BRO-3-06/BRO-2-01-CO:R:C:E 225155 AJS
Jonathan M. Fee, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman
Suite 4860
1201 West Peachtree Street, NE
Atlanta, GA 30309
RE: Billing of importer through another broker; HQ 224532; C.S.D.
79-111; 54 Fed. Reg. 13,136; 19 CFR 177.1(d); HQ 725085.
Dear Mr. Fee:
This is in reply to your letter of January 7, 1994, concerning
Wilmington Shipping Company (WSC) (file 92-8098-1(2) I).
FACTS:
Your request asks for a ruling that, under the franchising
arrangement contemplated in Headquarters Ruling Letter (HQ) 224532
(September 28, 1993), a broker within the franchise system
appointed by another such broker may either bill the importer
directly or bill the appointing broker, depending on their agreed
arrangement. The facts of HQ 224532 are incorporated by reference
in this ruling.
ISSUE:
Whether a broker in the subject franchising system appointed
by another such broker may either bill the importer directly or
bill the appointing broker.
LAW AND ANALYSIS:
In Customs Service Decision (C.S.D.) 79-111, Customs addressed
the issue of whether an importer may issue a power of attorney to
one (broker A) that would empower that broker
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to issue, on the importer's behalf, powers of attorney to other
brokers in other ports. These other brokers would have the same
relationship to the importer as does broker A, and would bill and
be paid by the importer directly and not through broker A. Customs
concluded this arrangement was permissible under the Customs
Regulations. C.S.D. 79-111 was generally affirmed in 54 Fed. Reg.
13,136 (1989). We note that C.S.D. 79-111 was cited in your ruling
request for HQ 224532.
In HQ 224532, powers of attorney obtained by WSC and
individual franchisees from their customers were to contain a
clause authorizing the appointee to execute and issue, on the
customer's behalf, powers of attorney to other brokers in other
ports and districts. Customs stated that this type of power of
attorney would be permissible as long as each franchisee has the
same relationship to the other fran- chisees' customers as the
other franchisee, and each fran- chisee bills and is paid by the
customer directly and not through WSC or another franchisee.
In your ruling request for HQ 224532, it states on page 9 that
each franchisee would maintain its own separate records. In
addition, your request states that funds received from or for
customers would be held and disbursed by the franchisee
independently from WSC or other franchisees. Lastly, it states
each franchisee would retain responsibility for collection of its
own accounts, and for its separate debts and payables. This
factual situation is similar to the situation described in C.S.D.
79-111. Based on these facts and C.S.D. 79-111, we issued HQ
224532. 19 CFR 177.1(d) states that a ruling interprets and
applies the provisions of the Customs and related laws to a
specific set of facts. Therefore, we did not consider it necessary
to proceed beyond C.S.D. 79-111 and the presented facts when
issuing HQ 224532.
This request cites to HQ 725085 (May 3, 1984), which addressed
the billing procedure when a broker appoints another broker to act
for an importer. See also HQ 718233 (April 27, 1982). We note
that this ruling was not cited in your ruling request for HQ
224532, and that we also did not consider it during the preparation
of HQ 224532. In HQ 725085, a broker considered including on blank
power of attorney cards a statement allowing it to appoint brokers
in other districts to act on behalf of its clients. Customs stated
that under C.S.D. 79-111, "if the power of attorney between the
principal (importer) and his local broker provides that the local
broker may appoint one or more
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brokers in other districts to act as agents (customhouse brokers)
of the importer, the local broker in appointing a broker in another
district to act on the importer's behalf creates a principal-agent
relationship between the outport broker and the importer."
Therefore, Customs concluded, the outport broker may bill the
importer directly and not go through the local broker, or the
outport broker may go through the local broker on the billing
procedure. This fact pattern was not at issue in HQ 224532, and
thus Customs did not interpret and apply the Customs and related
laws to these facts. In this request, you specifically ask the
question of whether a broker within the franchise system appointed
by another such broker may either bill the importer directly or
bill the appointing broker. Based on HQ 725085 and our previous
decision in HQ 224532, either of these arrangements would be
permissible. We note that in cases where the appointing broker is
billed, full disclosure of this fact must be provided to the
importer.
HOLDING:
A broker in the subject franchising system who is appointed by
another such broker may either bill the importer directly or bill
the appointing broker. In the case where the appointing broker is
billed, full disclosure of this fact must be provided to the
importer.
Sincerely,
John Durant, Director
Commercial Rulings Division