Understanding the Basics of a Customs Broker License

[raghunandhaanan rvi]

Introduction

Customs brokers play a vital role as intermediaries between traders and customs authorities, facilitating the clearance process by ensuring all necessary documentation, compliance with customs laws, and the collection of duties and taxes. Beyond these tasks, customs brokers are evolving into consultancy and advisory roles, offering various supply chain services. While some countries mandate licensed brokers, others leave it to the trader's discretion. The licensing and regulatory models for customs brokers vary globally, with different requirements for individuals and entities. In India, Section 146 of the Customs Act of 1962 requires a person to hold a license to conduct business as a customs broker at any customs station. The Customs Brokers Licensing Regulations (CBLR) 2018 govern the legal and procedural aspects of granting a customs broker license and outline the obligations and responsibilities of customs brokers. These regulations have been amended to provide the customs broker license lifetime validity.

Application for Customs Broker License and Eligibility

Under the Customs Brokers Licensing Regulations (CBLR) of 2018, the National Academy of Customs Indirect Taxes & Narcotics (NACIN) is responsible for accepting applications each August to conduct examinations for granting licenses. To be eligible, applicants must:

• Be Indian citizens of sound mind.
• Possess an Aadhar number and a valid PAN card.
• Demonstrate financial viability.
• Meet educational and professional prerequisites.
• Have no criminal convictions or pending proceedings.

The qualifying examinations include a written and an oral exam, with a maximum of six attempts permitted. The online written exam is held in the first quarter of each year, followed by the oral examination in the second quarter. Results are declared in July of the same year. Candidates must pass both the written and oral examinations.

Grant of License

Applicants who pass both exams must pay a fee of five thousand rupees within two months of the oral exam results. The payment details must be communicated to the Principal Commissioner or Commissioner of Customs. The license will be granted within one month of the fee payment. Failure to pay the fee within the stipulated period results in forfeiture of the right to be granted a license.

Conditions of License

An individual who passes the examination is granted a license in Form B1. Companies, firms, or associations can be granted a license in Form B2 if at least one director, partner, or authorised employee has passed the examination. Such individuals cannot transact business on behalf of multiple firms or companies at any time. Any changes in the directors, managing director, partner, or PAN, must be communicated to the Principal Commissioner of Customs within one month. If there is a change in the PAN, the licensee must apply for a fresh license within sixty days.

Extending License to Other Stations

Licensed customs brokers can work at all customs stations, subject to intimation in Form C to the Principal Commissioner or Commissioner of Customs. A copy of this intimation must also be sent to the Commissioner who issued the license. Brokers can transact business at a new customs station two years after the license issue date.

Execution of Bond and Security

Before granting the license, the Principal Commissioner or Commissioner of Customs requires the applicant to enter into a bond in Form D and, if specified, a surety bond in Form E. The applicant must also provide a bank guarantee, postal security, National Saving Certificate, or a fixed deposit receipt issued by a nationalised bank for five lakh rupees. Interest on these instruments accrues to the customs broker.

Validity of License

A license remains valid unless revoked according to regulations. It becomes invalid if the licensee is inactive for one year. The license can be renewed upon application and payment of a fee.

Obligations of a Customs Broker

Customs brokers have various obligations, including:

• Obtaining authorisation from each employer.
• Conducting business personally or through an approved employee.
• Advising clients to comply with laws and regulations.
• Ensuring the accuracy of information provided to clients.
• Promptly paying over government funds received for duties.
• Maintaining up-to-date and orderly records.
• Reporting loss of the license.
• Verifying client information using reliable documents.
• Informing customs authorities of any changes in contact information.
• Maintaining records for at least five years.
• Cooperating with customs authorities in investigations.

Engagement or Employment of Persons

The regulations specify qualifications for individuals involved in customs clearance, issuance of photo-identity cards, and employment conditions for non-cardholders. Customs brokers must supervise their employees and authorise them to sign documents. Changes in authorised personnel must be communicated promptly, and brokers are responsible for their employees' actions.

Revocation of License and Imposition of Penalty

The Principal Commissioner or Commissioner of Customs can revoke a license and forfeit security under certain conditions, including:

• Non-compliance with bond conditions.
• Regulatory non-compliance.
• Misconduct.
• Insolvency.
• Unsound mind.
• Conviction for an offence involving moral turpitude.

Prohibition of Operations

If obligations are unmet, the principal commissioner or Commissioner of Customs can prohibit a broker from conducting business in certain sections of the customs station. A license suspension is also possible, and a hearing within fifteen days can decide on its continuation.

Procedure for Revocation and Imposing Penalty

As per Regulation 14 of CBLR' 18, the Principal Commissioner or Commissioner of Customs may, subject to following the procedure laid down under Regulation 17, revoke the license of a Customs Broker and order for forfeiture of part or whole of security.

Revoking a license or imposing a penalty involves:

• Issuing a written notice to the broker.
• Allowing the broker to submit a defence within thirty days.
• Conducting an inquiry by the Deputy Commissioner or Assistant Commissioner of Customs.
• Allowing the broker to cross-examine witnesses and submit representations.
• Making a decision within ninety days based on the inquiry report and representations.

For non-compliance, up to fifty thousand rupees and a G cardholder may penalize a customs broker or F cardholder by up to ten thousand rupees.

Appeal

Customs brokers or F cardholders can appeal orders under Regulation 16 or 17 to the Customs Central Excise and Service Tax Appellate Tribunal. G cardholders can appeal orders to the Commissioner of Customs (Appeals), who must adjudicate within two months.

Membership of Association

Every customs broker must join a registered and recognised Customs Brokers’ Association. A broker cannot be a member of more than one association. The Principal Commissioner of Customs or Commissioner of Customs can recognise multiple associations if each has at least thirty per cent of the total licenses issued.

Conclusion

Understanding the intricacies of obtaining and maintaining a customs broker license is crucial for those in the field. The regulations ensure that brokers are qualified, compliant, and accountable, facilitating smooth trade operations and adherence to customs laws.