HQ 113867 - 19 U.S.C. 1641(a) and (b); Customs business; Human resource management; Responsible supervision and control over customs business - United States International Trade Commision Rulings

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HQ 113867

March 19, 1997

BRO-1-RR:IT:EC 113867 GOB

CATEGORY: BROKERS

Simon A. Mandell
National Staff Specialists
3039 Kilgore Road
Suite 150
Rancho Cordova, CA 95670

RE: 19 U.S.C. 1641(a) and (b); Customs business; Human resource management; Responsible supervision and control over customs business
Dear Mr. Mandell:

This is in response to your letter of February 17, 1997, in which you state as follows:

National Staff Specialists is an Employee Leasing company that would like to provide it's Human Resource Management services to a Customs Broker/Freight Forwarder. When entering into a contract with National Staff Specialists the client and NSS become Co-Employers. National Staff handles all related Human Resource responsibilities and the client handles everything else.

Some of the responsibilities NSS would handle is as follows: Payroll and all the reporting that goes with doing payroll, SB198 Compliance's, Safety and Risk Management, Policy and Procedure Manuals, etc.

I would appreciate a ruling from your office at your earliest convenience as to whether there are any additional requirements that NSS needs to meet to complete our contract with this potential client.

Subsequent to your letter of February 17, 1997, you provided additional information, including the proposed contract between National Staff Specialists ("NSS" or "National") and its proposed broker client.

The proposed agreement between NSS and its broker client provides, in pertinent part:

1. As required by COMPANY [the broker client], NATIONAL will provide COMPANY the employee services enumerated in the attached Schedule "A". The employee services provided by NATIONAL will not include, in any respect, any services with respect to the laws and regulations administered by the U.S. Customs Service. Further, NATIONAL will not engage in "customs business" as that term is defined in 19 USC 1641(a)(2). Thus, the services provided by NATIONAL will not affect the COMPANY'S supervision and control over the COMPANY'S customs business. The individuals who conduct the COMPANY'S customs business will be supervised and controlled by the COMPANY. Only the COMPANY has the authority to hire, terminate, and discipline its employees who are engaged in customs business. Said individuals will be co-employees of the COMPANY and NATIONAL, subject to the fact that NATIONAL'S responsibilities with respect to those employees will be limited to human resource management, i.e., functions such as payroll, workmen's compensation, health insurance, etc. and will not include any customs business.

2. NATIONAL will, upon request by the COMPANY, remove from office to the COMPANY any employees supplied by NATIONAL, as agent for the COMPANY, to the COMPANY. ...
5. Notwithstanding the fact that equipment is COMPANY's, the personnel provided are and will continue to be NATIONAL's employee's. NATIONAL will maintain adequate payroll records and reports and provide Worker's Compensation insurance records on all of NATIONAL's employees and advise COMPANY so that it will comply with all applicable laws and regulations of all governmental agencies with respect to such employment. NATIONAL will be compensated as described in "Schedule ...
10. The control of COMPANY's operation is entirely with the COMPANY and it's client's...

11. Should COMPANY place any employee supplied by [or] through NATIONAL onto their own direct payroll or utilize the services of such employee by contracting for their services with another Leasing or Temporary Service company, without the express, advance, written permission of NATIONAL, they shall pay to NATIONAL an amount equal to three (3) weeks of said employees wages.

Schedule A of the proposed agreement states services such as payroll procedures (i.e., the delivery of payroll checks, payroll periods, etc.) and standard benefit information (i.e., holidays, vacation time, and dates of medical coverage, etc.).

NSS's brochure states in pertinent part as follows:

If you have a new business in California (opening a branch or starting from "scratch") we can staff your operation with leased employees from the Chief Operating Officer through all levels, including the janitor and watchmen. The personnel areas you would like us to be responsible for are up to you. We can help you with the complexities of registering with all of the regulatory agencies and obtaining proper insurance coverages.
...
What is Full Service Labor Leasing?

Imagine being free of the frustrations associated with employee paperwork. Imagine how much more productive your company would be by devoting more time to business, instead of business administration.

