CBP Issues FAQ for Customs Brokers on Trade Names and Corporations

Individual licenses cannot be transferred to a corporation. CBP states that an individual Customs broker license may not be transferred for purposes of engaging in "Customs business" as a corporation.

Customs broker licenses are issued to individuals, associations, corporations, or partnerships, and they are not transferable from one business entity to another

For example, an individual licensee may not use his/her license for the purpose of a corporation to engage in "Customs business," but rather the corporation would need to obtain its own Customs broker license. However, the licensed individual, if an officer of the corporation, could qualify the corporation to engage in "Customs business."

Name changes, trade/fictitious names. CBP states that a broker who changes his name, or proposes to operate under a trade or fictitious name, must obtain approval from CBP prior to its use, pursuant to 19 CFR 111.30(c). Moreover, the broker must affix his own name in conjunction with the approved trade name when signing customs documents.

Licensed individual for a corporation, etc. who loses his license. According to CBP, an individual licensed qualifier for a corporation, association, or partnership, who loses his/her license (e.g., due to failure to file the status report) subjects the corporation, association, or partnership's license to possible revocation. If the corporation, association, or partnership brokerage firm fails to have during any continuous period of 120 days at least one officer who holds a valid individual broker's license, the business entity that was qualified by the licensed individual will result in revocation by law.

Licensed customs broker who incorporates based on advice of tax consultant. CBP gives the following two responses regarding the issue of a licensed broker who incorporates based on the advice of his tax consultant:

To qualify for a license, a corporation must have an officer that is a broker, and be empowered to transact customs business under its articles of incorporation.CBP states that if a corporation engages in "Customs business" without satisfying 19 CFR 111.11(c) (which states in pertinent part, that to qualify for a license, a corporation must have at least one officer who is a broker and be empowered under its articles of incorporation to transact customs business as a broker), the corporation will be subject to 19 USC 1641(b)(6) and liable for a monetary penalty not to exceed $10,000 for each intentional transaction of customs business without a license, among other things.

Broker who outsources ancillary services to a corporation. CBP states that if a licensed broker outsources ancillary services to a corporation, the corporation may have no access to, or involvement in, the actual customs business work of the licensed broker, and the records of the clients of the broker, and the information contained in those records, may not be disclosed to the corporation. (See 19 CFR 111.24 and note below.)

Filer codes. According to CBP, filer codes, which are unique and dedicated, are assigned to individuals, corporations, partnerships, or associations. A licensed individual with his own filer code who later obtains a corporate license to engage in "Customs business" and intends to conduct "Customs business" as a corporation would need to obtain a corporate filer code.

CBP FAQ (posted in late April 2004) for Customs brokers on trade names and corporations available at http://www.cbp.gov/xp/cgov/import/broker_management/faq_tradenames.xml

Note: In a relevant ruling, HQ 114758, on the issue of whether a licensed broker may transfer its ancillary financial functions, such as bookkeeping, accounting, banking, etc. to a related or affiliated company that is not a licensed broker, Customs stated, among other things, that there may be situations in which a licensed broker may legitimately transfer some of its business operations to another company.

The ruling gave as an example HQ 114411, in which Customs allowed a broker to outsource its human resources department to an employee leasing company. A condition of this arrangement, however, was that the leasing company have no access to, or involvement in, the actual customs business work of the broker, and further, that the records of the clients of the broker be kept confidential from the leasing company.

In HQ 114758, Customs stated that it follows that a broker may outsource other financial or administrative functions provided the same safeguards are in place.

As a practical matter, Customs stated that this means that the new service provider cannot perform any functions that are dependent on information or financial data derived from client files. For this reason, Customs stated that a selected service provider would be precluded from invoicing or taking collection action against clients of brokers, because the amounts in question relate back to customs business transactions performed by the broker for the clients. (HQ 114758 (dated 11/07/00) available at http://rulings.customs.gov/index.asp?ru=114758&qu=114758&vw=detail.