Summary: Starting January 5, 2027, foreign importers of record (IORs) must either be validated under the Customs Trade Partnership Against Terrorism (CTPAT) program or engage a CTPAT-validated customs broker to file entries. The rule also reaches U.S. entities that are mostly owned by non-U.S. persons, and every entry must declare U.S. IOR status. An inaccurate declaration can lead to longer customs processing time, duties due before goods are released, and greater penalties for brokers.
On November 6, 2026, U.S. Customs and Border Protection (CBP) published an interim final rule, “Heightened Requirements for Foreign Importers of Record,” in the Federal Register (91 FR 69977). The rule implements Section 2 of Executive Order (E.O.) 14411, “Strengthening Customs Enforcement,” signed on June 3, 2026. It adds a new Part 110 to Title 19 of the Code of Federal Regulations for Customs Duties (19 CFR) and amends Parts 111, 141, 142, and 171.
The rule makes two significant changes:
- First, beginning January 5, 2027, a foreign importer of record (IOR) may enter goods into the United States (U.S.) only if it is validated under the Customs Trade Partnership Against Terrorism (CTPAT) program or files through a CTPAT-validated customs broker.
- Second, CBP limits the “U.S. IOR” designation to businesses that are in the U.S., organized under U.S. law, and meet an ownership or real property test. Importers that fail the test will be subject to the foreign IOR rules.
A U.S. subsidiary owned by a foreign parent does not qualify on ownership alone. Unless it directly owns a significant amount of unencumbered U.S. real property, CBP is likely to treat it as a foreign IOR.
What is an importer of record?
An IOR is the person or company responsible for making entry, paying duties, and meeting U.S. import requirements for goods brought into the country. Under CBP’s new rule, any IOR that does not meet the definition of a U.S. IOR is a foreign importer of record, also called a nonresident importer.
Who qualifies as a U.S. importer of record under the new rule?
Under the new 19 CFR Part 110, a business must meet all three of these tests to qualify as a U.S. IOR:
- Located in the United States,
- Organized under U.S. law, and
- At least 51% of its beneficial owners with control of the entity must be U.S. citizens or lawful permanent residents, or it must directly own a significant amount of unencumbered U.S. real property.
What counts as a beneficial owner?
A beneficial owner is a natural person (an individual, not a company) who, directly or indirectly, either exercises substantial control over the entity or owns or controls at least 25% of its ownership interests.
- Every entity must have at least one beneficial owner. Where layers of entity ownership exist, the natural person at the top is the beneficial owner. As a result, a U.S.-incorporated subsidiary ultimately controlled by foreign natural persons could fail the test unless it meets the real property alternative.
How does the real property alternative work?
Real property is the only asset that can establish U.S. IOR status for an entity that fails the 51% test. The rule sets no dollar threshold, ratio, or safe harbor for “significant,” and gives no examples of how CBP will apply it.
How will CBP verify that an entity is located in the U.S.?
To test the “located in the U.S.” requirement, CBP may consider the following factors:
- Whether the entity has a U.S. principal place of business and physical presence
- Whether it holds sufficient unencumbered physical domestic assets, excluding receivables
- Whether it directly holds sufficient unencumbered U.S. real property
- Whether its gross sales generally exceed cost of goods sold and it is structured to generate its own profit
- Whether it is sufficiently capitalized
CBP will also consider the size and scale of the entity’s operations and whether it is an instrumentality of a foreign manufacturer without a substantial U.S. presence. Bank deposits, U.S. Treasury securities, and U.S.-located inventory count as physical domestic assets; receivables do not.
When does the foreign IOR rule take effect?
Because this is an interim final rule, it takes effect on January 5, 2027, the same day public comments are due, which is before CBP reviews them. CBP may still change the rule afterward.
How does the new rule affect foreign IORs?
Until now, a foreign company could become an IOR just by filing CBP Form 5106 or using an IRS Employer Identification Number (EIN). Many of these IORs have no U.S. assets, which makes CBP enforcement difficult.