National Staff Specialists makes this possible by taking over the details of employee administration. It works very simply: you "release" your employees; we hire them and then lease them back to your company. They continue working under your supervision, and you still make all operating decisions. However, you are no longer burdened with administrative tasks. We handle all payroll, take care of all government paperwork, maintain all records and provide exceptional employee benefits. You simply write one check to National Staff Specialists and leave the details to us.

ISSUE:

Whether the proposed relationship between NSS and its broker client is permissible under the customs laws.

LAW AND ANALYSIS:

19 U.S.C. 1641(a) and (b) provide in pertinent part as follows:

? 1641. Customhouse Brokers

(a) Definitions

As used in this section:

(1) The term "customs broker" means any person granted a customs broker's license by the Secretary under subsection (b) of this section.

(2) The term "customs business" means those activities involving transactions with the Customs Service concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by the Customs Service upon merchandise by reason of its importation, or the refund, rebate, or drawback thereof. It also includes the preparation of documents or forms in any format and the electronic transmission of documents, invoices, bills, or parts thereof, intended to be filed with the Customs Service in furtherance of such activities, whether or not signed or filed by the preparer, or activities relating to such preparation, but does not include the mere electronic transmission of data received for transmission by Customs.

(3) The term "Secretary" means the Secretary of the Treasury.

(b) Customs broker's licenses

(1) In general

No person may conduct customs business (other than solely on behalf of that person) unless that person holds a valid customs broker's license issued by the Secretary under paragraph (2) or (4) Duties

A customs broker shall exercise responsible supervision and control over the customs business that it conducts.

19 CFR 111.28(a) provides:

? 111.28 Responsible supervision.

(a) General rule. Every licensed broker operating as a sole proprietor and every licensed member of a partnership and every licensed officer of an association or corporation which is licensed as a broker shall exercise responsible supervision and control over the transaction of the Customs business of such sole proprietorship, partnership, association, or corporation.

19 CFR 111.11(d) provides in pertinent part:

(d) Responsible supervision and control. The term "responsible supervision and control" means that degree of supervision and control necessary to ensure that the employee provides substantially the same quality of service in handling customs transactions that the licensed broker is required to provide.

Our analysis of the facts yields the following.

NSS proposes to provide human resource management services to its broker client. These services would include payroll services, benefits management, workplace safety issues and the like.

The proposed agreement between NSS and its broker client provides in section 5, excerpted above, that "...the personnel provided are and will continue to be NATIONAL's [NSS's] employee's."

Section 2 of the proposed agreement provides: "NATIONAL will, upon request by the Company, remove from office to the COMPANY any employees supplied by NATIONAL, as agent for the COMPANY, to the COMPANY."

NSS's brochure states: "...you release' your employees; we hire them and then lease them back to your company."

The above provisions and statement reflect that NSS will be the employer, or co-employer, of the employees who are performing the customs duties. Prior to execution of the agreement, these employees are employees of the broker client.

Inasmuch as NSS is not a licensed customs broker, pursuant to 19 U.S.C. 1641(b)(1) it may not engage in "customs business," as that term is defined in 19 U.S.C. 1641(a)(2).

We determine that, under the facts presented and pursuant to the applicable Customs laws and regulations, NSS cannot be the employer, or the co-employer, of individuals who are engaged in customs business. By virtue of its proposed status as an employer of individuals who perform customs work, NSS would be engaged in customs business, as that term is defined in 19 U.S.C. 1641(a)(2). This it may not do. See 19 U.S.C. 1641(b)(1).

Additionally, if NSS is the employer or co-employer of individuals who perform customs duties, its broker client would not able to exercise responsible supervision and control over the pertinent customs business as required by 19 U.S.C. 1641(b)(4). For the broker client to permit NSS to be the employer of the employees who perform customs work would be for the broker client to relinquish the control needed for it to perform its responsibilities under 19 U.S.C. 1641(b)(4).

HOLDINGS:

Pursuant to the proposed relationship between NSS and its broker client, as described in their proposed agreement, NSS would be engaging in customs business within the meaning of 19 U.S.C. 1641(a)(2). Pursuant to 19 U.S.C. 1641(b)(1), it may not do this.

Further, pursuant to the proposed relationship between NSS and its broker client, its broker client would not be able to exercise responsible supervision and control over the pertinent customs business as required by 19 U.S.C. 1641(b)(4).

Sincerely,

Jerry Laderberg,
Acting Chief,

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