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HQ 115576

January 30, 2002

BRO-1-RR:IT:EC 115576 GG


Mr. Mark C. Joye &
Ms. Jamie A. Joiner
Baker & Hostetler LLP
1000 Louisiana, Suite 2000
Houston, TX 77002-5009

RE: Customs Brokers; Change of Ownership of Parent Company of Licensed Corporate Customs Broker; 19 U.S.C. 1641; 19 CFR Part 111

Dear Mr. Joye and Ms. Joiner:

This is in response to your letter of January 17, 2002, in which you request a ruling on behalf of your clients, Company B, Company C, and Company D. In deference to your request to keep as many details of the contemplated transaction confidential, we agree to conceal the true identities of the parties involved. We have also complied with your request that this matter be granted expedited treatment.


Company A, a corporate customs broker, currently wholly owns Company B. Company B, which is unlicensed, in turn wholly owns Company C. Company C wholly owns Company D. Both Company C and Company D are corporations and licensed customs brokers.

Company A is planning to offer units of a limited purpose trust known as “the Fund”. Units of the Fund will be publicly offered on a stock exchange. The Fund is being created to acquire the securities and certain notes of Company A via the proceeds raised through the public offering of the Fund. Upon closing of the offering, the shares of the parent of Company A will be acquired by the Fund. Following the acquisition of Company A’s parent by the Fund, the shares of the parent will be transferred to a newly incorporated wholly owned subsidiary of the Fund. Company A will subsequently be amalgamated with its parent company and certain other
wholly owned affiliates. The result will be a single corporation which is a subsidiary of the Fund. This new corporation will also be known as “Company A”, and will carry out the same business activities as the original Company A. Company A also intends to create a new wholly owned subsidiary, Company E, which will own 100% of the shares of Company B.

No changes are contemplated to the corporate structure of either Company C or Company D, and the existing boards of directors, officers, and license qualifiers will remain in place.


Upon implementation of the proposed restructuring, will either Company C or Company D, or both, be required to notify Customs of the described organizational changes, to obtain new licenses or permits, or to take any other action under the Customs Regulations?


Section 641(f) of the Tariff Act of 1930, as amended (19 U.S.C. §1641(f)) authorizes the Secretary of the Treasury to prescribe rules and regulations relating to the customs business of customs brokers. The resultant regulations are found in 19 CFR Part 111. Several of these regulations address organizational and ownership changes.

Section 111.30(b)(2) of the Customs Regulations provides, in pertinent part, that a corporate broker must immediately provide written notice to the director of each port through which it has been granted a permit of –

Any change in the Articles of Agreement, Charter, or Articles of Incorporation relating to the transaction of customs business, or any other change in the legal nature of the organization (for example, conversion of a general partnership to a limited partnership, merger with another organization, divestiture of a part of the organization, or entry into bankruptcy protection).

This particular notice requirement is not triggered by the proposed restructuring, because the regulation applies only in situations in which the change is to the licensed entity itself. Here, neither Company C nor Company D will experience any change. Consequently, they are not required to notify Customs of the planned restructuring.

Another regulation focuses on ownership changes. Section 111.28(d) of the Customs Regulations provides that if the ownership of a broker changes and ownership shares in the broker are not publicly traded, the broker must immediately provide written notice of that fact to the Assistant Commissioner, Office of Field Operations, and to the director of each port through which a permit has been granted. It is unclear whether Company C or Company D is publicly traded. However, the answer to that question is immaterial for purposes of this ruling, because the notification requirement in question only applies to changes in the ownership of the broker, and not of the broker’s parent firm. This interpretation of § 111.28(d) was elucidated in Treasury Decision (T.D.) 00-17, in Customs response to a comment received on proposed changes to the broker regulations. In the situation under review, neither Company C nor Company D is getting new owners. After the reorganization, Company D will remain a wholly owned subsidiary of Company C, and Company C will still be wholly owned by Company B. The most proximate “change” will occur to Company B, when its ownership is transferred from Company A to the newly formed Company E. This change, however, is not to Company C or Company D, and therefore is not of the type contemplated by §111.28(d).

With respect to whether Company C or Company D will require new licenses or permits, no new issuance of either type of instrument will be necessary, because both brokers will emerge from the restructuring unchanged.

A review of the remaining broker regulations reveals that no other obligations on the part of Company C or Company D will be triggered upon the implementation of the proposed restructuring.


The implementation of the proposed restructuring will not impose any requirements or obligations under the Customs Regulations on Company C or Company D.


Larry L. Burton

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