HQ 227186 - Definition of "customs business"; 19 U.S.C. ?1641; licensed broker providing customs business services for clients of unlicensed freight forwarder employer; permit required to conduct customs business. - United States International Trade Commision Rulings

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HQ 227186

January 13, 1999

BRO-2-01-RR:IT:EC 227186 GG

CATEGORY: ENTRY

Cameron W. Roberts, Esq.
Countryman & McDaniel
5933 W. Century Blvd.
11th Floor
Los Angeles, CA 90045

RE: Definition of "customs business"; 19 U.S.C. ?1641; licensed broker providing customs business services for clients of unlicensed freight forwarder employer; permit required to conduct customs business.

Dear Mr. Roberts:

This is in response to an inquiry made by you on August 13, 1996, concerning the meaning of the term "customs business" and its relevance to the operations of a freight forwarder. In a follow-up conversation with you in 1998, additional facts were proffered to clarify the situation.

FACTS:

Company A, a freight forwarder and NVOCC, employs a licensed customs broker who is also an attorney. This employee is not an officer of the corporation, does not serve in the capacity of in-house counsel, and does not purport to be a permitted customs broker. He simply represents the company on issues related to the work of a freight forwarder/NVOCC. Occasionally, however, clients request consultation on Customs issues. Examples of such consultation are as follows:

1) Giving advice on the completion of NAFTA certificates of origin. You state that "[t]he forwarder would provide copies of the form, assist in filling the form out, but would not offer a legal opinion' as to the country of origin or the commodity's ability to qualify for NAFTA treatment";

2) Providing advice on the completion of export documentation, including, but not limited to, commercial invoices, packing lists, certificates of origin, export registration, carnets and other documents "used in making entry that may be available in the country of importation, including the United States";

3) Advising clients on the relative merits of using a single entry or a continuous bond; also assisting in the preparation of the bond application paperwork and arranging with a surety for the issuance of a continuous bond, if appropriate; and

4) Consulting with clients on Customs requirements of foreign countries, such as Canada and Mexico.

At no time will the forwarder or its licensed employee sign or file entry documents with U.S. Customs. In addition, the forwarder will not represent that it is a permitted U.S. customs broker to its clients.

ISSUE:

May a licensed but unpermitted individual, working as an employee of an unlicensed freight forwarder, offer consultation services on issues relating to importing and exporting merchandise to clients of the freight forwarder?

LAW AND ANALYSIS:

Section 641(b)(1) of the Tariff Act of 1930, as amended (19 U.S.C. ?1641(b)(1)), provides that no person may conduct customs business (other than solely on behalf of that person) unless that person holds a valid customs broker's license. "Customs business" is defined in 19 U.S.C. ?1641(a)(2) as:

. . . [T]hose 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 to Customs.

The factual situation presented raises several related questions. First, do any of the described services which the licensed employee proposes to provide to clients of the freight forwarder fall within the definition of "customs business". Second, if so, may the licensed employee, either in his own name or on behalf of his employer the freight forwarder, provide such services?

1. Providing advice on and assistance with the filling out of NAFTA certificates of origin

Section 648 of the North American Free Trade Agreement Implementation Act (Public Law 103-182), enacted in 1993, amended 19 U.S.C. ?1641 by adding the preparation of documents and forms intended to be filed with the Customs Service, and activities relating to such preparation, to the definition of Customs business. The documents and forms covered by this provision must relate to any of the activities described in the first sentence of the definition, i.e., "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 if its importation, or the refund, rebate of drawback thereof." The preparation of documents and forms that are not "in furtherance of" any of the listed activities would not constitute "customs business" and could be done by an unlicensed person.

You do not specify whether the assistance to be provided with NAFTA certificates of origin will be connected to import or export transactions. This is crucial because, with a few exceptions, such as drawback, the statutory definition of "customs business" applies only to import activities. Thus, filling out a Customs Form 343 NAFTA Certificate of Origin for a U.S. exporter or producer of goods being sent from the United States to Canada or Mexico would not constitute "customs business". However, the preparation of a CF 343 for a shipment in-bound from Canada or Mexico relates to a transaction concerning the entry and classification of merchandise. Therefore, it is a customs business activity.

2. Providing advice on and assistance with the completion of export documentation.

The preparation of export documents is discussed above. As a general rule, unlicensed persons may prepare and sign documents relating to an export transaction on behalf of others, because such documents are not associated with "activities involving transactions with the Customs Service concerning the entry and admissibility of merchandise, its classification and valuation, etc.". We note, however, that the definition of customs business includes drawback transactions with Customs, which as you know involves the exportation of merchandise. For an explanation of the connection between drawback and the term "customs business", please see Treasury Decision 98-16, Vol. 32, No. 10, pages 13-14, Customs Bulletin and Decisions, March 11, 1998.

Other activities which are linked to the exportation of merchandise may also fall under the definition of "customs business". An example is the preparation and filing of NAFTA duty deferral entries, required upon the exportation of affected merchandise to Canada and, beginning in 2001, to Mexico. A NAFTA duty deferral entry relates to the payment of duties and fees on merchandise in its state when imported into the United States. Although the entry is filed and any applicable duties are paid upon exportation, the relation back to the importation places these activities in the realm of "customs business."

3. Advising clients on the relative merits of using a single entry versus a continuous bond; assisting in the preparation of the bond application paperwork and arranging for a surety to issue the appropriate bond.

Giving advice on what type of bond to use, on how to fill out bond application paperwork, and on submitting the application to a surety is not "customs business" and, as such, may be done by an unlicensed person on behalf of another.

4. Consulting with clients on Customs requirements of foreign countries, such as Canada and Mexico

Customs does not regulate the providing of advice on the Customs requirements of foreign countries.

An unlicensed person may render advice on issues, and assist another with the preparation of paperwork, if such activities fall outside of the definition of "customs business". Consequently, the unlicensed freight forwarder and its licensed employee may advise clients on those matters discussed above which are not considered to be "customs business". Both the unlicensed freight forwarder and the licensed employee would be precluded, however, from offering those services which are considered to be "customs business". The prohibition applies to the freight forwarder because the freight forwarder does not have a separate broker's license and permit of its own. It is for this reason also that the licensed employee may not transact customs business under the freight forwarder's name. The licensed employee will also be precluded from offering customs brokerage services to his employer's clients under his own name, because the employee does not have a permit to conduct customs business. Brokers are required to have permits for each customs broker district in which they operate. (19 U.S.C. ?1641(c) and 19 CFR ?111.2)

HOLDING:

A licensed but unpermitted individual may offer consultation services to clients of his employer, an unlicensed freight forwarder, on issues that relate to importing and exporting merchandise but do not rise to the level of "customs business". The freight forwarder would have to obtain its own license and permits to advise its clients on customs business matters. The individual broker would have to become permitted to transact customs business under his own name.

Sincerely,

Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch

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