Know Your Importer: CBP Ends the Era of the Anonymous Foreign Importer of Record

Key Points

• On November 6, 2026, CBP published an interim final rule, effective January 5, 2027, that bars foreign importers of record from entering goods for consumption unless they, or a customs broker they designate, are validated under the Customs Trade Partnership Against Terrorism (CTPAT) program.
• Under CBP’s new 19 C.F.R. Part 110, an entity qualifies as a U.S. importer of record only if it is organized under U.S. law, is located in the United States, and at all times either has at least 51% of its beneficial owners as U.S. citizens or lawful permanent residents with control of the entity or directly owns a significant amount of unencumbered U.S. real property.
• Customs brokers must request and review client records, and retain them for five years, before declaring a client a U.S. importer of record under CBP’s interim final rule on foreign importers of record.
• Revised Appendix B to 19 C.F.R. Part 171 allows CBP, at its discretion, to assess 19 U.S.C. § 1592 penalties against a customs broker for any violation, including a negligent one.
• Because a U.S. importer-of-record declaration determines whether an importer may enter goods without CTPAT validation, a knowing false declaration, including one made with reckless disregard, can support a False Claims Act claim under 31 U.S.C. § 3729.

On November 6, 2026, U.S. Customs and Border Protection (CBP) published an interim final rule, “Heightened Requirements for Foreign Importers of Record” (the Rule), implementing Section 2 of Executive Order 14411. The Rule takes effect January 5, 2027. It bars foreign importers of record (IORs) from entering goods for consumption unless they, or their customs broker, are validated under the Customs Trade Partnership Against Terrorism (CTPAT), and it requires every U.S. IOR to affirmatively declare its U.S. status on each entry. CBP estimates that roughly one-third of foreign IORs, about 5.4% of all IORs, will lose their current path to entry.

The New Rules of Entry

• A new, substance-over-form test for “U.S. IOR.” New 19 C.F.R. Part 110 treats an individual as a U.S. IOR only if a U.S. citizen or lawful permanent resident. An entity qualifies only if it is organized under U.S. law, located in the U.S., and at all times either (i) at least 51% of its beneficial owners are U.S. citizens or permanent residents with control of the entity, or (ii) it directly owns a significant amount of unencumbered U.S. real property. Every other IOR is a foreign IOR. “Beneficial owner” tracks the Financial Crimes Enforcement Network (FinCEN) 25% ownership-or-substantial-control standard but looks through every layer of U.S. holding companies to the natural persons, and CBP states it is not bound by FinCEN’s interpretation. In verifying “location,” CBP may weigh principal place of business, U.S. operations, unencumbered “physical domestic assets” (receivables are expressly excluded), profitability, and capitalization.
• Restricted entry for foreign IORs. A foreign IOR may enter goods for consumption, whether by formal entry or by informal entry filed on CBP Form 3461 or 7501, only if it is itself CTPAT validated or it designates a licensed, CTPAT-validated broker. Where the foreign principal is not the owner or purchaser, the validated broker must act as IOR. Because only Canadian foreign IORs are currently eligible for CTPAT validation, the practical route for most foreign IORs is a validated broker.
• Broker gatekeeping. Every broker must request and review client records (e.g., corporate charters, financial statements, documents of title) before declaring a client a U.S. IOR, and must retain those records for five years. A non-CTPAT broker that finds a client does not qualify must stop filing for it. The Rule also requires a power of attorney even when the broker acts as IOR, and it revokes by operation of law any prior CBP ruling to the contrary, including a 1992 ruling holding that no power of attorney was required when brokers make entry in their own name.

