HQ 0225011 - Request for Internal Advice concerning a licensed broker qualifying a licence and permit for one broker and being employed by a second broker; 19 U.S.C. 1641; 19 CFR 111.11; 19 CFR 111.19(d); C.S.D. 91-12 (March 8, 1991); Customs ruling 221724 (June 4, 1991). - United States International Trade Commision Rulings

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HQ 225011

February 22, 1994

BRO-3-05 CO:R:C:E 225011 TLS

CATEGORY: ENTRY

Ms. Mary A. Rasmussen
Assitant District Director
U.S. Customs Service
300 South Ferry Street
Terminal Island
San Pedro, California 90731

RE: Request for Internal Advice concerning a licensed broker qualifying a licence and permit for one broker and being employed by a second broker; 19 U.S.C. 1641; 19 CFR 111.11; 19 CFR 111.19(d); C.S.D. 91-12 (March 8, 1991); Customs ruling 221724 (June 4, 1991).

Dear Ms. Rasmussen:

This office has received the above-referenced request for internal advice as provided for under Customs regulations. We have considered the request and have made the following decision.

FACTS:

A licensed broker qualifying a license and permit for her sole proprietorship (Broker 1) is also employed by another broker (Broker 2). At the end of her workday for Broker 2, Broker 1 travels to her own business office and reviews her employee's work. The employee may or may not be present.

Broker 1 contends that she is performing her duties for Broker 2 during non-concurrent hours. She is seeking advice on whether this scenario is consistent with current Customs laws.

ISSUES:

Whether Broker 1 may continue to operate her own brokerage business and simultaneously be employed by Broker 2 under the circumstances outlined above.

Whether Broker 1 is exercising responsible supervision over her employee under the circumstances noted above.

Whether both brokers are involved in a conflict of interest in the circumstances presented if they do not inform their clients of the arrangement and obtain consent from those clients.

LAW AND ANALYSIS:

The first issue presented here has been addressed in a previous Customs ruling. Concerning the first issue, we have held that "a licensed individual who serves as the qualifying employee for the permit of one broker may be employed by another broker as a non-qualifying employee (i.e., a supervised employee), provided that the work is performed at each broker's office during prescribed, non-concurrent hours." Customs ruling HQ 222573 (March 8, 1991). The individual qualifying the permit for one broker cannot qualify the permit for another, unless authorized by a waiver. 19 U.S.C. 1641(c)(2); 19 CFR 111.19(d). The qualifying broker must be under responsible supervision and control while working for the second broker. 19 U.S.C. 1641(b)(4); 19 CFR 111.11(b) and (c); 19 CFR 111.19(d).

In this case, Broker 1 works for Broker 2 during the day and then works at her own office afterwards to review her employee's work. To the extent that these work hours are part of a regular schedule, we find that they are prescribed and non-concurrent. The facts presented indicate that Broker 1 qualifies the permit only for her own brokerage firm. The fact that she also qualifies the license for her own firm is of no consequence in this case. From the facts presented, we cannot determine if responsible supervision and control is being exercised over Broker 1 while she is working for Broker 2. If such is the case, we find that Broker 1 may work for Broker 2 as a non-qualifying employee while qualifying the permit and license for her own business. We do stress that the requisite supervision and control over Broker 1 must be present while she is working for Broker 2. We also emphasize here, as we did in HQ 222573, that this finding on the first issue does not in any way absolve Broker 1 of the responsibility of exercising responsible supervision and control over her employee in the office where she qualifies the permit.

On the second issue, we must look at what constitutes "responsible supervision and control." The term is defined under 19 CFR 111.19(d) as such:

[T]hat degree of supervision and control necessary to ensure that the employee provides substantially the same quality of service in handling customs transactions that the licensed broker is required to provide....

The facts presented here do not give a clear picture of how Broker 1 is supervising her employee, except to state that she reviews her employee's work, presumably after the work has been completed. We have found in at least one case that responsible supervision and control was present where the broker was in a position to direct and control her employees and specify the method and manner in which the work was done. Customs ruling HQ 221724 (June 4, 1991). Thus, if such is present in this case, the requirements of 19 CFR 111.19(d) are considered to be met. The fact that the broker is not present while the employee is performing her duties does not preclude the broker from exercising responsible control and supervision over the employee.

Concerning whether a conflict of interest exists under the current arrangement if the brokers do not inform their respective clients of the arrangement, we find no reason for having the brokers inform their clients of the arrangement. We have previously required that a parent broker must obtain a power of attorney from its client if a subsidiary broker is to conduct business on behalf of the parent for the client. HQ 221724, supra. The subsidiary must also obtain a power of attorney from the client, as well as exchange powers of attorney with the parent. Id.

In the present case, the facts given do not indicate that Broker 1 will be conducting business for Broker 2's clients on behalf of Broker 2 as a broker. Broker 1, for all intent and purposes, is an agent of Broker 2 while working as an employee for Broker 2. As such, Broker 1 is only representing Broker 2 in transactions involving Broker 2's clients; she is not representing her own brokerage firm. Conversely, Broker 1 is only representing her own firm when she is not in the employ of Broker 2. Assuming that the client lists of Broker 1 and Broker 2 do not overlap, we find no apparent conflict of interest in the circumstances presented.

HOLDING:

Under the circumstances presented, Broker 1 may qualify the license and permit for her own brokerage firm while working prescribed, non-concurrent hours in the employ of Broker 2.

Broker 1 is exercising responsible supervision and control over her employee only if she is in a position to direct and control her employee and specify the method and manner in which the employee's work is done. The fact that she might not be present when the employee is performing her duties does not preclude the broker from exercising such control over the employee.

There is no conflict of interest in this case between Broker 1 and Broker 2. Neither is required to inform their respective clients of their arrangement, provided that Broker 1 and Broker 2 do not represent the same clients. This ruling is based only on the facts presented as stated above.

Sincerely,

John Durant, Director

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