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(f) "Freight forwarder" means any person engaged in the business of dispatching shipments on behalf of other persons for a consideration, in foreign commerce between the United States, its territories or possessions, and foreign countries, and of handling the formalities incident to such shipments.

§ 31.4 Application for license; investigation and examination.

(a) Application to Commissioner. A person desiring to engage in the business of a customhouse broker shall submit to the collector of customs of the district in which the applicant intends to operate an application in duplicate, addressed to the Commissioner, stating his qualifications for a license. The application shall be under oath and executed on customs Form 3123 (individual), customs Form 3125 (partnership), customs Form 3127 (corporation), or customs Form 3129 (association), whichever is appropriate, and shall be accompanied by the fee of $150 prescribed by § 24.12 of this chapter. If an applicant fails to pass the examination required by paragraph (c), he shall receive a refund of $75. If the applicant is an individual who proposes to operate under a trade or fictitious name, evidence of the applicant's authority so to conduct business must accompany his application.

(b) Posting application. As soon as possible after an application has been filed, the collector of customs shall cause to be posted conspicuously in the customhouse at the headquarters port for the district and at the port where the applicant proposes to maintain his principal office the name and address of the applicant and, if the applicant is a corporation, an association, or a partnership, the names of the licensed officers or members thereof.

(c) Examination of applicant. The collector of customs shall notify the applicant, if an individual, to appear before a committee of examiners at a specified time and place in the customs district in which the applicant proposes to do business. The committee of examiners shall consist of not less than three nor more than five members designated as such by the Commissioner.

(d) Purpose of examination. The examination shall have for its purpose a determination of the applicant's knowledge of customs and related law and procedure and his fitness to render valuable service to importers and exporters.

The Commissioner may from time time furnish lists of suggestions for th guidance of committees of examiners a conducting such examinations. The examination may, at the option of the com mittee, be oral or written, but if oral shall be stenographically reported and transcribed, and in either case shall be transmitted forthwith to the collector of customs, with the report and recommen dation of the committee of examiners.

(e) Investigation of applicant—(1)}); Individual. Upon the applicant's ob taining a satisfactory grade on the ex amination, his application shall be re ferred by the collector of customs to the customs agent in charge of the area for investigation, report, and recommenda

tion.

(2) Corporation, association, or partnership. Each application shall be referred by the collector of customs to the customs agent in charge of the area for investigation, report and recommenda

tion.

(3) Information desired. The investigation shall seek information relevant to the question whether the application should be granted and shall cover, but need not be limited to, (i) the correctness of the statements made in the application, (ii) the business integrity of the applicant, and (iii) when the applicant is an individual (including an officer of a corporation or association or a member of a partnership), the character and reputation of the applicant.

(4) Return of application to collector of customs. The investigating agent shall return the application with his report and recommendation to the collector | of customs who requested it. The collector shall forward them to the Commissioner, accompanied by the report and recommendation of the committee of ex-1 aminers, if any. If he so desires, the. collector may also submit his independent recommendation.

(f) Additional investigation or examination. The Commissioner shall endeavor to ascertain, without undue expense or inconvenience to the applicant, all facts deemed necessary to pass upon the application, and may require additional investigation to be conducted. In the event, however, that the Commissioner is not satisfied by the information received, he may require the applicant (or, in the case of a corporation, assOciation. or partnership, one or more of its officers or members) to appear in person before the Commissioner or before

ne or more representatives of the Comissioner, for the purpose of undergoing dditional written or oral examination to the applicant's qualifications for a cense.

lec. 641, 46 Stat. 759, as amended; 19 U.S.C. 41) [28 F.R. 14829, Dec. 31, 1963, as aended by T.D. 56107, 29 F.R. 2336, Feb. 11, 64; T.D. 56288, 29 F.R. 14493, Oct. 22, 1964] 31.5 Issuance or denial of license. (a) Issuance if applicant qualified. If finds that the applicant is qualified, e Commissioner will issue a license in ch standard form as he shall have preribed. The license shall be forwarded the appropriate collector, who shall liver it to the licensee after making record thereof in a roster of licensed okers which shall be maintained in the istomhouse in such manner that it will readily accessible to the proper cusms officers and employees. The license r an individual who is an officer of a orporation or association or a member

a partnership will be issued in the Tame of the individual licensee, and not his capacity as officer or member of he organization with which he is conected.

