BRO-3-05/ENT-1-07:CO:R:C:E 224987 AJS
Mr. Carl B. Soller
Soller, Shayne & Horn
46 Trinity Place
New York, NY 10006
RE: Designation by consignee of itself as customs broker; 19
U.S.C. 1484(a)(1); 19 U.S.C. 1484(a)(2)(C); 19 CFR 141.6;
National Customs Brokers and Forwarders Association of America v.
U.S.; "consignee"; Customs Directive 3530-02; 19 CFR 142.13.
Dear Mr. Soller:
This is in reply to your request of October 4, 1993,
concerning various broker transactions.
FACTS:
Your request consists of five different factual scenarios
and other questions.
Scenario 1: Broker A is the nonowner/nonpurchaser consignee
of a container of merchandise claimed to be consigned to Z Corp.,
a public company, the owner/purchaser. Broker A does not have a
power of attorney from Z Corp., however, as "nominal" consignee
of the merchandise Broker A appoints itself as the customs broker
authorized to make entry as the importer of record. Your
requests asks whether Broker A acted properly.
Scenario 2: Broker A, under the circumstances described
above, has been informed by Z Corp. that Broker B is the broker
authorized to make entry on behalf of Z Corp. Broker A, however,
as nominal consignee, designates itself as the broker to be
importer of record in the transaction. Your request asks whether
Broker A acted properly.
Scenario 3: Broker A, as consignee of the container,
receives a letter from Z Corp., advising Broker A that when Z
Corp. is the importer, Broker A is not to make entries.
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Broker A is also instructed that Broker B is Z Corp.'s customs
broker and all documents in the possession of Broker A should be
forwarded to Broker B. Broker A responds to Z
Corp., stating that as consignee it may appoint itself, or any
other broker, as the broker permitted to make entry as importer
of record despite Z Corp.'s instructions. Your requests asks
whether Broker A is correct.
Scenario 4: Under the facts as outlined in scenario 3, the
merchandise arrives in a port where Broker A is not "permitted".
Broker A as consignee/licensed broker, appoints "permitted"
Broker C to make entry as importer of record. Your request asks
whether Broker C, prior to making entry, is required to notify Z
Corp. that it is the broker entering Z Corp.'s merchandise. Your
request also asks if Z Corp. instructs Broker C not to make
entry, whether Broker C may make entry as a broker designated by
the nominal consignee.
Scenario 5: In each of the above circumstances, Z Corp. has
written to the District Director of Customs at each location
where the goods are ultimately released to inform the District
Director that no one other than Z Corp. should be allowed to act
as importer of record for goods where it is the owner/purchaser.
Additionally, Z Corp. has informed the District Director that no
broker other than Broker B (permitted in each location) should be
allowed to act as its broker. Your requests asks whether this
advice would change any of our responses to the above situations.
In all the circumstances in 1 through 4, Broker A or C, the
importer of record, is the customs broker appointed by the
"nominal consignee". If the owner/purchaser X Corp. were on the
Customs sanction list, requiring live entries, your request asks
whether our response to questions 1 through 4 would be different.
Inasmuch as the sanction list is not a public document, we assume
that Broker A or C is aware of X Corp.'s inclusion on that list.
ISSUE:
What are the rights of Broker A, as consignee, to designate
itself or another customs broker as the person permitted to make
entry under 19 U.S.C. 1484. What are the rights of Broker A and
Broker C to make entry under 19 U.S.C. 1484.
LAW AND ANALYSIS:
19 U.S.C. 1484(a)(1) states that one of the parties
qualifying as the "importer of record" under paragraph (2)(C) of
this section shall make entry as described in paragraph
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(a)(1)(A) of this section. Section 1484(a)(2)(C) states that
when entry of merchandise is made, the required documentation
shall be filed either by the owner or purchaser of the
merchandise or, when appropriately designated by the owner,
purchaser, or consignee of the merchandise, a person holding a
valid license under section 1641 of this title (i.e., a customs
broker). The purpose of this language was basically to prevent
so-called "nominal consignees", other than licensed customs
brokers, from filing entries and thereby engaging in the
transaction of Customs business without a license. Customs
Directive 3530-02 (November 6, 1984). In scenario 1, the
consignee (i.e., Broker A) is also a customs broker. Therefore,
Broker A as consignee may appropriately designate itself as the
customs broker to file the documentation required to make entry
under section 1484.
