BRO-1-RR:IT:EC 114045 GEV
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.
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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
111.36(a)) or any other applicable regulations to two
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
111.36(a).
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.
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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