BRO 3-06
OT: RR: CTF: ER
H292868 rd
Craig Seelig
WiseTech Global, Inc.
1051 East Woodfield Road
Schaumburg, IL 60173
Re: Ruling request; Customs Broker Retention of Records outside of United States; 19 C.F.R. § 111.23
Dear Mr. Seelig:
This is in response to your ruling request dated December 12, 2017, on behalf of WiseTech Global, Inc., (“WiseTech”), regarding whether it is permissible to store copies or backups of U.S. customs broker’s digital records outside of the United States, provided that complete records belonging to WiseTech’s customers, U.S. customs brokers, are always contained within the U.S. A live database contains the current data regarding customs business being transacted by the customs brokers and all records from past activity. Backup digital records are digital copies created immediately when the live data is saved, so that if the primary electronic record system goes down, no data is lost.
FACTS:
WiseTech is an approved software vendor. Its software is certified to submit customs transactions to U.S. Customs & Border Protection (“CBP”) via the Automated Broker Interface (“ABI”). Wisetech’s U.S. customers are U.S. customs brokers. WiseTech’s U.S. customs broker database contains the records of customs business as transacted by the customs brokers including entry records, bond information, importer or record numbers and other data. WiseTech’s services include cloud based digital storage where brokers can store and access data via a secure internet connection. U.S. customer databases are hosted on servers or computers housed at the WiseTech data center, located in Illinois. All U.S. customs broker who use WiseTech’s software records are stored digitally within the U.S. based data center.
WiseTech states that best practices for disaster recovery require that “a live or near live copy of each brokers’ records be stored at a second facility which is a significant distance from the main storage location.” WiseTech explains that “[t]he ability to rely upon a primary and secondary location means that, in the event of a true disaster, the broker[’]s records may be restored from the secondary location.” WiseTech wishes to have two copies of the brokers’ records, one in a primary and one in a secondary site. The primary site will be in the U.S. and the secondary site, containing copies of records will be located outside of the U.S., under WiseTech’s ownership and control, in one of its other secure data centers, in either Australia or the United Kingdom. WiseTech asserts that at all times the U.S. customs brokerage firm’s records will be within the U.S. and accessible by CBP through appropriate legal means of access. WiseTech further contends that this approach is consistent with industry best practice and provides layers of protection for customer data, permitting CBP to retain access to records, while allowing the use of low cost resources to keep live backups of the database at secondary sites.
ISSUE:
Whether copies of a U.S. customs broker’s data concerning customs business may be stored outside of the United States, provided that the original record is maintained within the United States.
LAW AND ANALYSIS:
Record keeping requirements for agents of any owner, importer, consignee, importer of record, entry filer or other party who imports merchandise into the customs territory of the U.S. are found in section 508 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1508(a). This subsection requires agents to make, keep, and render for examination and inspection, records:
(which . . . include, but are not limited to, statements, declarations, documents and electronically generated or machine readable data) which --
(A) pertain to any such activity, or to the information contained in the records required by this Act in connection with any such activity; and
(B) are normally kept in the ordinary course of business.
Id. § 1508(a)(2)–(3). “[A] licensed customs broker is the agent of an importer.” HQ H240589 (July 18, 2014) (citing United States v. Fed. Ins. Co., 805 F.2d 1012, 1013 (Fed. Cir. 1986) (holding that a licensed customs broker is an agent of the importer.) Accordingly, licensed customs brokers, as agents of importers, must make, keep and render for examination and inspection electronically generated data which pertain to any customs business, or to the information contained in the records required by the Tariff Act of 1930, as amended, in connection with any such activity; and are normally kept in the ordinary course of business. See 19 U.S.C. § 1508(a)(1)(3); United States v. Fed. Ins. Co., 805 F.2d 1012; HQ H240589.