In scenario 1, Broker A does not possess a power of attorney
from Z Corp. 19 CFR 141.46 states that before transacting
business in the name of a principal, a customs broker is required
to obtain a valid power of attorney to do so. In this case,
Broker A is conducting business in the name of the consignee and
not Z Corp. Accordingly, Broker A does not need a power of
attorney from a non-principal (i.e., Z Corp.) to make entry as
the customs broker designated by the consignee.
This conclusion regarding the right of Broker A to make
entry is supported by the interpretation of section 1484 rendered
in National Customs Brokers and Forwarders Association of America
v. United States, 14 CIT 108, 731 F.Supp. 1076 (1990) (NCBFA).
This case involved an action to compel the Secretary of the
Treasury and the Commissioner of Customs to promulgate
regulations establishing a certain hierarchy among those
permitted to enter merchandise transported by international
courier services in consolidated shipments. In NCBFA, the
plaintiff contended that a broker chosen by a courier service may
not make entry of individual shipments in a consolidated shipment
if another broker has been chosen by the owner or purchaser of
the individual shipment. Your request essentially involves
similar facts in that a consignee desires to designate a customs
broker to make entry of merchandise when the owner or purchaser
of the merchandise wishes another broker to make entry.
In regards to section 1484(a)(2)(C), the court in NCBFA
stated that the term "a person" "appropriately designated" can be
read only to signify one who is designated in a suitable or
proper manner. NCBFA at 111. The court also stated that such
person must also hold a valid customs
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brokers license. NCBFA at 111. The court concluded that "[i]f
this person, therefore, has been designated in a proper or
suitable manner by either the owner, purchaser, or consignee, and
if this person is a properly licensed customs broker, such person
may make entry of the items in the shipment." NCBFA at 111. In
your request, we assume that
Broker A has been designated in a proper or suitable manner by
itself (i.e., the consignee) and that it is in fact a customs
broker. Based on this information, we find the above language
from NCBFA supportive for determining that Broker A may make
entry of the container mentioned in scenario 1.
The court in NCBFA also discussed the meaning of
"consignee". It stated that the term "consignee" has
traditionally been a broad one. NCBFA at 111. For tariff
purposes it is not synonymous with "owner" or "purchaser". NCBFA
at 111. It includes both nominal consignees and ultimate
consignees. NCBFA at 111. Your request refers to broker A as a
nominal consignee. The court stated that if courier services are
"nominal consignees," they are nonetheless "consignees" within
the meaning of section 1484(a)(2)(C). NCBFA at 111. We note
that courier services are listed as an example of a nominal
consignee in the previously cited C.D. 3530-02. The court
further stated that under the statute a consignee may designate a
licensed broker to enter goods, even if the consignee may not
enter goods itself. NCBFA at 111. We find the above language
supportive for concluding that Broker A as nominal consignee may
designate itself as a licensed broker to make entry of the
subject container.
The court in NCBFA also cited to the legislative history of
section 1484 which states that the language in question "would
prohibit nominal consignees from conducting customs business on
behalf of any other person, unless the consignee is a licensed
broker." NCBFA at 112, See also H.R. REP. No. 989, 97th Cong.,
2d Sess. 40, reprinted in 1982 U.S. CODE CONG. & ADMIN. NEWS
4137, 4140. The court stated that this language is strong
indication that Congress implemented section 1484 to permit the
continuation of entry of goods and packages by nominal consignees
as long as they are licensed customs brokers. As stated
previously, Broker A is a customs broker. Thus, we also find
this language supportive for concluding that Broker A may make
entry of the subject container.
In Scenario 2, broker A is informed by Z Corp. that Broker B
is the broker authorized to make entry on behalf of Z Corp.
