Volume I, No. XXXII
Customs redraws who counts as an American importer, and the CTPAT broker becomes the gate for everyone else
A CBP interim final rule effective January 5, 2027 defines a U.S. importer of record by ownership and assets, bars all others from entry unless they or their broker hold CTPAT validation, and exposes brokers to penalties up to the value of the goods.
Between January 2020 and August 2026, Customs and Border Protection audits found $1.16 billion in revenue lost on imports by foreign importers of record, and the agency recovered $35.7 million of it, a collection rate of 3.1 percent1. For American importers the rate was 15.2 percent1. On those figures U.S. Customs and Border Protection (CBP) rests an interim final rule, published November 6, 2026 as CBP Dec. 26-19, that changes a question customs law has long answered loosely: who is an American importer1. From January 5, 2027, the answer turns on citizenship, beneficial ownership and assets held on U.S. soil. Any importer that fails the test may enter goods only if it, or the licensed broker it hires, holds validation in the Customs Trade Partnership Against Terrorism (CTPAT)1. The rule converts a voluntary security program into a condition of access to the American market for a defined class of traders, and it moves much of the burden of policing that class onto customs brokers.
The instrument
The rule implements section 2 of Executive Order 14411, “Strengthening Customs Enforcement,” signed June 3, 20261,2. The order told the Secretary of Homeland Security to “promptly” prohibit foreign importers of record from filing informal entry under 19 U.S.C. 1498, and to require for formal entry that a foreign importer either be CTPAT validated, if CBP finds it eligible, or use a CTPAT-validated licensed broker2. It also directed that a foreign importer not rely on a continuous bond except where CBP is satisfied that the revenue is fully protected2.
CBP grounds the rule in a cluster of customs statutes rather than in the order alone. Sections 1484 and 1498 of title 19 authorize regulations governing formal and informal entry; sections 66 and 1624 give general rulemaking power under the Tariff Act of 19301. Two provisions added by the Trade Facilitation and Trade Enforcement Act of 2015 carry more of the weight. Section 4320 calls for an importer-of-record program that verifies an importer’s existence and identifies its affiliations and changes in corporate structure1. Section 4321 directs CBP to build a risk assessment program with closer oversight of new nonresident importers, and it exempts validated Tier 2 and Tier 3 CTPAT participants from that program1,4. CTPAT itself rests on the SAFE Port Act of 20061.
CBP issued the measure without prior notice and comment, invoking the Administrative Procedure Act’s good-cause exception1. It gives two reasons. Seizure rates are higher for foreign importers outside CTPAT, at 6.38 per million entry summaries against 1.14 for validated foreign importers1. And advance notice, CBP argues, would invite a rush of new shell accounts; its records show about 55,000 importer accounts created with fake phone numbers and 45,000 with fake email addresses between March 2019 and September 2025, and more than 870 Form 5106 accounts sharing one physical address1. The rule takes effect 60 days after publication, and comments close the same day1.
Who is a U.S. importer of record under the new definition?
The core of the rule is a new 19 CFR part 110. An individual is a U.S. importer of record if he or she is a U.S. citizen or lawful permanent resident1. An entity qualifies only if it is located in the United States, is organized under U.S. law, and, at all times, either has U.S. citizens or permanent residents as at least 51 percent of its beneficial owners, with control of the entity, or directly owns “a significant amount of unencumbered real property in the United States”1. Every importer that does not qualify is a foreign importer of record under new section 110.31.
The definition of beneficial owner follows the Financial Crimes Enforcement Network’s: a natural person who exercises substantial control or holds at least 25 percent of the ownership interests, traced through any number of corporate layers1. CBP added that tracing language so that a chain of U.S.-formed holding companies cannot hide non-U.S. owners at the top1. The consequence for multinational groups follows from the text. A U.S.-incorporated subsidiary of a foreign parent cannot meet the ownership prong, so it qualifies only through the real-property prong or else must meet the foreign-importer conditions. The rule sets no dollar figure for “significant.”
Whether an entity is “located” in the United States is left to case-by-case verification. CBP lists six non-exclusive criteria, among them a U.S. principal place of business, physical operations such as paying employees or running stores, sufficient unencumbered “physical domestic assets,” gross sales that generally exceed cost of goods sold, and adequate capitalization1. Physical domestic assets mean cash in U.S. bank accounts, Treasury bonds, and real property, inventory, machinery or equipment physically in the country; CBP deliberately excluded accounts receivable1. Disputed cases go to the director of the importer’s Center of Excellence and Expertise1.
