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HQ 114045





August 21, 1997

BRO-1-RR:IT:EC 114045 GEV

CATEGORY: ENTRY

Michael Hahn
President
Export Links Inc.
87 Dorchester Drive
Grimsby, Ontario, Canada L3M 1B1

RE: Broker; Consultant; 19 CFR ?? 111.35, 111.36(a)

Dear Mr. Hahn:

This is in response to your letters dated July 29 and August 5, 1996, containing a follow-up inquiry relating to Customs ruling letter 113715, dated January 9, 1997. Our ruling on your additional inquiry is set forth below.

FACTS:

Export Links Inc., is a Canadian company which provides various financial, consulting and management services to its clients. Your clients are primarily Canadian but some are subsidiaries of U.S. companies. Due in part to this type of U.S. exposure, you have recently been contacted to provide certain management services to U.S. importers. These management services include the provision of a review of financial and customs records. To facilitate this process, your U.S. clients have appointed you as "agents in trust" and have contractually empowered you to represent their interests in dealing with federal authorities.

Further in regard to the services your company provides, you state that you are not a U.S.- licensed customs broker or law firm. You therefore do not dispense U.S. customs legal advice, nor do you engage in any services which require a U.S. broker's license. You simply manage the process of conducting a review of the aforementioned records of your clients. If a specific area requires the services of a customs attorney or licensed customs broker, you have the contractual authority and obligation to appoint and hire the appropriate parties to provide the required services.

With respect to your company's services, your original inquiry of September 25, 1996, requested our opinion as to the applicability of ? 111.36(a), Customs Regulations (19 CFR scenarios. The first scenario under consideration (and the one that is the subject of your most recent letters) was originally posed as follows:

Scenario 1

Your service results in the discovery of a drawback opportunity. You engage a licensed customs broker to prepare and present the drawback claims. You negotiate the terms of engagement and contract to pay the licensed broker for the services provided. Additionally, your client, the U.S. importer, signs the required "Power of Attorney" authorizing the licensed broker to provide the service. The licensed broker then works directly with the importer to provide drawback services. Payment for the broker's service comes from you and is a cost to you.

In Customs ruling letter 113715 we stated that your company, an unlicensed customs consultant, would be receiving a monetary benefit (i.e., fees paid to you from your client) stemming from a contractual agreement between your company and the broker for the transaction of Customs business by the broker for your client. Accordingly, we held such a scenario to result in a violation of

In your follow-up inquiry the facts of the above scenario remain the same except that Export Links Inc. would retain a lawyer in the U.S. to work on its behalf. Consequently, the lawyer, under the direction of Export Links Inc. and acting as Export Links Inc.'s agent, would retain a broker to perform drawback services for the client. The broker would receive its own power of attorney directly from the client. In accordance with the agreement between Export Links Inc. and the client, the broker would have the drawback recovery forwarded to Export Links Inc. The broker would send its bill for services rendered to the lawyer, who would in turn invoice Export Links Inc. for that amount of money. Export Links Inc. would remit the sum invoiced to the lawyer, and the lawyer in turn would pay the broker its fee. The fee charged by the broker would be commensurate with the effort expended. You state that this amended scenario would appear to be a procedure which would enable Export Links Inc. to perform its consulting services in the United States.

ISSUE:

Whether the procedures described in the above follow-up scenario are permissible under the Customs Regulations.

LAW AND ANALYSIS:

Title 19, Code of Federal Regulations, ? 111.36(a) (19 CFR ? 111.36(a)) provides, in pertinent part, that "[a] broker shall not enter into any agreement with an unlicensed person to transact Customs business for others in such manner that the fees or other benefits resulting from the services rendered for others inure to the benefit of the unlicensed person except as provided in paragraph (b) of this section." The aforementioned exception regarding a freight forwarder is inapplicable with respect to the scenario in question.

Upon reviewing your follow-up inquiry, our position as set forth in Customs ruling letter 113715 remains unchanged. Your company, an unlicensed customs consultant, would still be receiving a monetary benefit stemming from a contractual agreement between your company (entered into by your lawyer acting under your direction as your agent) and the broker for the transaction of Customs business by the broker for your client. Accordingly, such a scenario still results in a violation of ? 111.36(a) regardless of your company's retention of a lawyer.

In regard to ? 111.35, Customs Regulations (19 CFR ? 111.35), which you cite in support of your proposal, we note that it provides, in pertinent part, that "[w]ith respect to customs transactions, a broker shall not demand or accept from any attorney...any fee or remuneration in excess of an amount measured by or commensurate with the time, effort and skill expended by the broker in performing his services." The appropriate amount of an attorney's fee is not dispositive of the revenue-sharing issue under consideration. Section 111.35 is therefore inapplicable to the scenario you pose.

HOLDING:

The procedures described in the above follow-up scenario are violative of ? 111.36(a).

Sincerely,

Jerry Laderberg
Chief
Entry and Carrier Rulings Branch

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