(b) Denial of license. (1) If the oplicant fails to obtain a satisfactory ade on the examination, notice of enial shall be given by the collector to e applicant.

(2) At the request of the applicant, he Commissioner may allow a further >portunity to the applicant to present formation or arguments in support of is application either by personal apearance or in writing, or both, in the scretion of the Commissioner.

(3) If the Commissioner determines at the application for license should be enied for any reason, notice of denial all be given by the Commissioner to e applicant and to the collector of the istrict in which the applicant proposed › do business.

(c) Grounds for denial of license. The auses sufficient to justify denial of an pplication for a license shall include, ut shall not be limited to, (1) any cause Ihich would justify suspension or revoation of the license of a licensed cus>mhouse broker under the provisions of 31.11; (2) a failure to establish the usiness integrity and character of the pplicant; (3) any gross misstatement of ertinent facts in the application; (4) ny conduct which would be deemed rossly unfair in commercial transactions

by accepted standards; (5) a bad reputation imputing to an applicant conduct of any of the foregoing types or of a criminal, dishonest, or unethical kind; (6) the minority of the applicant; or (7) a failure to establish sufficient knowledge by the applicant of customs and related law and procedures and fitness to render valuable service to importers and exporters. In the case of a corporation, association, or partnership, the application will be denied by the Commissioner unless it appears that the officers or members who are licensed customhouse brokers are to exercise responsible supervision and control of the transaction of the customs business of such corporation, association, or partnership. An individual who is unable for any reason to take the oath of allegiance and to support the Constitution of the United States shall not be licensed. An alien undergoing naturalization is ineligible to receive a license until he has received his final naturalization certificate. An officer or employee of the United States is ineligible to receive a license.

(d) Review. A decision of the Commissioner denying a license, upon the written request of the applicant, will be submitted to the Secretary of the Treasury for such review as the Secretary shall deem appropriate.

§ 31.6

Other representation by customhouse brokers.

A customhouse broker requires no further license or enrollment for the representation, within the customs districts in which he is licensed, at the office of the Regional Commissioner of Internal Revenue, or at the seat of the Government, of any person for whom he has acted as customhouse broker in respect of any matters relating specifically to the importation or exportation of merchandise under customs or internal-revenue laws. § 31.7 Licenses for more than one customs district.

Separate licenses shall be required if the licensee desires to transact customs business in more than one customs district. However, a licensee having a license in force in one district may on application to the Commissioner be granted a license to transact business in another district without further examination, provided it appears on investigation that the licensee is prepared and qualified to render efficient service in such other district. Licenses may be

granted to partnerships with two licensed members, and to corporations and associations with two licensed offcers, whether or not such members or officers are licensed in the district for which the partnership, corporation, or association license is granted.

§ 31.8 License, when not required.

(a) Dealing for one's own account. An importer or exporter transacting customs business solely on his own account and in no sense on behalf of another is not required to be licensed, nor are his authorized regular employees or officers who act only for him in the transaction of such business.

(b) Transportation in bond by common carrier. A common carrier transporting merchandise for another may make entry for such merchandise for transportation in bond without being licensed as a customhouse broker.

(c) Marine transactions. A person transacting business in connection with entry, clearance, or documentation of vessels or other regulation of vessels under the navigation laws is not required to be licensed as a customhouse broker.

(d) Employees of licensed brokers. An employee of a customhouse broker is not required to be licensed in order to act solely for his employer, but in order that such employee may sign customs documents on behalf of his employer the broker must file with the collector a power of attorney for that purpose. Each broker shall file with the collector at each port where the business is to be transacted an authorization specifically naming each employee who may properly act for him. A broker must promptly give notice of any change in the authority of any such employee and must exercise such supervision of his employees as will insure proper conduct on the part of the employees in the transaction of customs business. Each broker will be held strictly responsible for the acts or omissions of his employees within the scope of their employment, and for acts or omissions of such employees which, in the exercise of reasonable care and diligence, the broker should have foreseen. Every attorney in fact acting for a customhouse broker must be a resident of the United States.

