CUSTOMS RULING ALLOWS BROKERS ôREASONABLE CAREö FOR SUBSIDIARIES
A company employee will be able to provide advice on Customs issues to subsidiaries when the advice concerns the exercise of “reasonable care,” according to a proposed rulemaking by the U.S. Customs Service.
The rule would relax the restrictions imposed by Customs on the ability of corporations to centralize their in-house customs experts to provide advice to affiliated companies. Under the current regulations as interpreted by Customs, if an unlicensed corporation in a parent and subsidiary relationship wished to engage a licensed individual broker as an employee of the corporation to give customs business advice to its related company regarding specific transactions, there would be legal limitations. The rendering of advice under the described circumstances would be permissible only if:
* The licensed broker employee was to become a bona fide employee of each of the two involved companies.
* The employing corporation was to obtain a corporate broker license.
* The licensed broker employee was to set up business to operate as a broker during non-work hours.
The proposed rule would amend Part 111 of the Customs Regulations to specify that corporate compliance activity engaged in for the purpose of exercising 'reasonable care' under 19 U.S.C. 1484 is not defined as “customs business” and, therefore, such activity is not subject to the customs broker licensing requirements.
However, the proposed amendments make clear that this corporate compliance activity concept “does not extend to document preparation and filing, which is customs business subject to licensing requirements,” Customs said. The agency believes that the proposed amendments will improve the operational efficiency of the affected corporate entities and, thereby, enhance their ability to ensure compliance with applicable customs laws and regulations.
Customs said the amendments made in 1993 by the Customs Modernization Act provisions of the North American Free Trade Agreement Implementation Act included the requirement to exercise 'reasonable care' in connection with the entry requirements set forth in 19 U.S.C. 1484. To foster compliance with the customs laws and regulations under this added statutory responsibility, many importer groups consisting of a parent corporation and one or more subsidiary corporations have chosen to centralize their in-house customs experts into one corporate entity and to make the services of those experts available to the group as a whole, Customs said. “However, when requested to issue an administrative ruling on the issue, Customs has consistently taken the position that many of the activities performed under this type of arrangement would involve the transaction of 'customs business,' which would require a broker license under Sec. 111.2(a)(1),” it reported.
However, members of the trade community have indicated to Customs that the present situation is unsatisfactory because it does not afford importers sufficient opportunity to address multiple related aspects of an individual customs transaction or groups of transactions and thus is an impediment to their ensuring that reasonable care is exercised by all corporate affiliates for purposes of 19 U.S.C. 1484, the agency said.
Section 641 of the Tariff Act of 1930, as amended, provides that a person must hold a valid customs broker’s license and permit in order to transact customs business on behalf of others, and provides for the assessment of monetary penalties against other persons for conducting customs business without the required broker’s license.
Customs said in the proposed rulemaking that 'Customs business' means those activities involving transactions with Customs concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by Customs on merchandise by reason of its importation, and the refund, rebate, or drawback of those duties, taxes, or other charges. 'Customs business' also includes the preparation, and activities relating to the preparation, of documents in any format and the electronic transmission of documents and parts of documents intended to filed with Customs in furtherance of any other customs business activity.
In a filing with the Federal Register, Douglas M. Browning, acting commissioner of Customs, requested industry comments on the proposed rule by Dec. 16.