Foreign Importer; Continuous Customs Bond Signed by Freight Forwarder

HQ H251059 September 26, 2017 BON 1; BRO 4-01 OT:RR:CTF:ER H251059 ECG Regulatory Audit – Miami Field Office U.S. Customs and Border Protection 11232 NW 20th Street, Suite 302 Miami, FL 33172 Attn: Anibal Marrero, Field Director Re: Foreign Importer; Continuous Customs Bond Signed by Freight Forwarder Dear Port Director: This is in response to your letter dated February 25, 2014, regarding a foreign importer’s continuous customs bond signed by a freight forwarder. We regret the delay in our response. FACTS: You state that during a broker compliance audit, you discovered that a foreign importer and Chinese corporation, Shandong Longtai Fruits and Vegetables Co., Ltd (“Shandong Longtai”), has a continuous customs bond, xxxxxx053, signed by its freight forwarder, RDD Freight International, Inc. (“RDD”). Wilson Jin, as attorney in fact for RDD, signed Customs Form 301 on behalf of Shandong Longtai on December 29, 2011. Shandong Longtai had previously granted identical customs power of attorneys (“POA”) to RDD on December 1, 2011, and NCHB Corporation (“NCHB”), a licensed customs broker, on December 12, 2011. NCHB holds a national permit and filed the entries at issue: 1) xxx-xxxxxx74 on May 31, 2013; and 2) xxx-xxxxxx97 on June 7, 2013. You inquire whether Shandong Longtai may confer the powers listed in the POA to RDD and if signing a continuous customs bond on behalf of a foreign importer is considered customs business pursuant to 19 U.S.C. § 1641(a)(2) and 19 C.F.R. §§ 111.1 and 111.2, thus requiring RDD to hold a valid customs broker license and district permit. ISSUES: I. Whether signing a continuous customs bond constitutes customs business, requiring a customs broker license and applicable district permit. II. Whether Shandong Longtai properly conferred the powers in the POA to RDD. LAW AND ANALYSIS: I. Whether signing a continuous customs bond constitutes customs business, requiring a customs broker license and applicable district permit. Section 641(b)(1) of the Tariff Act of 1930, as amended (19 U.S.C. § 1641(b)(1)), provides that no person may conduct customs business (other than solely on behalf of that person) unless that person holds a valid customs broker license. The regulatory definition of “customs business,” which closely follows the language set forth in 19 U.S.C. § 1641(a), is provided in 19 C.F.R. § 111.1 as: those activities involving transactions with CBP concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by CBP on merchandise by reason of its importation, and the refund, rebate, or drawback of those duties, taxes, or other charges. “Customs business” also includes the preparation, and activities relating to the preparation, of documents intended to be filed with CBP in furtherance of any other customs business activity, whether or not signed or filed by the preparer. However, “customs business” does not include the mere electronic transmission of data received for transmission to CBP and does not include a corporate compliance activity. In general, signing a customs bond constitutes customs business. In HQ 115336, dated October 1, 2001, Customs addressed whether signing a single transaction bond is customs business. In its analysis, Customs noted that a single transaction bond ensures for liquidated damages in case of unperformed obligations, concerns responsibilities associated with a particular entry, and is filed with other entry documents to release imported merchandise. As signing a single transaction bond comprised the preparation of documents concerning the admissibility and entry of merchandise of a particular entry, Customs determined that it constituted customs business. Although an activity may generally be considered customs business, CBP has explained that customs business does not cover situations in which the person is explicitly allowed by statute or regulation to perform as an authorized agent. See 37 Cust. B. & Dec. 35, C.S.D. 03-15 (Aug. 27, 2003) (responding to a comment that proposed regulatory changes were not clear as to whether related parties could provide assistance to each other for the preparation of Customs Forms 29 and 28, and other similar documents like supplemental information letters). CBP regulations explicitly authorize certain agents to sign customs bonds on behalf of others, creating an exception to the general rule that signing a customs bond constitutes customs business. For instance, Customs clarified in HQ 115597, dated May 16, 2002, that a surety may sign a continuous customs bond on behalf of an importer. Customs noted that 19 C.F.R. § 113.31(b) specifically authorizes sureties to execute bonds on behalf of importers when such actions would otherwise be restricted to importers or their licensed brokers. Customs then determined that this authorization does not conflict with the holding in HQ 115336 (that signing a single entry bond constitutes customs business) because the regulation allows sureties to engage in activities otherwise restricted to importers or their licensed brokers. A similar authorization exists in 19 C.F.R. §§ 113.33(c) and (d) for corporate officers and attorneys in fact of a corporation to sign a bond on behalf of the corporation when the corporation is the principal on the bond. Therefore it follows that an attorney in fact may execute a bond on behalf of a corporate principal by virtue of the regulatory allowance. In this case, Shandong Longtai as a Chinese corporation may have either one of its authorized officers or an attorney in fact sign the bond. See 19 C.F.R. § 113.33(c) and (d). Shandong Longtai appointed RDD as its attorney in fact through a POA signed on December 1, 2011. In this case, Wilson Jin as attorney in fact for RDD executed Shandong Longtai’s customs bond. As Wilson Jin signed the bond as attorney in fact for RDD, and Shandong Longtai appointed RDD as its attorney in fact, the bond’s execution meets the requirements of 19 C.F.R. § 113.33(d). II. Whether Shandong Longtai properly conferred the powers in the POA to RDD. You also inquire whether Shandong Longtai properly conferred the powers in the POA to RDD, despite having issued a similar POA to NCHB. CBP regulations concerning the issuance of a POA provide that “[a] power of attorney may be executed for the transaction by an agent or attorney of a specified part or all of the Customs business of the principal.” 