BRO-3-05-CO:R:C:E 225006 CB
Ms. Mary A. Rasmussen
Assistant District Director
U.S. Customs Service
300 South Ferry Street
Terminal Island
San Pedro, CA 90731
RE: Broker Employer/Employee Relationship; Employment by more
than one broker; 19 U.S.C. 1641; 19 CFR 111.11(d)
Dear Ms. Rasmussen:
This is in response to your request for internal advice dated
October 8, 1993 (your file BRO-1-LA:E:BC MJB/mjb) regarding several
issues raised by Richard Fleischer, a customs broker.
FACTS:
Richard G. Fleischer (Fleischer) is the qualifying individual
for the license and permit for his sole proprietorship. According
to Fleischer there are three brokers (hereinafter referred to as
the "employer-broker") with whom he may have a possible employer-
employee relationship. You state that Fleischer is not qualifying
the permit for his employers.
Your request indicates that Fleischer is located in the
airport area while his employers are located in the seaport area
(approximately 30 miles apart) and he does not spend any time in
their offices. Fleischer sets aside one hour in the afternoon to
do the work in his own office, signs the CF 3461s and files the
completed entries with Customs.
Only one of the employer-brokers listed Fleischer on its list
of employees submitted to Customs. This same broker has executed
an employer power of attorney for Mr. Fleischer. However, you
indicate that the clients are unaware of this arrangement although
Fleischer has access to all of the clients' documents.
ISSUES:
1. You state that based on the definition of employer-
employee relationship you find two elements missing: the employers
do not provide sufficient control and supervision, and none of the
employers furnish tools and a place to work. Therefore, can
Fleischer be considered an employee?
2. If, as in this situation, one of the brokers involved has
his own brokerage business, do the restrictions that the licensed
individual can qualify the permit but not the license and that he
perform the work during non-concurrent hours apply and preclude any
outside employment?
3. If the employing broker's clients are unaware of the power
of attorney issued to Fleischer, has the confidentiality expected
by the clients been maintained?
LAW AND ANALYSIS:
The statutory provision governing customs brokers is found in
section 641, Tariff Act of 1930, as amended (19 U.S.C. 1641).
Under 19 U.S.C. 1641(b)(4), a customs broker, defined in 19 U.S.C.
1641(a)(1) as "any person granted a customs broker's license ...
under [19 U.S.C. 1641(b)]", "shall exercise responsible
supervision and control over the customs business that it
conducts."
In a letter dated December 17, 1991 to your office Mr.
Fleischer informed you that he is no longer employed by one broker
and only acts as a messenger for another broker. You have not
disputed this assertion. Therefore, we will address our comments
only with respect to the remaining employer-broker.
In his letter Mr. Fleischer states that he is paid as an
employee having payroll checks issued to him after deducting
applicable taxes. The salary is based on the amount of shipments
processed (according to Fleischer it's about one shipment daily).
According to Fleischer the documents come to him by messenger. He
prepares the entry documentation and then faxes the documents to
the broker for approval. The employer-broker then advises Mr.
Fleischer whether to file the entry. Once the entry is cleared,
Fleischer sends the processed entry by messenger to the employer-
broker. You have not challenged these statements.
Issue #1
The Customs Service position on relationships between brokers
was published by way of a Federal Register notice published on
March 30, 1989 (54 Fed. Reg. 13136 (1989)). The notice set forth
guidelines in determining whether a bona fide employer-employee
relationship exists. One of the guidelines was based on the
Internal Revenue Code. The notice stated that an employer is
required to deduct and withhold taxes on the wages of each
employee. The notice also pointed out that the act of an employee
binds the employer, unless it can be shown that an employee was
outside the scope of employment. Finally, it must also be
established that the employer-broker must exercise responsible
supervision and control. Supervision and control in the employment
context generally means the actual power to hire, fire and
discipline. For Customs purposes the regulations further define
"supervision and control" as the "degree of supervision and control
necessary to ensure that the employee provides substantially the
same quality of service in handling Customs transactions" that the
employing broker is required to provide. 19 CFR 111.11. Applying
this criteria to Mr. Fleischer's situation, it meets all of the
requirements set forth in the Customs notice: Mr. Fleischer is
included in the employee list and taxes are withheld; the acts of
Fleischer bind the employer; and all of the entry documentation
filed by Mr. Fleischer is first approved by the employer-broker.
Issue #2
It is not clear from your internal advice request why this
issue was presented. You state that Mr. Fleischer is not
qualifying the permit for his employer (nor, we assume, the
license). He is the qualifying individual for the license and
permit for his sole proprietorship.
In HQ 222573 (dated March 8, 1991) it was held that a person
who holds an individual broker's license may be employed by more
than one customs broker provided that responsible supervision and
control is exercised and that the hours of employment of the
individual for each broker are prescribed and non-concurrent. Mr.
Fleischer has indicated that he sets aside one hour a day to
perform the work for the employer-broker. Fleischer prepares the
documents and faxes a copy to the employer-broker for approval.
The entry is filed after it has been approved by the employer-
broker. In the Position Statement referred to above, it was stated
that the employer-broker must have the right to direct and control
the method and manner in which the work shall be done and the
result accomplished. 54 Fed. Reg. 13136. In the instant case it
must be concluded that Mr. Fleischer complies with the requirements
set forth in HQ 222573 and that the requisite supervision and
control are exercised by the employer-broker as listed in the
Federal Register notice.
Issue #3
If a bona fide employer-employee relationship is established
between two brokers, there is no requirement to disclose the
employment relationship. The regulations require only that if an
employee is authorized to sign Customs documents on his employer's
behalf, a valid power of attorney must be executed for that
purpose. 19 CFR 111.3(b). The regulations do not require that
a broker keep its clients apprised on personnel issues. See 19 CFR
111.39. Therefore, if Mr. Fleischer is acting solely as an
employee there is no violation of a client's expectations of
confidentiality.
HOLDING:
1. The record presented supports the conclusion that Mr.
Fleischer is a bona fide employee and not an independent
contractor.
2. Mr. Fleischer performs his work on behalf of the employer-
broker during prescribed non-concurrent hours. Additionally, the
documentation prepared and filed by Mr. Fleischer is reviewed and
approved by the employer-broker thereby satisfying the supervision
and control requirement. The acts of Mr. Fleischer are binding
upon the employer-broker.
3. Once a bona fide employer-employee relationship is
established, there is no requirement that a broker disclose to a
client the identity of the employee preparing entry documentation
on behalf of the client.
The Office of Regulations and Rulings will take steps to make
this decision available to Customs personnel via the Customs
Rulings Module in ACS and to the public via the Diskette
Subscription Service, Lexis, Freedom of Information Act and other
public access channels within 60 days from the date of this
decision.
Sincerely,
John Durant, Director
Commercial Rulings Division