§ 31.9 Books and papers.2

(a) Each customhouse broker shall maintain correctly and in orderly item

'See section 641 (d) in footnote 1 to § 81.2.

ized manner, and keep current, records of account reflecting all his financi transactions as a customhouse broke He shall keep and maintain on file a cop of each entry made by him, and copies d all his correspondence and other paper relating to his customs business.

(b) Except as provided for in paragraph (c) of this section, each custom house broker shall keep on customs Form 3079 (Record of Transactions Licensed Customhouse Broker), in ac cordance with the instructions printed thereon, records of all customs business transacted by him in behalf of his clients. If a transaction has been handled only in part by the broker, he need fill in only the appropriate part of his customs Form 3079. Records on customs Form 3019 shall be in addition to, and not in lieu of, the regular records of account required by paragraph (a) of this section to be kept and maintained.

(c) If the data prescribed to be recorded on customs Form 3079 are dis closed in other records regularly kept and maintained by a customhous broker in a systematic, convenient, and readily available form which will permit an effective inspection thereof by customs field auditors, such broker may by notice in writing from the collector for the district, be exempted from the requirements of paragraph (b) of this sec tion. Such notice of exemption shall be issued only if (1) a broker makes writte application therefor to the collector, setting forth the facts as to the records he keeps and agreeing that if the exemption is granted he will not change his system of records or his manner of keeping and maintaining them without notification to and prior approval by the said collector and (2) the collector and the comptroller of customs for the district are satisfied that the records are and will be kept and maintained by the broker in conformity with the conditions above stated.

(d) Whenever it shall appear to the satisfaction of the collector, upon an audit by a customs field auditor that & broker to whom an exemption has been granted as provided for in paragraph (c) of this section is not keeping and maintaining records in conformity with the requirements of the said paragraph (c). the exemption of such broker shall be revoked by notice in writing from the collector, and such broker shall thereafter keep and maintain records on customs Form 3079 as above stated.

field

(e) All the books and papers required by the foregoing provisions of this section shall be kept on file for at least 5 years and maintained in such manner that they may readily be examined. Any or all such books and papers shall be made available to customs auditors or customs agents on demand therefor within 5 years after their preparation or receipt by the broker, or within any longer period of time during which they remain in the possession of the broker. Each customhouse broker shall advise the Commissioner and the colector at the headquarters port in each listrict in which his license is held of each change of his business address. The broker shall also furnish such addiional information regarding his activties as a customhouse broker as such ustoms field auditors or customs agents nay require.

(f) The comptroller of customs or a customs field auditor designated by him shall make such inspection of the books and papers required by this part to be kept and maintained by a customhouse broker as may be necessary to enable the comptroller of customs, the collector of customs, and other proper officials of the Treasury Department to determine whether or not the broker is complying with the requirements of this section. Furthermore, the comptroller of customs or any customs field auditor designated by him, or the customs agent in charge, may at any time, for the purpose of protecting importers or the revenue of the United States, inspect such books ind papers to obtain information regardng specific customs transactions.

(g) The comptroller of customs, cusoms field auditor, or customs agent naking any inspection contemplated by Daragraph (f) of this section shall reDort his findings to the Commissioner and the collector.

(h) The books and papers referred to n this section and pertaining to the business of the clients serviced by the broker hall be considered confidential and the roker shall not disclose their contents or any information connected therewith o any persons other than such clients ind the comptroller of customs, the cusoms agent in charge, or their representitives except on subpoena by a court of competent jurisdiction.

28 F.R. 14829, Dec. 31, 1963, as amended by rD. 56201, 29 F.R. 8400, July 3, 1964]

§ 31.10 Other duties and obligations of customhouse brokers.

(a) No customhouse broker shall permit his license or his name to be used by or for any unlicensed person, or by or for any broker whose license is under suspension, in the solicitation, promotion, or performance of any customs business or transaction.

(b) (1) No customhouse broker shall accept or retain employment from or with an unlicensed employer to transact customs business for others than the employer in such manner that the fees or other benefits resulting from the services rendered by the broker for others inure to the benefit of the unlicensed employer, except that a customhouse broker may compensate a freight forwarder for services rendered in obtaining brokerage business, provided that

(1) The importer shall be notified in advance by the forwarder or broker of the name of the customhouse broker selected by the forwarder for the handling of his customs transactions;

(ii) If the fees and charges for such brokerage services are to be collected by or through the forwarder, the customhouse broker shall transmit directly to the importer a true copy of his bill of charges as rendered to the forwarder. If, on the other hand, such fees and charges are to be collected by or through the customhouse broker, he shall transmit directly to the importer a statement of his bill of charges and an itemized list of any charges to be collected for the account of the freight forwarder.

