HQ 0225006 - Broker Employer/Employee Relationship; Employment by more than one broker; 19 U.S.C. 1641; 19 CFR 111.11(d) - United States International Trade Commision Rulings

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HQ 225006

February 15, 1994

BRO-3-05-CO:R:C:E 225006 CB

CATEGORY: ENTRY

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

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