HQ 115013 - Brokers; Powers of Attorney; Change in Trade Name. - United States International Trade Commision Rulings

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HQ 115013

September 6, 2000

BRO-1-RR:IT:EC 115013 GG

CATEGORY: BROKERS

Richard H. Abbey, Esq.
Ablondi, Foster, Sobin & Davidow, P.C.
1150 Eighteenth Street, N.W.
Ninth Floor
Washington, D.C. 20036-4129

RE: Brokers; Powers of Attorney; Change in Trade Name.

Dear Mr. Abbey:

This is in response to your letters, dated April 11, 2000, May 9, 2000, and August 31, 2000, concerning the restructuring of your client, Radix Group International, Inc. (“Radix”). We have combined the responses to all three letters here because they raise related issues. The first letter requests a binding ruling, while the second and third seek the approval of the use of a new trade name.

FACTS:

Radix is a licensed U.S. customs broker currently doing business under the trade name of “AEI Customs Brokerage Services.” Air Express International (“AEI”) owns Radix. Recently, Deutsche Post acquired AEI through a stock purchase. Deutsche Post also owns Danzas Corporation (“Danzas”), which is another licensed U.S. customs broker. Deutsche Post plans to integrate Radix and Danzas sometime within the next 12 to 18 months. Although the exact details have yet to be determined, it is envisioned that Danzas will either cease to exist entirely after its clients have been transferred over to Radix, or be merged into Radix.

The powers of attorney issued to Radix by its clients identify the grantee, Radix, as “Radix Group International, Inc. d/b/a/ AEI Customs Brokerage Services.” In its letter of May 9, 2000, Radix requests Customs approval of its use of a new trade name, “Danzas AEI Customs Brokerage Services”. Radix has obtained, or is in the process of obtaining, the necessary state-by-state authorizations to use this as a new trade name. Radix enclosed copies of the state approvals it has received to date with its May 9 letter. The August 31, 2000, letter offers supplemental reasons why Radix should be entitled to use the requested trade name.

Radix does not intend to replace its approximately 35,000 existing powers of attorney from its own clients after it begins using the new, Customs-approved trade name, “Danzas AEI”. With respect to any new powers of attorney that Radix obtains, whether from existing Danzas clients or from any new clients, Radix proposes that it not use the new trade name on those powers of attorney. Instead, the name on the powers of attorney will be the name on the corporate broker’s license, “Radix Group International, Inc.” This would eliminate any confusion should Radix wish to change the trade name again in the future after the two companies have been fully integrated.

ISSUES:

Whether Radix may use the new trade name, “Danzas AEI Customs Brokerage Services.” Whether Radix must obtain new powers of attorney from its own clients to reflect a change in its trade name; Whether Radix may execute new powers of attorney without referencing a new trade name.

LAW AND ANALYSIS:

Section 641(f) of the Tariff Act of 1930, as amended (19 U.S.C. §1641(f)) gives the Secretary of the Treasury broad authority to prescribe regulations relating to the customs business of customs brokers. The regulations promulgated under this authority are found in Part 111 of the Customs Regulations (19 CFR Part 111). Section 111.30(c) of the Customs Regulations (19 CFR § 111.30(c)) requires brokers to obtain approval from Customs prior to changing their name or to using a trade or fictitious name. Customs has denied brokers’ requests to use a name when that name is confusingly similar to the name used by another broker. See, e.g., Headquarters Ruling (HRL) 114267, dated December 15, 1998. After reviewing the Radix/Danzas situation, our initial reaction was that the request to use the “Danzas AEI Customs Brokerage Services” trade name was premature. We were going to suggest that Radix delay such use until the merger was accomplished and Danzas’ corporate broker’s license had been cancelled.

Upon learning of this impending position of Customs, Danzas presented further arguments in support of its request for approval of the use of the proposed trade name. These arguments, presented in the letter of August 31, 2000, and during a meeting that took place at Customs Headquarters on September 6, 2000, are as follows: 1) Section 111.30(c) confers no independent authority on Customs to deny the use of a trade or fictitious name once State approval has been granted and evidence of such approval has been submitted to Customs; and 2) neither the public nor Customs would be harmed if approval of the immediate use of the proposed trade name were to be granted. While we disagree that Customs lacks authority to deny the use of a trade or fictitious name, we agree that the concerns that usually serve as the basis for a denial are largely absent here. During the September 6, 2000, meeting, Danzas stated that approximately 80% of Danzas’ former brokerage business had already been transferred to Radix, and that Danzas was no longer accepting new customers. Danzas’ effective disappearance as a business competitor to Radix eliminates the concern that importers will be confused or misled when presented with a choice of two brokers operating under similar names. Therefore, Radix may use the proposed trade name in those states where state approval has been granted and proof of the approval has been submitted to Customs.

The next issue is whether Radix will be required to obtain new powers of attorney from its clients to reflect the new trade name. In Customs Service Decision (C.S.D.) 82-79, Customs stated that “provided a broker’s legal status does not change, a mere change in name effects only powers of attorney filed thereafter [e]xisting powers to that broker remain effective”. This position is reiterated in HRL’s 224535, dated July 1, 1993, and 730666, dated August 18, 1987. Radix’s legal status will change following merger with Danzas, to the extent that a merger will have occurred. However, the change is not extensive enough to trigger a requirement for Radix to secure new powers, because Radix will survive as the same corporate broker following the merger. New powers would only be required if as a result of the change in legal status Radix were required to obtain a new license. This would occur, for example, if the merger eliminated both Radix and Danzas and created an entirely new corporation, or if the merger resulted in the creation of a partnership. In those cases, the surviving entity would have to obtain a new broker’s license and new powers of attorney.

Finally, your ask whether the new powers of attorney obtained by Radix from Danzas’s existing clients or from any new clients of Radix may omit any reference to the newly approved trade name. Section 111.30(c) of the Customs Regulations requires a broker to affix his own name in conjunction with each signature of the trade or fictitious name when signing customs documents. Similarly, it is Customs position that a broker must include an approved trade or fictitious name on all Customs documents following approval of the use of the trade or fictitious name by Customs. See HRL 225071, dated March 31, 1994 (a broker that is operating under an approved trade or fictitious name must use both the legal and the trade or fictitious names in signing Customs documents). Therefore, Radix must include both names on newly executed powers of attorney.

HOLDING:

Radix may use the trade name “Danzas AEI Customs Brokerage Services” provided approval for such use has been conferred by the various states, and provided proof of state approval has been submitted to Customs. Radix will not be required to obtain new powers of attorney from its existing clients after receiving approval from Customs to use a new trade name, provided Radix continues to exist as the same legal entity and to operate under its current corporate broker’s license. Radix’s new trade name must appear with its legal name on new powers of attorney issued by clients to Radix.

Sincerely,

Larry L. Burton
Chief

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