BRO 3-05
OT:RR:CTF:ER
H260075 ECG
David M. Murphy
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP
599 Lexington Avenue
36th Floor
New York, NY 10022-7648
Re: Broker Permit; Clearance of Vessel Operations
Dear Mr. Murphy:
This is in response to your letter dated December 3, 2014, requesting a ruling concerning whether a broker permit is required for clearance of vessel operations.
FACTS:
You state that Schenker, Inc. (“Schenker”) is a licensed customs broker and maintains a number of local district permits to conduct customs business. Schenker’s business includes services related to the entry and clearance of vessels with U.S. Customs and Border Protection (“CBP”). It conducts these activities as an agent under the appropriate powers of attorney from the relevant parties. Additionally, employees who countersign or sign documents on behalf of the vessel owners are authorized to do so pursuant to 19 C.F.R. § 111.2(a)(2)(ii)(A)(1). As its operations grow, Schenker anticipates that its vessel clearance activities may extend to broker districts where it does not have a local permit. Specifically, Schenker anticipates that these actions will involve filing and preparing certain forms including: 1) U.S. Coast Guard Notices of Arrival and Departure and related documentation; 2) CBP Form I-418 (passenger and crew lists); 3) CBP Form 1302 (cargo declaration); 4) CBP Form 1303 (ship stores declaration); 5) CBP Form 1304 (crew effects declaration); 6) CBP Form 3171 (application for permit to unlade-overtime); 7) inward and outward cargo manifests; 8) Importer Security Filings (“ISF”); 9) Automated Manifest System (“AMS”) transmissions; 10) Automated Export System (“AES”) transmissions; 11) CBP Form 7512 (transportation entry and manifest of goods subject to CBP inspection and permit); 12) CBP Form 4455 (certificate of registration); and 13) CBP Form 5129 (crewmember’s declarations). Schenker inquires if it may conduct its vessel clearance operations without a custom broker license and district permit, thus negating the need for Schenker to obtain a local permit where it conducts these operations.
ISSUE:
Whether the preparation and filing of documents in connection with vessel clearance constitutes customs business.
LAW AND ANALYSIS:
Section 641(b)(1) of the Tariff Act of 1930, as amended (19 U.S.C. § 1641(b)(1)), provides that no person may conduct customs business (other than solely on behalf of that person) unless that person holds a valid customs broker’s license. The regulatory definition of “customs business,” which closely follows the language set forth in 19 U.S.C. § 1641(a), is provided in 19 C.F.R. § 111.1 as:
those activities involving transactions with CBP concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by CBP 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 intended to be filed with CBP in furtherance of any other customs business activity, whether or not signed or filed by the preparer. However, “customs business” does not include the mere electronic transmission of data received for transmission to CBP and does not include a corporate compliance activity.
Furthermore, CBP regulations exclude certain transactions from the definition of “customs business,” including:
(iii) Marine transactions. A person transacting business in connection with entry or clearance of vessels or other regulation of vessels under the navigation laws is not required to be licensed as a broker.
(iv) Transportation in bond. Any carrier bringing merchandise to the port of arrival or any bonded carrier transporting merchandise for another may make entry for that merchandise for transportation in bond without being a broker.
19 C.F.R. § 111.2(a)(2)(iii)-(iv).
Additionally, a broker is required to hold a district permit “for each district in which the broker conducts customs business.” 19 C.F.R. § 111.2(b)(1). Thus, if the documents that Schenker intends to prepare and file fall outside the scope of “customs business,” then it may perform the described activities without a district permit.
Schenker would like to expand its operations beyond the districts where it currently holds permits. In these districts, Schenker’s operations involve the filing and preparation of certain forms including: 1) U.S. Coast Guard Notices of Arrival and Departure and related documentation; 2) CBP Form I-418 (passenger and crew lists); 3) CBP Form 1302 (cargo declaration); 4) CBP Form 1303 (ship stores declaration); 5) CBP Form 1304 (crew effects declaration); 6) CBP Form 3171 (application for permit to unlade-overtime); 7) cargo manifests; 8) ISF; 9) AMS transmissions; 10) AES transmissions; 11) CBP Form 7512 (transportation entry and manifest of goods subject to CBP inspection and permit); 12) CBP Form 4455 (certificate of registration); and 13) CBP Form 5129 (crewmember’s declarations). Each item will be examined to determine whether it constitutes “customs business,” thus requiring a district permit.