CBP has the authority to issue a summons to compel, upon reasonable notice, such agents and any person having possession, custody, or care of records relating to importation to appear before the appropriate customs officer to produce records and give testimony under oath regarding subjects relevant to an investigation or inquiry. 19 U.S.C. § 1509 (a)(2)(A)–(D). Records are defined as:
any information made or normally kept in the ordinary course of business that pertains to any activity listed in paragraph (a)(2) of this section [19 C.F.R. § 163.1]. The term includes any information required for the entry of merchandise (the (a)(1)(A) list) and other information pertaining to, or from which is derived, any information element set forth in a collection of information required by the Tariff Act of 1930, as amended, in connection with any activity listed in paragraph (a)(2) of this section. The term includes, but is not limited to, the following: Statements; declarations; documents; electronically generated or machine readable data; electronically stored or transmitted information or data; books; papers; correspondence; accounts; financial accounting data; technical data; computer programs necessary to retrieve information in a usable form; and entry records (contained in the (a)(1)(A) list).
19 C.F.R. § 163.1(a) (emphasis added). In turn, paragraph (a)(2) of 19 C.F.R. § 163.1 provides that:
[t]he following are activities for purposes of paragraph (a)(1) of this section:
(i) Any importation, declaration or entry;
(ii) The transportation or storage of merchandise carried or held under bond into or from the customs territory of the United States;
(iii) The filing of a drawback claim;
(iv) The completion and signature of a NAFTA Certificate of Origin pursuant to § 181.11(b) of this chapter;
(v) The collection, or payment to Customs, of duties, fees and taxes; . . .
(xviii) Any other activity required to be undertaken pursuant to the laws or regulations administered by Customs.
19 C.F.R. § 163.1(a)(2). Customs brokers must “maintain all records required by law and regulation for the required retention periods and as original records, whether paper or electronic, unless alternative storage methods have been adopted in accordance with [§163.5(b)].” 19 C.F.R. § 163.5(a).
CBP’s regulations dictate that a licensed customs broker may retain records relating to its customs transactions “at any location within the customs territory of the United States” in accordance with 19 C.F.R. part 163. 19 C.F.R. § 111.23 (a) (emphasis added). See also HQ 115616 (Apr. 8, 2002) (“Part 111 specifies the location where brokers must keep their records[.]”). The history behind 19 C.F.R. § 111.23 illuminates the rationale behind this rule. When CBP promulgated the final rule codified in 19 C.F.R. § 111.23, it analyzed and responded to several comments. Customs Broker Recordkeeping Requirements Regarding Location and Method of Record Retention, 77 Fed. Reg. 33,964 (Jun. 8, 2012). “One commenter inquired whether a broker’s electronic (imaged file) documentation can be maintained on a server physically located outside the customs territory of the United States.” Id. at 33,965. CBP responded by stating that: “[f]or purposes of complying with CBP’s broker recordkeeping requirements, a broker’s electronic documentation must be maintained on a server physically located within the customs territory of the United States wherein CBP has jurisdiction to issue a summons under 19 U.S.C. 1509(a)(2).” Id. (Emphasis added). Thus, the rationale is clear, a broker’s electronic records must be maintained on a server physically located within the customs territory of the United States, because this is where CBP has jurisdiction to issue a summons and inspect records. Id.
WiseTech wishes to store digital copies U.S. customs broker’s data outside of the territory of the United States, while also maintaining digital records of this information within the U.S. While such copies of data may be “records” under 19 C.F.R. § 163.1(a) since they consist of electronically stored information made or normally kept in the ordinary course of business that pertains to activities listed in subsection 163.1(a)(2), as listed above (see 19 C.F.R. § 163.1(a)), there is no rule applicable to duplicate records. It seems logical then that once the recordkeeping regulations are met, including 19 C.F.R. § 111.23(a), requiring that records be retained at any location within the customs territory of the United States, that duplicates of these records may be maintained outside the territory of the United States. In fact, in the event of a disaster, which destroys WiseTech’s records in its locations in the U.S., it would behoove CBP to have access to duplicate records, if outside of the U.S. Thus, WiseTech is permitted to retain duplicate customs records outside of the customs territory of the United States so long as WiseTech maintains all “records” that are subject to the recordkeeping requirements in the United States and fulfills all recordkeeping requirements with records maintained within the United States. See e.g., 19 C.F.R. §§ 111.23(a), 163.1(a).
HOLDING:
Based on the above, WiseTech is permitted to maintain copies or backups of a U.S. Customs Broker’s data to be stored outside of the territory of the United States. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Sincerely,
Gail G. Kan, Chief
Entry Process and Duty Refunds Branch