 5, 2027. Brokers also should begin collecting client documentation every time a new power of attorney is obtained.
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Update systems and procedures. Ensure that ACE filings and internal procedures accommodate the new U.S. IOR declaration and the principal identification fields on CBP Forms 3461 and 7501. Develop audit program to ensure IOR status is properly reported.
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Consider submitting comments. Comments may be submitted at regulations.gov under docket number USCBP-2026-1387 on or before the comment deadline (January 5, 2027).
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