The mechanism
From January 5, new section 141.21 bars a foreign importer from entering merchandise for consumption, whether by formal entry or by informal entry types 11, 12 and 13, unless it is CTPAT validated or designates a CTPAT-validated licensed broker1. Where the foreign principal is not the owner or purchaser of the goods, the broker must itself act as importer of record1. Every U.S. importer, in turn, must declare its status on CBP Forms 3461 and 7501 through a new checkbox, or a “Yes” or “No” field in the electronic versions1. A false declaration becomes a new ground for CBP to require live entry, with duties deposited before release, and to withdraw immediate delivery privileges1.
Brokers acquire a new due-diligence duty in 19 CFR 111.29(a)(2). Before declaring a client a U.S. importer, a broker must request and review records establishing the client’s status, which may include proof of citizenship, corporate charters, financial statements or title documents, and keep them for five years1. A broker without CTPAT validation that finds a client is foreign must stop filing for it1. The rule also revokes, by operation of law, a 1992 headquarters ruling holding that a broker entering goods in its own name needs no power of attorney1.
The penalty change may matter most to brokers. Section 1641 caps a broker’s monetary penalty at $30,0003. Until now CBP pursued brokers under the general fraud and negligence penalty statute, 19 U.S.C. 1592, only for fraud or where a broker profited beyond customary fees1. The revised paragraph (K) of the part 171 guidelines lets CBP, at its discretion, apply section 1592 to any broker violation, with a maximum penalty at the domestic value of the merchandise1. Brokers may ask by January 5 to delay compliance with the verification duty, but all must comply by May 6, 20271.
The effect
CBP’s own analysis maps the exposure. Of importers that filed an entry summary between October 2020 and February 2026, 16 percent were foreign and 84 percent were U.S.1. Only 0.4 percent of foreign importers are CTPAT validated, and only Canadian foreign importers are currently eligible for validation1. But 68 percent already use CTPAT-validated brokers1. The remaining 32 percent must switch brokers to keep importing; they account for 5.4 percent of all importers and 2.6 percent of entry summaries1. Among brokers, 21 percent are CTPAT validated and 78 percent are not; CBP expects validated brokers to gain about 9.3 percent more clients and 3.1 percent more entries, revenue it treats as a transfer from non-validated firms1. CBP assumes the cost of stricter vetting will pass to foreign importers through higher broker fees, but says it lacks an estimate of the difference1.
The wider cost lands on the nearly one million U.S. importers that must now document their status to their brokers. CBP says it cannot estimate that cost and that “it could be substantial on aggregate”1. On the benefit side, CBP points to the gap in uncollected bills: $1.21 per entry summary for CTPAT-validated foreign importers against $34.08 for others, and $1.01 billion in open principal owed by non-CTPAT foreign importers as of February 6, 20261.
Trade counsel read the June order as a heavy load for non-resident importers. Lawyers at Hogan Lovells Cadwalader wrote that its changes “impose significant new obligations on non-resident importers” and “will materially affect the ability of Foreign IORs to import into the United States,” and flagged effects on delivered-duty-paid arrangements for U.S. buyers6. Flexport told clients in August that CBP had instructed brokers “to complete comprehensive vetting before conducting any customs business with a foreign client,” including beneficial ownership and evidence of ability to pay7. CBP’s case, set out in the preamble, is that the rule holds foreign importers “to the same standards and enforcement mechanisms” U.S. importers already face, given that the revenue rule keeps foreign courts from enforcing U.S. customs debts1.
The longer view
Congress asked for broker verification of importer identity a decade ago. Section 116 of the 2015 trade enforcement act added 19 U.S.C. 1641(i), requiring minimum standards for brokers and importers, “including nonresident importers,” on verifying who the importer is3. CBP proposed such rules in August 2019, requiring brokers to collect information to verify the identity of importers, including nonresident ones5. This year the agency moved from identity to status: in August it began voiding importer numbers backed by inaccurate Form 5106 data, a step this journal examined in its essay on the importer registry, and now it has defined which importers count as American at all.
The rule is also narrower than the order behind it. CBP chose not to ban informal entry by foreign importers, as section 2(b) directed, and instead lets validated parties keep filing while it monitors those entries1,2. It reserves the power to impose the full ban and asks for comment on doing so1. The order’s continuous-bond limit and its “good standing” test for importers and their affiliates are not in this text1,2. Comments are due January 5, 2027, under docket USCBP-2026-1387, on the same day the rule begins to govern entries1.