BRO-3-05-CO:R:C:E 224406 CB
Mr. H. J. Henderson
Cortez Customhouse Brokerage
4950 West Dickman Road
Battle Creek, MI 49015
RE: Request for binding ruling on billing procedures by broker;
19 CFR 111.36
Dear Mr. Henderson:
This is in response to your letter of January 12, 1993,
wherein you requested a ruling regarding several hypothetical
fact scenarios and questions regarding the arrangement and
billing of transportation.
FACTS:
Cortez Customhouse Brokerage Company (Cortez) is a licensed
Customs broker. Additionally, Cortez was recently licensed by
the Federal Maritime Commission as an Ocean Freight Forwarder and
a Nonvessel Operating Common Carrier. Cortez was also recently
licensed by the Interstate Commerce Commission as a Property
Broker of General Commodities.
You set out four fact situations and ask whether the
proposed methodology is in compliance with our regulations. In
Fact Scenario #1 and #2 Cortez retains a freight forwarder on
behalf of a customer. You ask whether you may bill the client
more than the freight forwarder charges you and simply invoice
the charge as "transportation". In Fact Scenario #3 you ask
whether you can charge more than the steamship company charges
you and invoice it as "transportation". Finally in Fact Scenario
#4 you ask whether you can hire a trucking company and charge
your customer more than the quote you receive and invoice the
difference as "transportation". In all four situations you ask
whether you are required to file rates and/or tariffs with the
Customs Service.
ISSUE:
Whether the described procedures are permissible under the
Customs Regulations?
LAW AND ANALYSIS:
First of all, the Customs Service does not require that a
broker's rates and/or tariffs be filed with the agency.
Regarding Fact Scenario #1, #2, and #3, a Customs broker is
required to impart any information relative to any Customs
business to a client who is entitled to the information. See 19
CFR 111.39(a). Additionally, a broker is required to notify the
importer in advance of the name of the selected freight forwarder
and to transmit directly to the importer "[a] statement of his
brokerage charges and an itemized list of any charges to be
collected for the account of the freight forwarder if the fees
and charges are to be collected by or through the broker; ...."
See 19 CFR 111.36(b) If Cortez wants to impose a surcharge on
the cost of transportation it may do so, provided that there is
full disclosure to the importer. Section 111.29(a) requires a
broker to exercise diligence in making financial settlements.
The last two sentences of this section indicate that if the
broker receives money from the client to pay a charge but does
not pay it, the broker must provide a written accounting to the
client. Enclosed for your information is a copy of T.D. 78-308
which sets forth Customs change of policy relating to brokers'
charges for incidental services. Under this policy change,
"Customs will inquire only into the reasonableness of the charges
and then only in cases in which the charges are not itemized on
the broker's statement to the client or are not itemized in
writing to the client before the charges are incurred."
Finally, regarding Fact Scenario #4, you are asking for a
ruling regarding the transportation of merchandise once "[a]n
international shipment belonging to our customer terminates
transportation at Chicago." We are assuming that by "terminates
transportation at Chicago" you meant that entry was made in
Chicago. Customs regulation of brokers pertains only to the
transacting of customs business. Section 641 of the Tariff and
Trade Act of 1930 (19 U.S.C. 1641), as amended by section 212 of
the Tariff and Trade Act of 1984, Public Law 98-573, provides the
following definition of the term "customs business":
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 the
merchandise by reason of its importation, or the refund,
rebate or drawback thereof. (emphasis provided)
The inland transportation arrangements the importer wishes to
make after the merchandise has been entered are not within the
purview of the Customs Service.
HOLDING:
A broker may impose a surcharge on the amount that was
charged by a freight forwarder provided there is full disclosure
on the invoice to the importer.
Sincerely,
John Durant, Director
Commercial Rulings Division