CBP Imposes New Restrictions on Foreign Importers of Record

On November 6, 2026, U.S. Customs and Border Protection (“CBP”) issued a Notice of Interim Final Rule (the “Notice”) implementing restrictions on foreign importers of record (“IORs”) that were first ordered by the President in June 2026 as part of Executive Order 14411, Strengthening Customs Enforcement (the “EO”). These restrictions will take effect on January 5, 2027.

The Notice announces changes to the Customs Regulations in Title 19 of the Code of Federal Regulations to bar certain “foreign” persons or entities from serving as IOR to import goods into the United States unless they obtain validation under the Customs Trade Partnership Against Terrorism (“CTPAT”) program or import through a CTPAT-validated customs broker. Unlike current rules that distinguish between U.S. resident and non-resident importers, the new definition of “foreign” importers extends beyond non-U.S. citizens and businesses not incorporated in the United States; it also pulls in businesses with a U.S. establishment if CBP deems their U.S. assets insufficiently substantial. To implement this change, CBP has added a check-box to Forms 3461 and 7501, which must be checked for any IOR that qualifies as “U.S.” rather than “foreign.”  Finally, while the Notice otherwise adheres closely to the EO, it departs from the EO by failing to disallow informal entries by foreign IORs, instead allowing foreign IORs to continue to make informal entries if they are CTPAT-validated or use a CTPAT-validated customs broker.

The Notice includes a lengthy justification for the change in treatment of foreign IORs. Historically, a non-resident person or entity could become an IOR by obtaining an IOR number from CBP, appointing an agent for service of process, and obtaining an importer bond from a surety. According to CBP, these requirements are insufficient to ensure compliance with U.S. customs laws, protect national security, and protect the revenue, because IOR “shell companies” with few or no U.S. assets can avoid paying duties and penalties more easily than U.S. IORs. The new requirements are intended to “ensure proper vetting of foreign IORs” and to “level the playing field for U.S. IORs by holding foreign IORs to the same standards and enforcement mechanisms to which U.S. IORs are currently held.”

Key changes made by the Notice include:

Both Non-Resident Importers and Some U.S. Companies Will be Treated as “Foreign” IORs

The Notice defines a “foreign” IOR as one that does not meet the definition of a “U.S.” IOR. To qualify as a U.S. IOR, an entity must satisfy all of the below criteria:

1. Located in the United States;
2. Incorporated in the United States; and
3. Either:

a. A majority (51% or more) of the entity’s “beneficial owners”[1] (defined as a natural person who, directly or indirectly, controls the entity or owns at least 25% of it) must be U.S. citizens or permanent residents and have control of the entity; or

b. The entity must directly own a “significant amount of unencumbered real property” (defined as the greater of the entity’s prior year’s entered value or $20 million) in the United States at all times.

Unlike CBP’s existing definition of “nonresident” IOR (which remains untouched by the Notice), merely being incorporated in the United States is not enough to qualify as a U.S. IOR.

CBP has the right to verify whether an entity satisfies the above definition of a U.S. IOR, and may in its discretion consider several factors, including but not limited to:

1. Whether the entity’s principal place of business is in the United States;
2. Whether the entity has a physical presence where substantial business transactions are conducted in the United States, including, but not limited to, paying employees, generating revenue, or operating retail locations;
3. Whether the entity maintains sufficient unencumbered physical domestic assets (defined as cash in U.S. bank accounts, U.S. Treasury bonds, and real property, inventory, machinery, and/or equipment physically located in the United States);
4. Whether the entity directly owns a significant amount of unencumbered real property in the United States;
5. Whether the entity’s gross sales generally exceed its cost of goods sold and the entity is structured in a manner that it is anticipated to generate its own profit; and
6. Whether the entity is sufficiently capitalized.

