HQ 0086096 - Customs Regulations. Transactions with Customs; brokers - United States International Trade Commision Rulings

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HQ 086096

March 22, 1990

CLA-2:CO:R:C:G 086096 SER

CATEGORY: CLASSIFICATION

Mr. Peter Hilfrich
PBH International
P.O. Box 942
Bellevue, WA 98009

RE: Customs Regulations. Transactions with Customs; brokers

Dear Mr. Hilfrich:

Thank you for your letters, received by this office on December 13, 1989, (HQ 086095, 086096) concerning recent transactions with the United States Customs Service. Upon examination of your correspondence with various officials at Customs and with other United States Government Agencies, it has come to our attention that you may not have fulfilled several requirements of the regulations which govern Customs business.

I. Transacting customs business without a license

A. Authorization to conduct Customs business

The statutes and regulations which govern Customs establish limits on who is allowed to conduct Customs business. Primarily, as stated in 19 U.S.C. 1641(b), no person may conduct customs business unless that person holds a broker's license. Any person who intentionally transacts customs business, other than as provided in section 111.3, without holding a valid broker's license, shall be liable for a monetary penalty for each such transaction as well as for each violation of the requirements of 19 U.S.C. 1641. The penalty shall be assessed in accordance with Subpart E of this chapter. 19 U.S.C. 1641(b), 19 Code of Federal Regulations (C.F.R.) 111.4.

In addition to brokers, Customs allows attorneys the right to practice certain Customs transactions. Treasury Decision (T.D.) 86-161, and 19 C.F.R. Part 177. The Treasury Decision provides that an attorney is not required to obtain a broker's license to represent a client in an administrative proceeding before Customs. Also, recognition is given to attorneys in 19 C.F.R. Part 177, which provides that, "[w]ith the exception of attorneys whose authority to represent is known, any person appearing before the Customs Service as an agent in connection with a ruling request may be required to present evidence of his authority to represent the principal."

Further exceptions for transactions in which a license is not required are provided for in 19 C.F.R. 111.3, and further described in Part 177. Section 111.3 states:

A license is not required to engage in the following transactions with the Treasury Department or any representative thereof:

(a) For one's own account. An importer or exporter transacting Customs business solely on his own account and in no sense on behalf of another is not required to be licensed, nor are his authorized regular employees or officers who act only for him in the transaction of such business.

(b) As employee of brokers. An employee of a broker, acting solely for his employer, is not required to be licensed where:

(1) Authorized to sign Customs documents. The broker has authorized the employee to sign Customs documents on his behalf, and has executed a power of attorney for that purpose. The broker is not required to file the power of attorney with the district director, but shall provide proof of its existence to Customs upon request. Only employees who are residents of the United States may be authorized to sign Customs documents; or

(2) Authorized to transact other business. The broker has filed with the district director a statement identifying the employee as authorized to transact business on his behalf. Such statement shall also be filed at each port within the district where the broker wishes the employee to act for him.

The standard for acting for one's account is further elaborated in 19 C.F.R. 177.1 (d)(4), which allows for an individual representing his full-time employer, or a bona-fide officer, director, or other qualified representative of a corporation, association, or organized group, to not need a statement of authority to represent a client as does a broker upon request.

B. "Customs business"

"Customs business" means those activities involving transactions with Customs concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by Customs upon merchandise by reason of its importation, or the refund, rebate, or drawback thereof. 19 C.F.R. 111.1 The interaction you have had with Customs, primarily your requests for classification of merchandise and the correlating questions of issues such as country of origin, clearly fall within the definition of transacting "Customs business".

C. Statutory purpose

The limiting of those authorized to conduct Customs business is for several purposes. One fundamental purpose is to protect the importers who transact international trade. The legislative history of an amendment to 19 U.S.C. 1641(d) helps illustrate this purpose:

While the large importers are more or less familiar with customs procedure the great majority of importers are solely dependent upon the honesty and the competency of their customs brokers to protect their interests. Even in the case of large importers, however, due to the specialized nature of customs procedure, great reliance must be placed upon their brokers for proper entry of merchandise.

In view of the fact that these customhouse brokers are quasi officers of the Treasury and that by licensing them the Treasury holds out to importers that it has investigated their character and represents to such importers that they are capable and honest in their conduct of their customs business, . . . , it is essential that the Department [of Treasury] have wide discretion in dealing with these brokers and that the Secretary of Treasury, therefore, be given broad powers to regulate and supervise these activities.

In summary, the statutes and corresponding regulations allow for licensed Customs brokers, attorneys, and those individuals working for their own account and their employees to conduct Customs business. Upon examination of our records we find no evidence that you are a licensed Customs broker or an attorney, nor do you appear to fall within any of the exceptions provided in the regulations which would allow you to conduct Customs business. If you desire to conduct further business with Customs, you must either prove that you fall within one of the categories of individuals authorized to practice Customs business or become a licensed broker.

II. Prospective rulings

In the event that you satisfy the requirements relating to the authorization of conducting Customs business, any further transactions that you request must be of a prospective nature. The regulations, in 19 C.F.R. 177.1 provide:

It is in the interest of the sound administration of the Customs and related laws that persons engaging in any transaction affected by those laws fully understand the consequences of that transaction prior to its consummation. For this reason, [Customs] . . ., will give full and careful consideration to written requests . . ., with respect to a specifically described Customs transactions, a definitive interpretation of applicable law, or other appropriate information.

Customs does not provide rulings on hypothetical questions. It appears from our review of your submissions that some of your requests relate to hypothetical questions, such as what sources of sugar could be used in a product, or whether a product can be imported in bulk. As a public agency Customs is not in a position to provide business or legal advice to private importers.

III. Summary

To further conduct Customs business you must prove that you meet the requirements of the regulations which govern the authorization to conduct Customs business. If you meet those requirements any further Customs business must be for prospective Customs transactions.

Sincerely,

John Durant, Director
Commercial Rulings Division

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