Items 1 and 6 – U.S. Coast Guard Notices of Arrival and Departure and CBP Form 3171
Customs business covers transactions with CBP for the entry and admissibility of merchandise. See 19 C.F.R. § 111.1. Conversely, the entry and admissibility of merchandise differs from the entry and clearance of a vessel with CBP. CBP regulations require formal entry of certain vessels, pursuant to 19 U.S.C. § 1434. This type of vessel entry differs from the entry of merchandise and covers CBP’s requirements for the vessel’s entry to the U.S. port and physical lading and unlading of cargo. See 19 C.F.R. §§ 4.3, 4.9. A vessel clearance is authorized pursuant to 46 U.S.C. § 60105. See also 19 C.F.R. §§ 4.60 - 4.76. Accordingly, if the forms that Schenker will prepare and file do not concern a transaction with CBP for the entry and admissibility of merchandise, but rather the entry and clearance of a vessel, then Schenker may do so without a customs broker license because doing so does not meet the definition of customs business.
Schenker inquires whether the filing of U.S. Coast Guard Notices of Arrival and Departure and related documentation constitutes customs business. It provides that the certificates it will file with the U.S. Coast Guard Notice of Arrival and Departure include: 1) certificate of registry; 2) international tonnage certificate 1969; 3) load line certificate; 4) safety equipment certificate; 5) certificate of financial responsibility; 6) international oil prevention certificate; 7) safe manning certifications; 8) document of compliance; 9) international ship security certificate; and 10) continuous synopsis report. These notices and certificates for use by the U.S. Coast Guard require information about the vessel, its operator, its voyage, the crew and passengers, and general information about the cargo, including any hazardous conditions either onboard or caused by the vessel. See 33 C.F.R. §§ 160.206, 160.215. As these concern the entry and clearance of a vessel, and not the entry and admissibility of merchandise, the preparation and filing of Coast Guard notices of arrival and departure, does not constitute customs business.
Similarly, Schenker provides that it will file CBP Form 3171. This form is the application for permit to unlade overtime and requires information concerning the vessel, vessel’s arrival, cargo, carriers, bond, importer, and articles released and reladen. See Agency Information Collection Activities: Application-Permit-Special License Unlading-Lading- Overtime Services, 80 Fed. Reg. 7361 (Feb. 11, 2016). This is provided for in 19 U.S.C. §§ 1447-55, 1551 and 19 C.F.R. §§ 4.10, 4.30, 4.37, 4.39, 4.90, 10.60, 24.16, 122.29, 122.38, 123.8, 146.32, 146.34 and concerns the physical unlading of merchandise. As CBP Form 3171 concerns the entry and clearance of a vessel, and not a transaction with CBP for the entry and clearance of merchandise, the preparation and filing of CBP Form 3171 does not constitute customs business. Accordingly, the preparation and filing of CBP Form 3171 may be prepared and filed without a customs broker license and district permit.
Items 2-5, 7 and 13 – Inward Cargo Manifests and CBP Forms 1302, I-418, 1303, 1304, and 5129
CBP has also explained that customs business does not cover activities that are explicitly permitted by statute or regulation to be performed by an authorized agent. See C.S.D. 03-15 (responding to a comment that proposed regulatory changes were not clear as to whether related parties could provide assistance to each other for the preparation of Customs Forms 29 and 28, and other similar documents like supplemental information letters). For example, authorized agents may file protests, certain ruling requests, and certain drawback documents. See id.; see also, 19 C.F.R. §§ 174.3, 174.12, 177.1, 177.2(c), 191.154. Therefore, if any of the documents are permitted by statute or regulation to be filed by an authorized agent, then they are exempted from customs business.
Schenker inquires whether the preparation and filling of an inward cargo manifest requires a customs broker license. Generally, the requirements for an inward foreign manifest include, a vessel entrance or clearance statement, cargo declaration, crew’s effects declaration, crew list, and passenger list. See 19 C.F.R. § 4.7. Pursuant to 19 U.S.C. § 1431(b), covering the production of inward manifests, the manifest shall be transmitted “by the master or person in charge of the vessel . . . or by any other authorized agent of the owner or operator of the vessel. . .” Accordingly, the statute permits an agent to file an inward cargo manifest and its preparation and filing does not constitute customs business. Therefore, assuming that Schenker establishes an agency relationship with the vessel’s owner or operator to file the inward cargo manifest, Schenker may prepare and submit an inward cargo manifest without a customs broker license and district permit.
Furthermore, CBP regulations require the filing of certain CBP forms as part of the inward cargo manifest. Pursuant to 19 C.F.R. § 4.7, the manifest required by 19 U.S.C. § 1431 must consist of: 1) CBP Form 1302; 2) CBP Form 1303; 3) CBP Form 1304, or, optionally a copy of Customs and Immigration Form I-418, to which a copy of CBP Form 5129 is attached; and 4) a crew and passenger list, Customs and Immigration Form I-418. Accordingly, as 19 U.S.C. § 1431(b) permits an agent to file an inward cargo manifest, and 19 C.F.R. § 4.7 requires the filing of these forms as part of the inward cargo manifest, the preparation and filing of these forms does not constitute customs business. Therefore, if Schenker establishes an agency relationship with the vessel’s owner or operator to file the inward cargo manifest, it may prepare and file CBP Forms 1302, I-418, 1303, 1304, and 5129 without a customs broker license and district permit.