Based on the above criteria, U.S.-incorporated subsidiaries of foreign parent companies and even U.S. companies with no foreign affiliates will not qualify as “U.S.” IORs unless they maintain a substantial presence in the United States through employees, offices, assets, and transactions. The new regulations place the burden on both the IOR and the customs broker to verify that an IOR qualifies as a “U.S.” IOR before checking the box on Forms 3461 and 7501 and to maintain records supporting this status. CBP’s guidance on the new rules emphasizes the importance of maintaining documentation that validates an IOR’s status as “U.S.” or “foreign.” 

Foreign IORs Must be CTPAT Certified or Use a CTPAT Certified Customs Broker

Under the new rules, foreign IORs are prohibited from importing goods into the United States unless the foreign IOR:

1. Obtains CTPAT validation; or
2. Imports through a CTPAT-validated customs broker.

Foreign IORs cannot circumvent this restriction by asking their customs brokers to serve as IORs. The Notice explicitly states that customs brokers that serve as IORs on behalf of an entity that would otherwise qualify as a foreign IOR must be CTPAT-validated.

These requirements apply to both formal and informal entries. Although the EO directed CBP to ban foreign IORs from filing informal entries altogether, the Notice indicates that CBP has determined not to immediately adopt that ban. Instead, CBP will monitor informal entries by foreign IORs and may impose a full prohibition if it determines they present risks to the revenue, national security, or public health and safety.

Customs Brokers Face Heightened Due Diligence Obligations

The new rules require customs brokers to conduct due diligence on their customers to ensure that those customers qualify as U.S. IORs, including by requesting and reviewing customer records such as corporate charters, financial statements and records, purchase receipts, or documents of title. As a result of these heightened due diligence obligations, foreign companies and their U.S.-based subsidiaries can expect more documentation requests from their customs brokers as part of the verification process.

The new rules also address situations in which a customs broker that is not CTPAT-validated acts as the IOR on a U.S. principal’s behalf. In these cases, when filing the entry and entry summary, the customs broker must identify the principal on the broker’s power of attorney and declare that the principal meets the requirements to be considered a U.S. IOR, which means the principal must have a CBP Form 5106 on file with CBP. On the updated CBP Forms 3461 and 7501 (and their electronic equivalents), the customs broker will check a box indicating that it is acting as the IOR on behalf of a principal and provide the principal’s IOR number or, if the principal has no IOR number, another identifier linked to its CBP Form 5106.

Both IORs and Brokers Face Penalties for Noncompliance

If CBP determines that an IOR (or a customs broker acting as the IOR on behalf of a principal) has inaccurately declared U.S. IOR status, CBP may require “live entry,” meaning the goods will not be released from CBP custody until the entry summary is filed and all estimated duties, taxes, and fees are deposited. CBP may also discontinue the IOR’s immediate delivery privileges for future shipments.

Separately, the new rules expand the exposure of customs brokers to penalties under 19 U.S.C. § 1592 for failure to comply, in addition to the $30,000 maximum penalty for customs broker violations under 19 U.S.C. § 1641.

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The new rules are likely to have a particularly significant impact on U.S. subsidiaries of foreign parent companies and U.S. entities with limited business activity, which may fall within the expanded definition of “foreign” IOR if CBP deems their U.S. assets insufficiently substantial. Importers should begin now to gather documentation demonstrating that they satisfy the requirements to qualify as a “U.S.” IOR, and should be prepared to respond to an increased volume of documentation requests from their customs brokers, which may in turn need to substantiate their customers’ “U.S.” IOR status. Changes in corporate structure, such as mergers, acquisitions, divestitures, or internal reorganizations, may affect whether an entity qualifies as a “U.S.” or “foreign” IOR, and therefore importers should reassess their IOR status following any such change to ensure continued compliance. Importers should also confirm the CTPAT status of each customs broker they use. Finally, importers that may be considered foreign IORs should consider the pros and cons of seeking CTPAT validation.

Covington’s customs and tariff experts can assist importers in assessing the applicability of these regulations, making necessary changes to current import processes, developing support for “U.S.” importer status, and applying for CTPAT membership. We can also assist companies that may wish to file comments on the Interim Final Rule; comments are due January 5, 2027.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Customs and International Trade practice.