19 C.F.R. § 141.31(a). However, a POA cannot delegate customs business to an unlicensed entity. In HQ 225000, dated June 27, 1994, Customs determined that a limited POA could be issued to authorize an unlicensed party to sign an in-bond transportation document, an activity exempted from customs business. The limited POA was allowed to the extent that the documents did not concern entries within the meaning of 19 U.S.C. § 1484. Furthermore, when a POA does grant an agent the authority to conduct customs business on behalf of the principal, only one licensed entity may be authorized to conduct customs business on behalf of that importer. In HQ 223453, dated January 21, 1992, Customs determined that for the transaction of customs business, a single POA should only authorize one licensed broker to act as agent for the principal to conduct customs business. In that case, a principal issued a single POA that listed two separate customs brokers that were distinct legal entities as agents. Customs noted that although agency law enables a principal to execute a single POA to two agents, it requires that the agents act jointly to bind the principal. See First National Bank v. Hough, 643 F.2d 705, 707 (10th Cir. 1972); Keough v. Kittleman, 447 P.2d 77, 78-79 (Wash. 1968). Despite this agency law principle, Customs noted that the requirements of both broker management and entry, the regulations’ intent, and the interest in avoiding confusion dictates that a single POA may only list one agent to perform customs business. In HQ 223453, Customs also provided that a customs broker authorized to act an as agent for the principal can appoint another broker to act on behalf of that principal when the initial POA expressly authorized the customs broker agent to do so. Such a relationship is permissible, because the agency relationship would not be between two customs broker agents, but rather a relationship between the principal and the second broker. Similarly in HQ 225375, dated October 31, 1994, Customs found that a freight forwarder, acting as a general agent under an importer of record’s POA, may sign for the importer another POA that appoints a customs broker as the importer’s agent. This scenario was permissible because the freight forwarder was expressly authorized to appoint a customs broker on behalf of the principal, and entering into that relationship on behalf of the importer was not customs business. In this case, Shandong Longtai permissibly entered into two separate agency relationships with its customs broker, NCHB, and its freight forwarder, RDD. This scenario is similar to HQ 225375 where the importer established two permissible agency relationships, one between the importer and the customs broker and the second between the importer and its general agent freight forwarder. For Shandong Longtai, there exist two similarly permissible agency relationships, one between Shandong Longtai and NCHB and the other between Shandong Longtai and RDD. Unlike in HQ 223453, where the importer impermissibly granted a POA to two separate customs broker entities, the concern that multiple brokers could conduct customs business on behalf of the importer principal does not exist. Rather, Shandon Longtai has only entered into one agency relationship that enables an agent to conduct customs business on its behalf – the relationship between Shandong Longtai and NCHB. Accordingly, the POAs issued by Shandong Longtai conform to the requirements of broker management and entry and the intent of those regulations. See HQ 223453. We note that the POA issued by Shandong Longtai to RDD is narrowly construed to cover only those activities that RDD may legally perform, e.g., non-customs business activities. See HQ 225000 (noting that an unlicensed party’s POA was permitted to the extent that it was limited to an activity exempt from customs business provided that such actions did not concern entries within the meaning of 19 U.S.C. § 1484). Furthermore, to the extent that Shandong Longtai authorized both RDD and NCHB through separate POAs to conduct non-customs business activities, per agency law principles, it is incumbent upon both agents to act in the principal’s best interests and use care when acting on the principal’s behalf. See Restatement (Third) of Agency §§ 8.01, 8.08 (2006). The constrictions of agency law require that RDD and NCHB act in such a manner to avoid overlapping activities that could result in Shandong Longtai’s detriment, e.g., filing multiple in-bond entries on the same transaction. HOLDING: Based on the above, the signing of a continuous customs bond does not constitute customs business pursuant to 19 U.S.C. § 1641(a)(2) and 19 C.F.R. § 111.1 when signed by an individual authorized to do so under the customs regulations. Furthermore, Shandong Longtai properly issued the POA to RDD. You are to mail this decision to counsel no later than sixty days from the date of this decision. At that time, Regulations and Rulings of the Office of Trade will make the decision available to CBP personnel, and to the public, on the CBP Home Page on the World Wide Web at http://www.cbp.gov, by means of the Freedom of Information Act, and other methods of publication. Sincerely, Monika R. Brenner, Acting Chief Entry Process and Duty Refunds Branch