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June, 2010

Trouble for US importers and CBP: importer identity theft

Tuesday, June 29th, 2010

Both importers and US Customs and Border Protection (CBP) alike continue to be vexed by unscrupulous entities who attempt to circumvent customs laws by misrepresenting themselves as legitimate parties to international trade transactions.   Although these illicit activities are widespread, both business and the federal government can take steps to eradicate, or at least minimize, the problem.

According to Eric Kulisch, in his America Shipper article, “Importers face increased identity theft risk,” criminals operate under the radar by leveraging information on importers that is readily available and quite accessible.

The criminals are able to obtain the importer’s tax identification number and address, and file a customs entry under its name falsely declaring products in the shipment — leaving the legitimate business on the hook for any consequences. The schemes are primarily being used to bring in counterfeit goods or other contraband….In several cases, the importers did not know they were at risk until CPB issued a notice of detention following a cargo exam.  The criminals used the false identity to smuggle goods through ports of their choice, not just ones the importer favored.

Importer identity theft is “surprisingly easy,” according Neville Peterson LLP’s Global Trade Alert, “Identity Theft:  A Growing Problem for Importers and the Trade Community.”  To perpetrate the fraud, a criminal simply needs an importer’s Employee Identification Number (EIN), which also serves as the importer or record number.  

Once a malefactor has [the] EIN, it’s easy to forge a Customs power of attorney to hire a Customshouse broker to make entry.  Once the bad guys know [the importing] company’s name and EIN, other identifying details – address, names of corporate officer, lines of business, can usually be gotten quickly and quietly, from [the importer’s] website, or from the Secretary of State [in the state of incorporation] (most of this information is also available online.)

Customs’ Automated Commercial System (ACS) makes identity theft easy.   A Customs broker (who likely doesn’t know that the power of attorney he’s been given is phony) merely needs to enter your EIN into the ACS; the system will report back your address, Customs bond code and all the other information the broker needs to make entry.

From that point, the transaction appears to be legitimate, and once cleared by Customs, the goods disappear into the stream of commerce.

So what can importers do to protect the misuse of their identity by international trade criminals?

 According to American Shipper:

  • Know the parties to whom you give power of attorney and instruct your customs broker to not accept such documents at face value, and call to verify if something looks amiss.
  • Scrutinize customs transactions reporting available through CPB’s Automated Commercial Environment (ACE) and Importer Trade Activity (ITRAC) reports for irregularities
  • If C-TPAT certified, zealously guard your Importer of Record number, which would-be thieves desire since such importers undergo fewer security exams and thus less Customs scrutiny

And what can CBP do?  As proposed by Neville Peterson, the agency can take control over importer identities and importer-authorized parties, to which is does not have visibility today, by:

  • Establishing a national importer registry
  • Electronically issuing customs powers of attorney