HQ H175280
BRO 3-05 OT:RR:CTF:ER HQ H175280 JLG
Ms. Eveline D. Koot McCue
Koot& Associates
1000 N. Green Valley Pkwy
Ste 440-262
Henderson, NV 89074
Dear Ms. Koot McCue:
This is in response to your letter, dated June 27, 2011, in which you request a binding ruling regarding the activities of your prospective business reorganization. In reaching our decision, we have taken into account additional information submitted to this office in October 2011. We note that in emails dated May 21, 2012 and May 22, 2012, you state that the information submitted in respect of your ruling request does not contain any privileged or confidential commercial or financial information regarding your business. Therefore, you are not requesting confidential treatment pursuant to 19 C.F.R. § 177.2(b)(7).
FACTS:
You are a licensed customs broker doing business under the trade name “Eveline D. Koot McCue d/b/a Koot& Associates,” which we will refer to as K&A. K&A offers customs broker services and seeks to open new offices that will offer what you describe as “customs compliance services.” There will be no licensed customs brokers in the new compliance offices. The employees in K&A’s new offices will market, customize, and use K&A’s newly developed customs compliance software. Essentially, the software compiles data from clients’ records to identify inconsistencies in documentation submitted to U.S. Customs and Border Protection (CBP). Record sources include inventory, accounts payable, vendor invoices, Automated Broker Interface (ABI) files and ACE extracts.
You state that the employees of these new offices will conduct post entry audits by reviewing electronic documentation submitted via K&A’s software against the original source entry documents filed with CBP to determine if there are discrepancies with regard to value, classification, and quantity entered. Discrepancies or irregularities found will then be forwarded to K&A’s brokerage office for review and resolution by a licensed customs broker. Lastly, you maintain that these employees will not interact with clients or CBP officials, nor interpret or resolve any discrepancies discovered.
ISSUE:
Whether the described proposed activities in K&A’s compliance offices constitute customs business.
LAW AND ANALYSIS:
The employees of K&A’s new offices will conduct post-entry audits with software intended to assist importers in identifying errors in entry documents submitted to CBP. K&A asserts that the business activities in its new “compliance” offices do not constitute “customs business,” and therefore do not require a licensed customs broker to oversee the work. Because K&A describes its employees’ activities as reviewing electronic entry documentation for errors and states that such employees will not interact with CBP, prepare CBP documents, or evaluate or resolve identified discrepancies, these activities do not qualify as “customs business.”
Section 641 of the Tariff Act of 1930, as amended (19 U.S.C. § 1641), prohibits non-licensed persons from transacting customs business on behalf of others. See 19 U.S.C. § 1641(b)(1). The statute, 19 U.S.C. § 1641, defines “customs business” as follows:
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 to Customs.
19 U.S.C. §1641(a)(2). The definition of customs business cited above includes provisions added in 1993 pursuant to the Customs Modernization Act ("Mod Act") (Public Law 103-182). Specifically, the preparation of customs documents and other activities leading to such preparation are activities reserved as the province of importers or licensed brokers. See HQ 114199 (February 26, 1998) (holding that an unlicensed
entity may give instruction or advice to clients on general issues involving CBP but may not offer advice on issues relating to a particular transaction, or prepare or assist in preparing, documents and forms intended to be filed with CBP). The regulatory definition of “customs business” provided in 19 C.F.R. § 111.1 mirrors the language set forth in 19 U.S.C. §1641(a)(2).
In CBP Headquarter’s ruling HRL 114654 (May 28, 1999), CBP determined that an unlicensed entity can review a client’s entry compliance procedures and conduct post entry audits provided such activities do not evolve into the transaction of customs business. In HRL 114654, an unlicensed Canadian corporation intended on advising their Canadian clients on CBP policies and procedures, performing entry compliance and post entry reviews and audits, and installing ABI software for its Canadian clients. While we found the descriptions of the activities vague, CBP concluded that the unlicensed corporation could dispense general advice on CBP policies and procedures, so long as specific advice on how to classify, appraise, or mark goods for particular entries was not provided. We further held that it was permissible for an unlicensed corporation to review a client’s entry procedures and perform post entry audits.
This situation at bar is analogous to the situation addressed in HRL 114654. The employees of K&A’s compliance offices will conduct post entry audits by reviewing electronic documentation submitted via K&A’s software against the original source entry documents filed with CBP to determine if there are discrepancies with regard to value, classification, and quantity entered. K&A’s review of information and documents to find inconsistencies does not involve preparing documents for filing with CBP or activities leading to such preparation. Additionally, these employees will not make decisions concerning classification, value, or admissibility of merchandise leading to preparation of CBP documents. K&A’s employees will not resolve discrepancies or irregularities in CBP transactions. If irregularities or potential errors are discovered, these will be forwarded to K&A’s customs offices where K&A’s licensed brokers will determine if errors were actually made, and then advise companies on ways to rectify any inaccuracies. Furthermore, any documents submitted to CBP are filed by K&A’s brokers not those working in the new offices.
CBP’s position on this issue remains the same as that articulated in HRL 114654. Unlicensed entities may give general advice on customs-related issues, and conduct post-entry audits provided the services rendered do not amount to the transaction of customs business. Since the employees of K&A’s compliance offices will not prepare documents for filing with CBP or engage in activities leading to the filing of such documents, the identification of discrepancies between entry documents filed with CBP and clients’ records is not customs business. Accordingly, the employees’ activities in the proposed new offices are not subject to the laws and regulations applicable to customs brokers transacting customs business.
HOLDING:
The proposed activities as described will not constitute “customs business;” therefore, the employees of K&A’s new offices are not subject to the laws and regulations applicable to customs brokers transacting customs business.
Please note that 19 C.F.R § 177.9(b)(1) provides that “each ruling letter issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division