BRO-1-RR:IT:EC 113867 GOB
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
A".
...
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
(3).
* * * * *
(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,
Entry and Carrier Rulings Branch