HQ 0224987 - 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. - United States International Trade Commision Rulings

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HQ 224987

March 15, 1994

BRO-3-05/ENT-1-07:CO:R:C:E 224987 AJS

CATEGORY: ENTRY BROKERS

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.

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

(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
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
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.

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
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

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