Broker A, as consignee, designates itself as the
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broker to be the importer of record in the transaction. As in
Scenario 1, Broker A as consignee is within its rights
under section 1484 to designate itself as the required customs
broker. Your request asks whether Broker A has
acted "properly". Our response is limited only to whether Broker
A acted lawfully within the meaning of the section 1484. We do
not think it proper for Customs to comment on whether Broker A
acted "properly" in ignoring Z Corp.'s
request. We note that Z Corp. may pursue other remedies for the
conduct of Broker A under these circumstances. In NCBFA, the
court stated that if a specific broker is named or designated
under section 1484 and a broker other than the one specifically
named or designated enters the merchandise and damage results to
the owner or broker originally designated, the parties should
look to their contracts for remedies. NCBFA at 114. The court
also stated that leaving to the parties to protect themselves
through contract or through their choice of carrier appears more
appropriate than compelling Customs to prohibit the entry of
consolidated shipments in the manner requested. NCBFA at 114.
The court added that under the terms of the statute Customs
remains free to deal with any licensed broker chosen by an owner,
purchaser or consignee. NCBFA at 114. Consequently, if Z Corp.
is disturbed by the failure of Broker A to follow its
instructions, it may seek remedies under contracts it possesses
with Broker A as its consignee.
In scenario 3, your request raises the issue of whether
Broker A as consignee may appoint itself, or any other broker, to
make entry as importer of record despite Z Corp.'s contrary
written instructions. Our response to this scenario is the same
as to scenario 1 and 2.
In scenario 4, the merchandise arrives in a port where
Broker A is not "permitted". Broker A as consignee/licensed
broker, appoints "permitted" broker C to make entry as importer
of record. Your request raises the question of whether Broker C,
prior to making entry, is required to notify Z Corp. that it is
the broker entering Z Corp.'s merchandise. Inasmuch as Broker C
has been appointed by Broker A pursuant to section 1484, Broker C
is not required to notify Z Corp. prior to making entry.
In scenario 4, if Z Corp. instructs Broker C not to make
entry, your request raises the question of whether Broker C may
make entry as a broker designated by the nominal consignee. As
stated previously, the consignee may designate a broker to make
entry despite contrary instructions from Z Corp. Therefore,
Broker C may make entry in this case.
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In scenario 5, Z Corp. writes to the District Director of
Customs at each location where the goods are ultimately released
to inform the District Director that no one other
than Z Corp. should be allowed to act as importer of record for
goods where it is the owner/purchaser. Additionally, Z Corp. has
informed the District Director that no broker other than Broker B
(permitted in each location) should be allowed to act as its
broker. Your requests raises the issue of whether this advice
would change any of our responses to the above situations. Our
answer is no for the reasons discussed above. If a party is
permitted to make entry under section 1484, then that party may
make entry. The court in NCBFA rejected the notion that a
hierarchy of persons permitted to make entry may be created by
Customs.
In all the circumstances in 1 through 4, Broker A or C, the
importer of record, is the customs broker appointed by the
"nominal consignee". If the owner/purchaser X Corp. were on the
Customs sanction list, requiring live entries, your request
raises the question of whether our response to questions 1
through 4 would be different. We assume that Broker A or C is
aware of X Corp.'s inclusion on the sanction list. We also
assume that your request is referring to 19 CFR 142.13(d) which
states that a broker shall not circumvent action taken under this
section by applying for release of the importer's merchandise in
the broker's name and under the broker's bond. Under this
section, Customs may require that the entry documentation be
filed and estimated duties be deposited at the time of entry
before the merchandise is released. 19 CFR 142.13(a) & (b). If
Broker A or Broker C were permitted to apply for release of X
Corp.'s merchandise without the filing of entry documentation and
depositing of estimated duties before release of the merchandise,
then X Corp. would be able to circumvent this section.
Therefore, neither Broker A nor Broker C may apply for the
release of X Corp.'s merchandise in their name nor under their
bond.
You additionally request that Customs withhold action
against any importer who is not the importer of record and who
has had penalties assessed as a result of entry documents
submitted by a broker appointed by a nominal consignee. There is
no basis to stay any existing penalty action under these
circumstances. However, if a penalty has been assessed
incorrectly based on this ruling Customs would reconsider the
penalty if a supplemental petition is filed.
HOLDING:
Broker A, as consignee, may designate itself or another
customs broker as the person permitted to make entry under 19
U.S.C. 1484. As appropriately designated persons, Broker A
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and Broker C may also make entry under 19 U.S.C. 1484. How-
ever, neither Broker A nor Broker C may apply for the release of
X Corp.'s merchandise in their name nor under their bond.
Sincerely,
John Durant, Director