(iii) No part of the agreement of compensation between the customhouse broker and the forwarder, nor any action taken pursuant thereto, shall forbid or prevent direct communication between the importer and the customhouse broker; and

(iv) In making such agreement and in all actions taken pursuant thereto, the customhouse broker shall be subject to all other provisions of these regulations and any amendments thereto.

(2) Where a customhouse broker is employed for the transaction of customs business by an unlicensed employer who is not the actual importer, a copy of the statement of charges made by the customhouse broker must be transmitted to the actual importer by the customhouse broker, except where the merchandise was purchased for delivery on an all free basis.

(c) No customhouse broker shall knowingly and directly or indirectly (1) accept employment to effect a customs transaction as associate, correspondent, officer, employee, agent, or subagent from any person whose license as a customhouse broker shall have been revoked for any cause, or whose license is under suspension, or who has surrendered his license "with prejudice," or who is notoriously disreputable, or (2) assist the furtherance of any customs business or transactions of such person, or (3) employ, or accept such assistance from, any such person, or (4) share fees with any such person, or (5) permit any such person directly or indirectly to participate, whether through ownership or otherwise, in the promotion, control, or direction of the business of the broker: Provided, That nothing herein shall be deemed to prohibit any customhouse broker from acting as a customhouse broker for any bona fide importer or exporter, notwithstanding such importer or exporter may have had his license as a customhouse broker revoked or suspended, or may be disreputable: And further provided, That nothing herein shall be deemed to prohibit any person whose license has been revoked or surrendered with prejudice from petitioning the Commissioner to exercise his discretion to relieve him of the disabilities imposed by subparagraph (3) of this paragraph. Any such petition shall be filed no less than 5 years after the revocation of the petitioner's license, or its surrender with prejudice as the case may be. The Commissioner shall not approve any such petition unless he is satisfied that the petitioner has refrained from all activities in any way violative of the provisions of this paragraph and is also satisfied that in all other respects the petitioner's conduct has been exemplary during the period of disability under this paragraph. The Commissioner shall also give consideration to the gravity of the misconduct which gave rise to the petitioner's disability. In any case in which such misconduct led to pecuniary loss to the Government or to any person, the Commissioner shall also take into account whether the petitioner has made reimbursement for the losses incurred.

(d) No customhouse broker shall act in behalf of any person, or attempt to represent any person, in respect of any protest or appeal for reappraisement, unless he shall previously have been

specifically or generally authorized to d so by such person.

customhouse

(e) No broker shall knowingly use false or misleading representations to procure employment in any customs matter, nor shall he represent to a client or prospective client that he can obtain extraordinary favors from the Treasury Department or any representa tive thereof.

(f) No customhouse broker shall rep resent a client before the Treasury Department or any representative thereof in any matter to which the broker, as officer or employee, gave personal consideration, or as to the facts of which he gained knowledge, while in the Govern ment service.

shall

(g) No customhouse broker knowingly (1) assist a person who has been employed by a client in a matter pending before the Treasury Department or any representative thereof to which matter such person gave personal con sideration or gained personal knowledge of the facts or issues thereof while in the Government service, or (2) accept assistance in any such matter from any such person, or (3) share fees in any such matter with any such person.

(h) No customhouse broker shall suggest to a client or a prospective client & plan known to be illegal for evading payment of any duty, tax, or other debt or obligation owing to the Government.

(i) Each customhouse broker who knows that a client has not complied with the law or has made any error in, o omission from, any document, affidavit, or other paper which the law requires such client to execute shall advise his client promptly of the fact of such non compliance, error, or omission.

(j) Each customhouse broker shall exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any customs business; and no customhouse broker shall knowingly impart to a client false information relative to any such business when such false information is or might be detrimental to the interests of the Government, the client, or ang other person.

(k) No customhouse broker shall withhold information relative to any customs business from a client who is entitled to the information.

(1) Each customhouse broker shall promptly pay over to the Government when due all sums received for the payment of any duty, tax, or other debt of

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