Items 7, 10, 12 – Outward Cargo Manifests, AES Transmissions, CBP Form 4455
CBP has also determined that customs business does not include certain activities in connection with the exportation of merchandise. In HQ 227186, dated January 13, 1999, Customs found that the filing of NAFTA certificates of origin with exports did not constitute customs business because they were prepared for purposes of exportation and not in connection with the entry or classification of merchandise. Although CBP noted in HQ 227186 that some export transactions constituted customs business, including NAFTA duty deferral entry and drawback transactions, the NAFTA certificates of origin were not a transaction with CBP for the entry or classification of merchandise. Accordingly, if the forms that Schenker will prepare and file are in connection with the exportation of merchandise, then Schenker may do so without a customs broker license because doing so would not constitute customs business.
Schenker inquires whether the filing of an outward cargo manifest constitutes customs business. The outward cargo manifest requires that a departing vessel submit information to CBP concerning cargo data, vessel data, country of ultimate destination, and estimated date of exportation, port of exportation, and information concerning high-risk cargo. See 19 C.F.R. § 192.14(b). As in HQ 227186, where Customs found that the filing of NAFTA certificates of origin with exports did not constitute customs business because they were prepared related to exportation and not in connection with the entry or classification of merchandise, the filing of an outward cargo manifest similarly concerns information about the cargo’s exportation that is submitted during the clearance process. Thus, the filing of an outward cargo manifest does not constitute customs business and may be done without a customs broker license or district permit.
Additionally, Schenker provides that it will transmit data through the AES system for its clients. AES is the electronic portal through which cargo’s electronic export information, including the shipper’s export declaration, cargo declaration, outward commercial forms, commodity export information, outbound vessel information, and export filings required by the Department of Commerce, is submitted to CBP prior to a vessel’s departure from the United States. See 15 C.F.R. §§ 30.2, 30.60; 19 C.F.R. § 192.14. These transmissions implement the requirements of Section 343(a) of the Trade Act of 2002, as amended by section 108 of the Maritime Transportation Security Act of 2002. See 19 U.S.C. § 2701 note. As in HQ 227186 where Customs found that the filing of NAFTA certificates of origin with exports did not constitute customs business because they were prepared related to exportation and not in connection with the entry or classification of merchandise, AES transmissions similarly concern information about the cargo’s exportation that is submitted during the clearance process. Although CBP noted in HQ 227186 that some export transactions constituted customs business, including NAFTA duty deferral entry and drawback transactions, AES transmissions differ because they are not included in the definition of customs business, like drawback, nor do they concern the entry and valuation of merchandise like NAFTA duty deferral transactions. Accordingly, the definition of customs business does not encompass AES transmissions, and therefore, does not require a customs broker license or district permit.
Furthermore, Schenker also anticipates that it will file CBP Form 4455. This form is the certificate of registration used when exporting an article abroad for repair, alteration, or processing. It registers articles that are temporarily exported and subsequently returned to the United States either duty free or at a reduced duty rate. See Agency Information Collection Activities: Certificate of Registration, 80 Fed. Reg. 61221 (Oct. 9, 2015). To complete the form, it requires information regarding the carrier, bill of lading or insured number, the reasons for the article’s export, and the amount of packages and their description. See 19 C.F.R. §§ 10.8, 10.9, 10.68, 148.1, 148.8, 148.32, 148.37. Although in HQ H091624, dated January 6, 2012, CBP determined that the preparation of CBP Form 3311, the form filed with the importation of American goods returned, constituted customs business, the reasoning in H091624 does not extend to CBP Form 4455. While both forms 4455 and 3311 are filed to support the duty free or reduced duty rate entry of articles, these two forms differ in that form 3311 is prepared at importation and form 4455 is prepared at exportation. Moreover, form 3311 is used to classify articles under 9801.00.10, HTSUS, and requires the articles’ valuation, whereas form 4455 requires the articles’ description without classification or valuation. CBP found in H091624 that the preparation and filing of form 3311 is customs business because it requires the classification and valuation of American goods returned; however, the provision of information required for form 4455 does not similarly amount to a transaction with CBP to provide classification or valuation information. Rather, the filing of form 4455 is analogous to the filing of NAFTA certificates of origin in HQ 227186 where Customs found that the filing of NAFTA certificates of origin with exports did not constitute customs business because they were prepared related to exportation and not in connection with the entry or classification of merchandise. Thus, the preparation of CBP Form 4455 does not amount to customs business and may be prepared and filed without a broker’s license and district permit.
