Bankruptcy Treatment for Customs Brokers Improved in Appropriations Bill
Customs brokers have been pushing for a change to U.S. bankruptcy law for decades to make it so pass-through payments to CBP for tariffs are not subject to clawback after a client goes bankrupt. With a package of funding bills the Senate passed March 8, brokers got a permanent change to the law.
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The clawback provisions are there so that company insiders don't strip a company of assets through bonuses or other special financial treatment to preferred vendors in the last three months before a filing, but National Customs Brokers & Forwarders Association of America members had pointed out that this money does not stay with their firms, and so, like tax payments, should not be recouped to distribute to creditors. During the pandemic, the National Customs Brokers & Forwarders Association of America got the carve-out for just one year.
"For 20 years, NCBFAA has sought subrogation rights for customs brokers in the U.S. Bankruptcy Code,” said NCBFAA President J.D. Gonzalez in a news release following the vote in the Senate, calling the bill's passage an "important victory for our customs broker industry."
The Customs Broker Fairness Act is "vital to the protection of our nation’s customs brokers and their tens of thousands of employees," the news release said, protecting "customs brokers who have paid duties to CBP on behalf of importers that subsequently file for bankruptcy." The bill also secures subrogation rights for customs brokers who have received money or paid duties to the U.S. government on behalf of a bankrupt importer, the NCBFAA said. "If a customs broker could be subrogated to the priority rights of CBP, any payments from the importer to CBP via the customs broker during the 90-day period would likewise no longer be subject to a preference payment recovery action."