Freight Forwarder Collection of Duties for Delivery to Customs Broker Not 'Customs Business,' CBP Says

Freight forwarders that transfer funds to customs brokers from importers for payment to CBP are not performing "customs business," CBP said in a Sept. 6 ruling. CBP issued ruling HQ H258556 in response to a ruling request from Terra Nova Trade Services, a licensed customs broker. As long as the freight forwarder isn't involved in the actual calculation of the customs duties, CBP said, the freight forwarder is allowed to play an intermediary role. Terra Nova, through its lawyer George Tuttle, also sought CBP's input on the required power of attorney (POA) for such transactions.

Terra Nova bills unlicensed freight forwarders for customs duties owed from importers. The freight forwarders then collect the funds from the importers and send them to Terra Nova to pay CBP, it said. "To comply with the statutory definition of customs business, a transaction with CBP to pay customs duties must be structured in such a manner that only a licensed broker or the importer of record tenders the payment to CBP," the agency said. While only licensed brokers are allowed to perform "customs business," CBP also previously ruled it doesn't regulate private financial arrangements (see 1606230052), it said.

The use of a freight forwarder as an intermediary is "permissible because it ensures that the customs business activity, the payment of duties, taxes, and fees to CBP, is only performed by the customs broker," the agency said. "However, an unlicensed party may not interface with a broker on behalf of another when it amounts to active participation in activities related to customs business." Therefore, if a freight forwarder is involved in active participation in decisions about the importer's duty payments, that would not be allowed, CBP said. "In the instant case, we find Terra Nova’s interfacing with the freight forwarder is a permissible interaction with an unlicensed entity because the unlicensed freight forwarder does not actively participate in the decisions and activities related to the customs business."

Still, POA is necessary between the importer and freight forwarder for Terra Nova to disclose billing information, including duty payment information, to the freight forwarder, CBP said. Terra Nova obtains a single customs POA from the importer of record that authorizes Terra Nova to transact customs business on the importer’s behalf, but "without specific written consent by the importer to allow the sharing of its confidential information with the freight forwarder, Terra Nova cannot disclose its client’s billing information to the freight forwarder," CBP said. Absent a POA arrangement between the importer and freight forwarder "there is no agency relationship established between the two entities, and therefore, the freight forwarder is not an agent for Terra Nova’s importer client."