Key Dates

Where the Legal Exposure Lies

• Penalty and enforcement exposure. An inaccurate U.S.-IOR declaration is now an express trigger for “live entry” and loss of immediate delivery privileges, for both formal and informal entries. Under live entry, CBP will not release goods until the importer files the entry summary and deposits all estimated duties, taxes, and fees. Losing immediate delivery takes away the ability to obtain release before the entry documents are filed. More significantly, the revised Appendix B to Part 171 broadens CBP’s ability to pursue brokers under 19 U.S.C. § 1592. Section 1592 is a civil penalty statute that has always reached “any person,” and the statute itself is unchanged; what changes is CBP’s enforcement policy. Previously, Appendix B limited § 1592 penalties against brokers to cases involving fraud or in which the broker shared in the benefits of the violation beyond customary brokerage fees; otherwise, CBP proceeded under the broker-specific remedies in 19 U.S.C. § 1641, where monetary penalties are capped at $30,000. Now, at CBP’s discretion, any broker § 1592 violation, including a negligent one, may draw a § 1592 penalty, which can reach the domestic value of the merchandise in fraud cases and is substantial even at the negligence level.
• False Claims Act risk. Because each U.S.-IOR declaration is a material statement to CBP, a false declaration can support more than a customs penalty. Where the misstatement is knowing (including reckless disregard), the U.S. Department of Justice (DOJ) and private whistleblowers can bring claims under the False Claims Act (FCA), 31 U.S.C. § 3729, typically on a “reverse false claim” theory that the importer avoided duties owed to the government. FCA liability carries treble damages plus per-claim penalties, and qui tam relators (often competitors or former employees) share in any recovery. Customs fraud is an active DOJ enforcement priority, so companies should expect § 1592 and FCA theories to follow misstatements of IOR status.
• Corporate structure and transactions. The 51% ownership test and the “at all times” standard convert routine events (a foreign investment round, a cross-border acquisition, a change in control, or an asset-light distribution model) into potential changes in import status. CBP expressly links its asset definition to successor, alter-ego, and veil-piercing collection theories, raising liability considerations for officers and shareholders of thinly capitalized importing subsidiaries. Diligence, purchase agreements, and investment documents should now address IOR status.
• Administrative Procedure Act vulnerability. CBP bypassed notice and comment by invoking both the foreign affairs and good cause exceptions. Each is narrowly construed, and the agency acknowledges brokers’ compliance costs “could be substantial” without quantifying them. The Rule includes a severability clause, signaling CBP anticipates challenges in the Court of International Trade.
• More may be coming. “Informal entry” is a simplified entry process, with fewer forms and procedures, generally available for shipments valued at $2,500 or less. The executive order directs CBP to bar foreign IORs from using informal entry altogether. CBP has not done so; instead, it allows foreign IORs to file informal entries if they are CTPAT validated or use a CTPAT-validated broker. CBP will monitor those entries and warns that it may prohibit foreign IORs from informal entry if the CTPAT safeguard proves insufficient to protect the revenue, national security, or public health and safety. Separately, CBP has issued a companion Low Value Shipments proposed rule that would change Type 11 entries (the entry type code for most informal entries) and postal informal entries (shipments arriving through the international mail). Companies that rely on informal or postal channels should track both developments.

Recommended Actions

• Importers: Assemble ownership charts to natural persons, and asset records; confirm U.S. or foreign status before January 5.
• Foreign Sellers and Nonresident Importers: Secure a CTPAT-validated broker or restructure (e.g., shift from Delivered Duty Paid to Delivered at Place terms, or form a qualifying U.S. importing entity).
• Customs brokers: Build a documented verification protocol, update power of attorney intake, and file any delayed-compliance request by January 5.
• Investors and Deal Teams: Add IOR status representations, covenants, and indemnities to transaction documents.
• All Stakeholders: Consider submitting comments by January 5, 2027.

For questions about the Rule or help preparing for January 5, 2027, contact Daniel Anziska, Ryan Last, or any member of Troutman Pepper Locke’s Tariff + Trade Task Force, whose attorneys advise importers, foreign sellers, and customs brokers on U.S. IOR status, CTPAT-validated broker arrangements, and comments to CBP.