A freight forwarder is referring an import client to a customs broker with an expectation of receiving a referral fee. Which ONE of the following statements is legally TRUE with respect to their relationship?
How to get there
19 CFR 111.36(c): Relations with a freight forwarderA broker may compensate a freight forwarder for referring brokerage business, subject to the following conditions:
(1) The importer or other party in interest is notified in advance by the forwarder or broker of the name of the broker selected by the forwarder for the handling of his Customs transactions;
(2) The broker transmits directly to the importer … a true copy of his brokerage charges … or a statement of his brokerage charges …;
(3) The broker must execute a customs power of attorney directly with the importer of record … and not via a freight forwarder or other third party … No part of the agreement … can forbid or prevent direct communication between the importer … and the broker; and
(4) … the broker remains subject to all other provisions of this part.
(1) The importer or other party in interest is notified in advance by the forwarder or broker of the name of the broker selected by the forwarder for the handling of his Customs transactions;
(2) The broker transmits directly to the importer … a true copy of his brokerage charges … or a statement of his brokerage charges …;
(3) The broker must execute a customs power of attorney directly with the importer of record … and not via a freight forwarder or other third party … No part of the agreement … can forbid or prevent direct communication between the importer … and the broker; and
(4) … the broker remains subject to all other provisions of this part.
Choice B is condition (1). The answer is B.
Why the other choices are wrong
A) POA via the forwarder or another third party: § 111.36(c)(3) requires the POA directly with the importer, “not via a freight forwarder or other third party.”
C) Importer may only talk to the broker through the forwarder: the agreement can't forbid or prevent direct communication (§ 111.36(c)(3)).
D) No agreement benefiting the unlicensed forwarder: that's the general rule in § 111.36(b), but § 111.36(c) is an express exception for freight forwarders, so referral compensation is allowed on these conditions.
Tip
Forwarder referral fees are legal if the importer stays in the loop: told the broker's name in advance, gets the broker's charges directly, signs the POA directly, and can always contact the broker.
Source: 19 CFR 111.36(b)–(c) (eCFR).
CBP answer key: Answer B · 19 CFR 111.36Source: CBP past exams ↗