Customs Brokerage Not Allowed to Pay Sales Representatives by Commission, CBP Says

Welke Customs Brokers USA cannot pay unlicensed sales representatives by commissions for brokerage services sold, CBP said in a Nov. 30 ruling. Welke USA (WUSA) and sister company Welke Customs Brokers Ltd. in Canada (WCAN) both employ separate sales forces, but were considering a change to the sales structure, CBP said. WUSA sought CBP input on whether the company may pay sales commissions and if WCAN can solicit business on behalf of WUSA.

Under the revised sales structure, "sales representatives would remain employed by a specific company, but would conduct sales on behalf of both WUSA and WCAN instead of just their respective employer," the agency said. There also would be a "variable pay structure based on new account sales," which was later explained to be a commission paid by the company that performed the services, CBP said.

CBP has previously said its regulations preclude a "broker from entering into an agreement with an unlicensed person, except a freight forwarder, to perform Customs business for a third party when fees generated from the transaction inure to the benefit of the unlicensed person." While the use of a flat salary is allowable, "we again find that WUSA may not utilize commissions as payment because unlicensed persons may not receive a benefit derived from fees earned by transacting customs business," the agency said.

As to whether the sales representatives can solicit business for WUSA, CBP said the proposed plan sounds permissible. "We find that solicitation by unlicensed sales representatives, which WUSA employs, is permissible because it occurs in the context of a bona fide employment relationship and proper supervision can be maintained," the agency said. "We find that solicitation by unlicensed sales representatives employed by WCAN may be permissible, but requires special caution" because WCAN lacks an internal standard operating procedure for broker supervision of the sales force.