HQ 0223845 - Internal Advice request concerning power of attorney requirement for a licensed custom broker to sign a Type 2 bond 19 U.S.C. 1641; 19 CFR 141.46; 19 CFR 111.1 - United States International Trade Commision Rulings

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HQ 223845

September 11, 1992

BRO-4-01-CO:R:C:E 223845 SR

CATEGORY: ENTRY BROKERS

District Director
Los Angeles, CA 90012

RE: Internal Advice request concerning power of attorney requirement for a licensed custom broker to sign a Type 2 bond 19 U.S.C. 1641; 19 CFR 141.46; 19 CFR 111.1

Dear Sir:

This request for internal advice was initiated by a letter dated March 24, 1992, from the District Director of Customs in Los Angeles.

FACTS:

Western Overseas Corporation, a licensed Customs broker, was granted power of attorney by the principal, Senko Logistics. The broker then filed a Type 2 Custodial Bond (CF 301). Customs requested that a power of attorney be provided because the bond was not executed by an officer of the corporation. The broker refused saying that he need only have the power of attorney in his files. The Los Angeles Customs office rejected this bond (CF 301) on the basis that a Type 2 Custodial Bond allows the broker to secure approval, on behalf of the principal, for operations that are not "customs business" as defined in 19 U.S.C. 1641(a)(2), 19 CFR 111.1(c).

ISSUES:

ISSUE 1

Whether a power of attorney must be filed by a licensed broker with the district director of Customs in order to execute a Type 2 Custodial Bond.

ISSUE 2

Whether a CF 5291 may be used by a licensed broker as proof of power of attorney to obtain a Type 2 Custodial Bond.

LAW AND ANALYSIS:

ISSUE 1

In the facts at issue Customs denied a Type 2 Custodial Bond on the basis that the operations allowed under this type of bond are not "customs business". "Customs business" is defined in 19 U.S.C. 1641(a)(2), (19 CFR 111.1(c)) as:

. . . those activities involving transactions with Customs concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by Customs upon merchandise by reason of its importation, or the refund, rebate, or drawback thereof.

The legislative history of 19 U.S.C. 1641, ((H.R. Rep. No. 1015, 98th Cong., 2d Sess. at 72, reprinted in 1984 U.S. Code Cong. & Admin. News 4960, 5030) discusses the legislation as follows:

. . . defines the term "customs business" and restricts the scope of Customs' review of customs brokers to such customs business. It also specifies that only licensed brokers may conduct customs business for third parties; sets forth licensing and permit procedures; establishes a duty for customs brokers to exercise responsibility and control over its customs business; provides for disciplinary proceedings, including monetary penalties and revocation or suspension of licenses or permits under prescribed procedures . . .

As stated in the legislative history, the legislation imposes on licensed brokers a duty to operate in a responsible manner, and allows Customs to take disciplinary action. The customs broker at issue has filed a Type 2 Custodial bond which would allow him to operate a Customs bonded warehouse, a container freight station, operate as a carrier of bonded merchandise or as a Customhouse cartman. These operations are not mentioned in the definition of "customs business" as provided in 19 U.S.C. 1641(a)(21), (19 CFR 111.1(c)), however, operation of a Customs bonded warehouse, for example, involves the entry and admissibility of merchandise and therefore involves "customs business". The customs broker has a duty to perform in a responsible manner when performing the duties for which he is licensed.

19 CFR 141.46 which concerns the power of attorney retained by customs brokers provides as follows:

Before transacting Customs business in the name of his principal, a customhouse broker is required to obtain a valid power of attorney to do so. He is not required to file the power of attorney with a district director. Customhouse brokers shall retain powers of attorney with their books and papers, and make them available to representatives of the Department of the Treasury as provided in subpart C of part 111 of this chapter.

It is logical that licensed brokers need not file a power of attorney with Customs because the laws establish a duty on the part of licensed brokers. Therefore, a power of attorney need not be filed with the district director of Customs, however, it must be kept on file by the broker and readily available in case Customs (or any representative of the Department of the Treasury) wants proof of agency. Customs, as an agency under the Department of Treasury, has the right to demand the presentation of a power of attorney.

ISSUE 2

The Customs Form (CF) 5291 is a general power of attorney for Customs purposes. The language of CF 5291 specifically mentions activities that are not mentioned in the definition of "customs business"; for example; the third and forth paragraphs mention lading, unlading, and other means of conveyance.

HOLDING:

ISSUE 1

A power of attorney does not need to be filed with the district director of Customs by a licensed customs broker in order to secure approval for a Type 2 Custodial Bond.

ISSUE 2

A CF 5291 may be used as proof that power of attorney has been granted by the principal to the Customs broker to execute a

Type 2 Custodial Bond.

Sincerely,

John Durant, Director

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