Items 8 and 9 – ISF and AMS Transmissions
CBP has also previously addressed whether certain actions constitute customs business. For instance, Schenker provides that it will file the ISF for its clients. The ISF provides CBP with advanced information prior to cargo’s importation that enables CBP to target high-risk importations pursuant to Section 343(a) of the Trade Act of 2002 and Section 203 of the Security and Accountability for Every Port Act of 2006. See 6 U.S.C. § 943; 19 U.S.C. § 2071 note. The implementing regulations allow for an importer’s agent to file the ISF without requiring that the agent be a licensed customs broker. See 19 C.F.R. § 149.5(c). When promulgating the final rule, CBP stated that if an importer chooses to have the ISF elements used for entry purposes, the ISF and entry summary must be self-filed by the importer or filed by a licensed customs broker in a single transaction to CBP. See Importer Security Filing and Additional Carrier Requirements, 73 Fed. Reg. 71,730, 71,734 and 71,746 (Nov. 25, 2008). In response to comments on the proposed rule, CBP also stated that classification at the six-digit HTS level required for the ISF does not constitute customs business, nor does providing the importer record number and consignee number. Id. Furthermore, CBP has held that filing an ISF does not constitute customs business, and therefore, it may be filed without a broker’s license or district permit. CBP found in HQ H045695, dated October 15, 2010, that the preparation and filing of an ISF does not concern customs business as long as the HTS number is not reported past the six-digit level. If the number is reported to the ten-digit HTSUS level, then the ISF filing concerns classification for purposes of customs business and requires a license and applicable district permit. Therefore, Schenker may file the ISF without a customs broker license or district permit.
Similarly, AMS transmissions are not transactions with CBP that constitute customs business. AMS is a module of the Automated Commercial System (“ACS”) that effectuates the provisions of Section 343(a) of the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002. See 19 U.S.C. § 2071 note. This system allows carriers to electronically provide manifest information to CBP in advance of a vessel’s arrival. See 19 C.F.R. § 4.7(b)(2). In CBP’s final rule promulgation for AMS, CBP addressed whether an electronic filer’s submission of the six-digit HTS number through AMS was customs business. See Required Advance Electronic Presentation of Cargo Information, 68 Fed. Reg. 68140, 68146 (Dec. 5, 2003). CBP explained that this provision does not constitute customs business because the six-digit HTS provision is insufficient for entry, and that activities covered by customs business in 19 U.S.C. § 1641 concern entry, not manifesting. See id. Furthermore, CBP explained that the mere electronic transmission of data to CBP in AMS does not constitute customs business, pursuant to 19 C.F.R. § 111.1. See id. Accordingly, Schenker may transmit data through AMS without a customs broker license or district permit.
Item 11 – CBP Form 7512
CBP regulations exclude in-bond transactions from the definition of customs business. See 19 C.F.R. §111. 2(a)(2)(iv). Transportation in-bond includes “[a]ny carrier bringing merchandise to the port of arrival or any bonded carrier transporting merchandise for another may make entry for that merchandise for transportation in bond . . .” 19 C.F.R. § 111.2(a)(2)(iv). Therefore, if the forms that Schenker will prepare and file are in connection with the transportation of merchandise in-bond, then Schenker may do so without a customs broker license because doing so would not constitute customs business.
Schenker provides that it will prepare and file CBP Form 7512 for its clients. CBP Form 7512 is used for the in-bond transportation of merchandise, documenting the carrier initiating the in-bond movement and the merchandise moving in-bond. See Agency Information Collection Activities: Transportation Entry and Manifest of Good Subject to CBP Inspection and Permit, 78 Fed. Reg. 57405, 57406 (Sept. 18, 2013). For cargo moving in-bond in the United States, the CBP Form 7512 comprises the manifest and transportation entry. See id. Customs noted in HQ 225000, dated June 27, 1994, that the preparation and signing of a Customs Form 7512 did not constitute “customs business” pursuant to 19 U.S.C. § 1641(a)(2) and 19 C.F.R. § 111.1 because the preparation and signing of transportation entry was exempted from “entry” within the meaning of “customs business.” Therefore, the preparation of CBP Form 7512 is exempted from the definition of customs business. Accordingly, CBP Form 7512 may be prepared and filed without a broker’s license and district permit.
HOLDING:
Based on the above, the filing and preparation of the ISF, U.S. Coast Guard Notices of Arrival and Departure, AES and AMS transmissions, inward and outward cargo manifests, and CBP Forms 1302, 1303, 1304, 3171, I-418, 4455, 5129, and 7512 does not constitute customs business, and therefore, may be done without a customs broker license and district permit.
Please note that 19 C.F.R. § 177.9(b) provides that “[e]ach ruling letter is 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,
Monika R. Brenner, Acting Chief
Entry Process and Duty Refunds Branch