CBP reports that non-CTPAT foreign IORs owe $1.01 billion in unpaid bills opened since October 1, 2020.
We expect these practical impacts:
- Broker changes and capacity – Only 643 active brokers are CTPAT validated, compared with 2,428 that are not. Many foreign IORs may need to move their business on short notice. Validated brokers may become selective, especially about clients that look risky.
- More scrutiny when onboarding – Brokers will have a legal duty to verify IOR status. Expect requests for ownership charts, beneficial owner identification, financial statements, and proof of U.S. assets when the rule enters into force.
- Foreign-owned U.S. subsidiaries may be caught too – A U.S. subsidiary that fails both the 51% test and the real property alternative will be treated as a foreign IOR and must follow the foreign IOR rules.
- Delivered duty paid (DDP) sales models – Foreign sellers who ship DDP to U.S. customers and act as IOR face the full impact. Some U.S. customers may be asked to become the IOR instead, but those customers must meet the U.S. IOR test themselves.
- Cash flow and supply chain risk – If a U.S. IOR declaration turns out to be inaccurate, CBP can require live entry, meaning goods are held at the port until estimated duties are paid. With today’s Section 232, Section 301, and other tariffs, that can be a large cash demand.
- Penalty and audit exposure – The declaration becomes a recurring statement on every entry. Entry errors can lead to enforcement and draw CBP’s attention to other compliance areas, such as valuation, classification, and country of origin.
What should importers do before January 5, 2027?
Take these steps before the rule takes effect, starting with an evaluation of the ownership and asset structure of each importing entity to determine whether it qualifies as a U.S. IOR or must prepare for the foreign IOR rules:
| Step | Focus area | Action | Key details |
|---|---|---|---|
| 1 | IOR inventory | List every IOR number your group uses | Include entry volumes, values, and the broker for each |
| 2 | Broker CTPAT status | Confirm your broker’s CTPAT validation status | Get confirmation in writing |
| 3 | Beneficial ownership | Map ownership up to the natural persons and identify every beneficial owner | A beneficial owner holds 25% ownership or substantial control |
| 4 | Tax and transfer pricing | If you are considering establishing or restructuring a U.S. entity, start the tax and transfer pricing analysis now | Include whether current transfer pricing policies support the capital and operations the entity will need |
| 5 | 19 CFR 110.2 test | Test each existing U.S. entity against 19 CFR 110.2 | Include the six verification factors and document the conclusion |
| 6 | U.S. IOR declaration | Decide how each entity will answer the U.S. IOR declaration | Agree on the approach with your broker |
| 7 | Contracts | Review Incoterms, distribution agreements, and customer contracts | Establish importer responsibilities |
| 8 | Cash flow | Model the cash flow impact | Applies if live entry is required |
| 9 | Real property | If a U.S. entity is on the table, weigh whether it should own or lease real property | Model the Foreign Investment in Real Property Tax Act (FIRPTA) consequences |
| 10 | CBP comments | Consider submitting comments to CBP by January 5, 2027 (docket USCBP-2026-1387) | For example, you could ask CBP to define “significant” real property, or to give foreign-owned operating companies credit for leased facilities and payroll |
Final thoughts: Preparing for CBP’s foreign importer of record rule
CBP’s new rule turns IOR status into a question every importer needs to answer on every entry. Companies that confirm their status, line up a CTPAT-validated broker, and model the cash flow impact before January 5, 2027, will be in a stronger position to keep goods moving.
Because CBP may revise the rule after the comment period, it’s also important to watch for updates. If you’re unsure where your entities stand, Aprio’s Customs and Tariffs specialists can help you work through the new test.
This article is for general information only and is not tax, legal, or customs advice. It is based on the interim final rule as published in the Federal Register on November 6, 2026 (91 FR 69977), which CBP may revise after the comment period. Talk with a qualified advisor about your specific facts.
Sources
- U.S. Customs and Border Protection, “Heightened Requirements for Foreign Importers of Record,” interim final rule, CBP Dec. 26-19, FR Doc. 2026-22735 (federalregister.gov/d/2026-22735)
